Lurking in the depths of a Da Vinci Code-style vault, shrouded in Swiss secrecy, is a big bag of tax-free swag that costs the UK somewhere between £4 to 13 billion per year. Well, it’s something billion. Nobody’s really too sure. Either way, it sounds like a lot and Brown, Sarkozy, Merkel et al suddenly seem very eager to get it back.
President Obama’s legislation to stop offshore tax haven and tax shelter abuse (cannily entitled The US Stop Tax Haven Abuse Act) has shaken Swiss banking giants UBS to the core. It demands that they not only pay back tax deficits to the US, but that they hand over the fortified names of hundreds of their mysterious account holders, a fair number of whom I suspect are British.
With UK havens like the Isle of Man, Guernsey and Jersey under Obama’s spotlight, I can feel the reverberation from Brown’s knee-jerk reaction as he edges his toes out of neutral waters and decides to finally do something about tax avoidance. But is it too little, too late? And more importantly, is his assault on world greed targeted in the right place?
It’s no secret that the über-rich have been filtering their bonuses, mortgages and spousal ‘gifts’ in Switzerland, the Cayman Islands and Monaco for decades. It’s also no secret that the rest of us (particularly financial professionals) have been increasingly looking for work in other tax havens like the Middle East to avoid (note – not evade) paying that irksome amount that comes out of our pay packet each month.
Lumbering the offshore industry together into one, ‘tax haven’ package is essentially adding another layer of confusion to the already cloudy haze pervading tax avoidance. As soon as one tax loophole is sloppily patched up, another one opens.
I’d like to see the rules on tax avoidance made clearer through the implementation of an all-encompassing, general anti-avoidance rule (GAAR) – although this has already been dismissed a few years ago as being too ‘uncertain’. What, more uncertain than our current tax laws? Really?
With the G20 summit in London just around the corner, European leaders have already been discussing (without going into detail, naturally) how best to reform the European Union Savings Tax Directive and how to implement universal policies that will prevent the world’s rich from getting richer.
All very nice, but I can’t help but agree with the comments made by the Director of the European Centre for International Political Economy Fredrik Erixon after the recent mini G20 meeting in Berlin, in which he stated that “they couldn’t agree on something more substantial so they went for the easy targets: tax havens and hedge funds”.
I am not for a moment condoning unfair tax practices that engender a ‘one rule for us, another for them’ approach. Obama is perfectly correct when he outlines this issue as one of “fairness and integrity”.
But in UK terms, tax havens (and all associated complications) just seem like a rather obvious target, or worse still, diversionary tactic from other more critical financial issues. I can’t help wondering if Mr Brown’s attention is better spent elsewhere.
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