A Corporate Coup d’Etat

[Magda Hassan]

A Corporate Coup d'Etat

Posted February 7, 2011
You thought elections counted for something? Look at what wasn't in the manifesto.

By George Monbiot. Published in the Guardian 8th February 2011
"I would love to see tax reductions," David Cameron told an interviewer at the weekend, "but when you're borrowing 11 per cent of your GDP, it's not possible to make significant net tax cuts. It just isn't."(1) Oh no? Then how come he's planning the biggest and crudest corporate tax cut in living memory?
If you've heard nothing of it, you're in good company. The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone(2,3). They are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d'etat is taking place. Like the dismantling of the NHS and the sale of public forests, no one voted for these measures, as they weren't in the manifestos. While Cameron insists that he occupies the centre ground of British politics, that he shares our burdens and feels our pain, he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century. The latest heist has been explained to me by the former tax inspector, now a Private Eye journalist, Richard Brooks and current senior tax staff who can't be named. Here's how it works.
At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil PLC pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match the corporate tax rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.
Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies"(4): it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime"(5). The main beneficiaries, in other words, will be the banks.
But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate "of any major Western economy"(6). By the time this government is done, we'll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph David Cameron said "what I want is tax revenue from the banks into the Exchequer, so we can help rebuild this economy."(7) He's doing just the opposite.
These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates. Any UK business which doesn't outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage. The new rules also threaten to degrade the tax base everywhere, as companies with headquarters in other countries will demand similar measures from their own governments.
So how did this happen? You don't have to look far to find out. Almost all the members of the seven committees the government set up "to provide strategic oversight of the development of corporate tax policy" are corporate executives. Among them are representatives of Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays(8,9).
I used to think of such processes as regulatory capture: government agencies being taken over by the companies they were supposed to restrain. But I've just read Nicholas Shaxson's Treasure Islands perhaps the most important book published in the UK so far this year and now I'm not so sure(10). Shaxson shows how the world's tax havens have not, as the OECD claims, been eliminated, but legitimised; how the City of London is itself a giant tax haven, which passes much of its business through its subsidiary havens in British dependencies, overseas territories and former colonies; how its operations mesh with and are often indistinguishable from the laundering of the proceeds of crime; and how the Corporation of the City of London effectively dictates to the government, while remaining exempt from democratic control. If Hosni Mubarak has passed his alleged $70bn through British banks, the Egyptians won't see a piastre of it.
Reading Treasure Islands, I've realised that injustice of the kind described in this column is not a perversion of the system; it is the system. Tony Blair came to power after assuring the City of his benign intentions. He then deregulated it and cut its taxes. Cameron didn't have to assure it of anything: his party exists to turn its demands into public policy. Our ministers are not public servants. They work for the people who fund their parties, run the banks and own the newspapers, insulating them from democratic challenge.
Our political system protects and enriches a fantastically-wealthy elite, much of whose money is, as a result of their interesting tax and transfer arrangements, effectively stolen from poorer countries and poorer citizens of their own countries. Ours is a semi-criminal money-laundering economy, legitimised by the pomp of the Lord Mayor's show and multiple layers of defence in government. Politically irrelevant, economically invisible, the rest of us inhabit the margins of the system. Governments ensure that we are thrown enough scraps to keep us quiet, while the ultra-rich get on with the serious business of looting the global economy and crushing attempts to hold them to account.
And this government? It has learnt the lesson that Thatcher never grasped. If you want to turn this country into another Mexico, where the ruling elite wallows in unimaginable, state-facilitated wealth while the rest can go to hell, you don't declare war on society, you don't lambast single mothers or refuse to apologise for Bloody Sunday. You assuage, reassure, conciliate, emote. Then you shaft us.
http://www.monbiot.com
References:
1. http://www.telegraph.co.uk/news/newstopi...-cuts.html
2. See: HM Treasury, 2011. Overview of draft legislation for Finance Bill 2011.
http://www.hm-treasury.gov.uk/d/financeb...erview.PDF
and:
3. HM Treasury, 2011. Corporate Tax Reform:
delivering a more competitive system.
http://www.hm-treasury.gov.uk/d/corporat...cument.pdf
4. HM Treasury, 2011, Part IIIB: Foreign branch taxation, para 2.16.
http://www.hm-treasury.gov.uk/d/corporat...xation.pdf
5. HM Treasury, 2011. Overview of draft legislation for Finance Bill 2011, page 75.
http://www.hm-treasury.gov.uk/d/financeb...erview.PDF
6. http://www.publications.parliament.uk/pa...cy/m46.htm
7. http://www.telegraph.co.uk/news/newstopi...-cuts.html
8. Members of the Liaison committee are listed here:
http://www.hm-treasury.gov.uk/corporate_tax_reform.htm
9. Members of the six working groups are listed here:
http://www.hm-treasury.gov.uk/consult_cfc_reform.htm
10. Nicholas Shaxson, 2011. Treasure Islands: tax havens and the men who stole the world. Bodley Head, London.

[Peter Presland]

An example of MSM reporting that is rarely seen.

It should be condensed a little, with a tabloid style (not content) makeover and force-read to everyone who still thinks that elections in the West have ANY meaning other than to exhaust Sheeple potential for political mischief in orgies of manufactured party-loyalty-based disputes over trivia.

Thanks Magda - I'd have missed it myself otherwise

[Jan Klimkowski]

So, one public manifesto for the electorate, and one private manifesto for the powerful.

A tax change this fundamental and detailed didn't just happen. It was planned in advance, just as the Volkland Security statutes were prepared ready for their moment of implementation.

This is quite clearly a corporate coup, happening in the shadows whilst the dear leaders distract the masses with garbage about how "multiculturalism causes terrorism", and "we're all in this together".

One Ring to rule them all, One Ring to find them,
One Ring to bring them all and in the darkness bind them

[Magda Hassan]

http://38degrees.uservoice.com/forums/78...rvoice.com

Raise public awareness of the highly damaging proposed corporate tax reforms

The government are planning what journalist George Monbiot suggests may be 'the biggest and crudest corporate tax cut in living memory'.
This is not the well publicised cut in the corporation tax rate from 28% to 24% but something far less publicised, yet much more far ranging and destructive to... more

The government are planning what journalist George Monbiot suggests may be 'the biggest and crudest corporate tax cut in living memory'.
This is not the well publicised cut in the corporation tax rate from 28% to 24% but something far less publicised, yet much more far ranging and destructive to the common good.
The plan is to charge UK companies NO TAX on earnings from their foreign branches, whilst still allowing them to claim the expense of funding those branches against tax it pays in the UK.
This will have the effect of UK companies transferring as much of their operations as possible overseas. So not only do we lose out on a huge amount of tax receipts, we lose a huge amount of jobs too.
The scariest part of this is that something this important can be kept so under the radar. This proposal desperately needs to be publicly debated.
See George Monbiot's article in The Guardian for full details: http://www.guardian.co.uk/commentisfree/...of-century

[Jan Klimkowski]

The comments on Monbiot's article as reprinted at The Guardian now run to several thousand, and many - including accountants and tax lawyers - are claiming that he's misinterpreted the statute.

This I do know: if lawyers and accountants for multinationals can find a way of using a clause in a bill to ensure their clients pay less tax, or can exploit tax havens or multiple jurisdictions, they will do so.

Monbiot may have some of the detail wrong. The Big Picture is clear and proven over time....