Panama Papers Expose Tax Avoidance

April 21, 2016

 

Following the Panama Papers leak, which lifted the lid on the elaborate tax avoidance techniques employed by wealthy individuals – including a number of world leaders – the Prime Minister was forced to issue a statement about his own financial affairs.
 
Initially, when questioned, Downing Street said Mr Cameron’s affairs were “a private matter.” The next day when asked if he had previously invested in his Father’s offshore company, he said that he “owned no shares”. Later that afternoon, the statement was expanded to emphasise that “the prime minister, his wife and their children do not benefit from any offshore funds”. By Wednesday, another statement said the Cameron's will not benefit from offshore funds “in future”. On Thursday the Prime Minister was forced to admit he had, in previous years, benefitted from the offshore trust in question.
 
Given several opportunities to clarify his financial arrangements, the slippery way the Prime Minister chose to handle the situation raises an issue of trust. If he can’t be relied upon for a straight answer on this, on what other matters might he obfuscate? On top of that, the way he dismissed his £30,000 in offshore shares – as if it were small change – only goes to show how out of touch with reality he really is.
 
Containing 11.5 million documents, it will be months before the Panama Papers can be fully digested and we gain a clearer insight in to the murky accounting arrangements of the super-rich. However, it should be remembered that this leak – the largest in financial history – only relates to one company based in Panama. What of other masters of the accounting dark arts operating in other offshore havens, such as the British Virgin Islands? Clearly these recent revelations are only the tip of the iceberg.
 
In recent years, many people have become wearily resigned to an assumption that wealthy companies and individuals can operate above or around the law. However, this need not be the case.
 
Only two years ago, after being exposed in a tax avoidance scandal, Starbucks reported its first ever fall in UK sales, after 17 years, when customers boycotted the chain. The result? Starbucks completely altered its tax arrangements to pay £10million a year in tax – substantially more than the total of £8.6million paid in total in the preceding 14 years!
 
Likewise, tax dodging wealthy individuals should be subject to the law through investigation, exposure and enforcement.
 
In order to achieve this, it is essential that the UK Government works in partnership with other governments. The first step is having a robust set of tax laws in which loopholes are minimised and closed if detected. The SNP Government has already done so in preparation for the devolution of income tax. At UK level, authorities must be properly equipped to investigate wealthy elites, many of whom employ teams of accountants to make their money difficult to trace.
 
At Prime Minister’s Questions last Wednesday, SNP Westminster Leader, Angus Robertson MP, asked the Prime Minister why a mere 300 HMRC staff were investigating tax evasion by the super-rich, worth up to £70 billion when as many as 3,250 DWP staff are chasing benefit fraud worth £1.2 billion.
 
Whilst abuse of the benefit system should obviously be tackled, given the sums involved, surely it would be a more fruitful use of time and resources to crack down on those who are fabulously wealthy but chose not to pay what they owe?
 
To put things in perspective, the £70 billion in UK tax avoided every year is equivalent to more than double the entire Scottish Parliament's budget. Clearly, UK finances would quickly improve and the mountain of debt decline, if all with the means to do so paid their fair share. 

 

Previous Labour, Coalition and Tory Governments have failed for decades to adequately address this matter. It is time to walk the walk and not just talk the talk when it comes to dealing with both tax avoidance and tax evasion.

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