George Osborne does the Right Thing on tax avoidance (for once)

I am no fan of George Osborne, but he seems to be doing the right thing in the G20 in Moscow in pushing for international controls on tax avoidance.

I first wrote about this to my MP, John Penrose, Weston super Mare, Con, on  Monday, February 21, 2011, almost exactly 2 years ago:

Dear John

I am following developments regarding tax avoidance measures practiced by large corporations. Estimates of the wealth leaching out from the real economy of the UK to tax havens go up to £120 billion a year, and Richard Murphy of Tax Research UK  estimates that some £20 billion per year could be recovered if the Government were so minded.

The argument is put that if the UK tightens its tax regime, companies will simply migrate to countries with easier regimes.

There is therefore a strong case for global action on tax policy as a logical response to the globalization of commerce.Already on the agenda of the next G20 meeting in France this November are headline items relating to “Strengthening financial regulation”.The G20 needs to take common action to close down tax loopholes and tax havens to prevent the “race to the bottom” induced by low tax regime competition.I would be grateful if you would ask the Prime Minister (who will be leading the UK G20 delegation) if he will welcome and support a global closure of tax havens and loopholes.
Thank you
Regards
Richard


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I wrote again on Monday, August 29, 2011


Many thanks for your response to my question about tax havens. I am grateful to you for reviewing the several measure that HMG has taken to try to close tax loopholes and clamp down on evasion, but the central question remains unanswered, namely, whether the Government will put forward to the G20 in November the proposal to close down all tax havens in order to close the continuous haemorrhage of wealth out of all national economies into tax havens?

As I mentioned, estimates of the wealth leaching out from the real economy of the UK to tax havens go up to £120 billion a year, and Richard Murphy of Tax Research UK estimates that some £20 billion per year could be recovered if the Government were so minded.  This is an improvement on the modest £7 billion that you mention in your letter.

In response to calls for more efficient taxation on the extremely wealthy, the argument is put that if the UK tightens its tax regime, companies will simply migrate to countries with easier regimes.  This makes a strong case for global action on tax policy as a logical response to “globalisation”.

Already on the agenda of the next G20 meeting in France this November are headline items relating to “Strengthening financial regulation”.

The G20 needs to take common action to close down tax loopholes and tax havens to prevent the “race to the bottom” induced by low tax regime competition.

I would be grateful therefore if you would ask the Prime Minister (who will be leading the UK G20 delegation) if he will welcome and support a global closure of tax havens.

Thank you
Regards
Richard

As a result of this one, my MP wrote to Osborne on 28th September. David Gauke responded on 21 October 2011, mentioning the Communique of Finance Ministers and Central Bank Governors calling for progress in tackling non cooperative jurisdictions and tax havens to be discussed at the G20 in Cannes.
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I wrote back to the Treasury on Monday, December 05, 2011

David Gauke
Exchequer Secretary to the Treasury

Dear David Gauke

Thank you for your letter of 21 October about tax avoidance. I am pleased to learn that the Government is concerned about tax avoidance and evasion, and is strongly committed to increasing tax transparency. I welcome the call from the recent G20 for progress on non-cooperative jurisdictions and tax havens.

However, I am very concerned that the UK has opposed the installation of a Financial Transactions Tax within the EU on the grounds that the traders would (a) pass it on to the general economy, and would (b) move their operations to more lax jurisdictions.

It can be argued that this is an exaggeration of the actual risks, but the Treasury's position makes a stronger argument for these measures to be brought in on a global basis. In a globalised economy, it makes sense to have a globalised tax framework. If globalised, the tax take from the FTT could then be used as Tobin intended it, as a fund for helping impoverished countries.

We are all painfully aware that there is a global financial crisis in operation. It makes absolutely no sense to impose austerity measures on country after country, measures that exacerbate low growth and/or recession, while vast amounts of national wealth from all countries are being siphoned out of national economies into tax havens.

In the UK, a full tax take on the richest 1% could neutralise the deficit, and the same would apply in countries like Greece, Italy and Spain.

You will be aware that several billionaires, starting with Warren Buffet, have put on record that some of their income streams are taxed at a lower rate than the average worker.

Global tax measures would be complex and difficult to bring in, but if the political will were present, it could be arranged to be ratified at the next G20. And the desperate global economic condition should supply that political will. It is a pity that the UK did not agree to the EU bringing in a FTT, since it would have motivated the UK to lead the world in bringing these tax measures in on a global basis.

I would be grateful if you would give this proposal serious examination, and hope that you will agree that it makes excellent economic sense.

Sincerely
Richard Lawson
cc John Penrose MP

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Now I am not in any way claiming that my letter caused Osborne to take this action a year later, but this correspondence shows that letters from the general public do get read, and can have a tiny effect on the decisions made, and that it may be valuable to continue to keep on keeping on, writing our letters to MPs.