Paying Taxes and Those Who Avoid It!
Posted on December 3, 2019
Following various Twitter and Facebook groups, I am quite surprised how many assumptions people make about tax and tax avoidance.
I guess that most people are PAYE (Pay As You Earn) so they don’t really have to know the tax affairs of businesses. I have seen some people claim that corporate giants pay no tax at all, whilst others say Jeremy Corbyn is making it all up when he says companies are avoiding it.
What is a Tax Haven?
A tax haven is a country that has very lenient and, in some cases, non-existent tax laws. There are several tax havens around the world. These include The British Virgin Islands, Bermuda, The Cayman Islands and Dominica amongst others.
Tax laws in each location vary from as low as 2% and in some cases bugger all. The British Virgin Islands for instance, has no corporate tax, estate tax, inheritance tax, gift tax or sales tax, and it has an effective income tax rate of zero.
What Do Tax Havens Provide?
So, what do they do? Well, Tax havens provide legal offshore banking to foreign businesses (for an arranged fee). This allows them to avoid paying income taxes in their countries of residence. So, for example, a blue-chip corporation might establish an offshore subsidiary in say, the Cayman Islands. They then direct all sales through the subsidiary rather than through the parent company based in the UK.
The company in The Cayman Islands (a shell company) then earns the annual profits and is subject to those tax laws rather than the UK. So, in Layman’s terms (or should I say Cayman’s terms) Instead of being subject to UK. Corporation Tax (19%) profits are subject to the Cayman Islands rates.
It’s Legal Though!
It’s not illegal but it is as immoral as fuck. Some political parties (the current Labour Party) want it smashed and for these people to pay up, whilst others (Tories) would happily leave it be. This is because the Conservative party has been infiltrated by people who benefit from tax avoidance.
MP’s such as Jacob-Rees Mogg and several multi-million-pound Conservative donors are heavily involved in tax avoidance. At present, there are no laws to stop donations from tax avoiders or indeed to stop them becoming MP’s. Our last PM for instance (Theresa May, remember her?) had a husband whose employer advised on how to avoid tax.
Whatever your political colour, someone who aggressively avoids tax due to the HMRC should, surely, not be allowed to be an MP and political parties should be barred from taking donations from companies avoiding corporation tax.
Tell me if I am wrong?
To add to this, The Mail, The Express, The Sun, The Times and The Telegraph are all owned by tax avoidance barons who are allowed far too much influence in the political system. Having a political bias is one thing, having a bias aimed at ripping off the HMRC is another.
Can We Stop It?
The next question is this. Do we just accept that is the way it is, or do we try to do something about it?
The EU is trying (hence the hatred in the above-named newspapers) but are
already coming up against opposition from countries like Ireland and Luxembourg
who have low corporation tax rates. The EU 2020 Tax Avoidance Regulations have
been the driving force (along with deregulation) behind Brexit, so there would
be some irony if they failed. You would probably see Rees-Mogg change his mind.
Jeremy Corbyn seems to think he has a plan in place to call a halt to the gravy train and rebuild the economy around the billions of revenues corporation tax will bring in. Bold and audacious maybe, but how realistic are the challenges his government would face? These companies won’t go down without a fight, that’s for sure.
However, many businesses like mine are pissed off. As a limited company, we file our accounts in April and pay our corporation tax in January. Most of us do it, not with a beaming smile but because it is our duty. I don’t pay much as I only have a small business, but I feel like I have done my bit when I do.
Then a few days into February, we read about Facebook, Google, Amazon,
Starbucks, Dell, Apple and so on, doing deals with the HMRC where they pay what
they decide is due and the HMRC can either lump it or try to get it from The Cayman
Islands. These companies think paying 19% Corporation Tax is taking the piss.
This leaves us with a conundrum. Do we just accept it and vote for a political party swimming in cash that has avoided corporation tax? Or do we vote for a party who are saying they are going to have a go at get that money in.
Call me a champion of the underdog if you wish, but I know where my vote is going. It’s not that I think Corbyn is a Messiah, it is more a case of having had enough of being taken the piss out of.
I couldn’t give a toss if he once tried to broker peace with the IRA; that’s a politicians job.