Our campaign to end tax avoidance by global multinationals has now placed tax firmly on the agenda of the G7 meeting. An initial agreement to end global corporate tax dodging is within reach.
Last weekend the Labour party wrote to the Chancellor, Rishi Sunak, calling on the government to support a global deal to ensure big companies pay their fair share.
The Financial Times came out in support of the plan put forward by President Biden to have a global minimum corporation tax rate. This would help end tax avoidance by big multinational companies. It would also put pressure on tax havens.
Former Prime Minister, Gordon Brown, wrote in favour of a deal. The Daily Express and Guardian newspapers raised uncomfortable questions about why the UK is so slow to get behind the plan.
By Monday evening the UK’s position on the Biden plan was the main topic of debate in Parliament. It was great to hear MPs across the board speaking out in favour of a global deal to curb tax dodging.
On Thursday the media was reporting that tax will now be on the agenda for the G7 meeting of the world’s richest countries, hosted by the UK in mid-June. This is a real success and shows how with some smart campaigning we can make things happen.
Friday saw business leaders come out in favour of a global deal. In a joint letter, 70 prominent business figures argued that a strong deal would help tackle tax avoidance. Signatories include former senior Facebook executive Brian Boland, James Timpson, founder of key-cutters Timpsons’, Gemma McGough of Eleos Compliance and Jerry Greenfield, co-founder of Ben and Jerry’s ice cream. The letter and full list of signatories is here.
However, there’s more work to be done to ensure that the UK backs a strong agreement. The current rumours are that the G7 leaders will agree to a 15% global minimum tax rate. This is far too low and we’re calling for a minimum rate set at 25%. Any deal must also work for lower income countries as well. Our allies at the Tax Justice Network have set out what this should look like.
It's also a problem that the deal is being doing by a small group of rich and powerful countries. Global tax policy needs to be set in a much more democratic way. Tax justice campaigners are calling for the UN to take the lead, in the same way as currently happens on climate issues.
This week's news shows that campaigning can have an impact. We'll keep fighting for a fairer tax system.
The media has reported that Chancellor Rishi Sunak is blocking efforts to end tax avoidance by big multinational companies.
The US President, Joe Biden, has proposed a deal to ensure that all the biggest multinationals are required to pay at least 21% tax on their profits. According to our analysis, it could raise up to £13.5 billion a year for investment in things like the NHS or "levelling up" in the UK.
The UK government has indicated that they are willing to block the introduction of a global minimum corporate tax rate if there isn’t also a deal on taxing the tech multinationals – an international mechanism to replace the UK’s Digital Services Tax (DST).
However, as Tax Justice Network Chief Executive, Alex Cobham, said: “The UK's position simply doesn't hold water. They’re claiming that they want to make sure tech multinationals are properly taxed, while blocking the best opportunity for a generation to curb corporate tax abuse across the board.”
It’s time that the UK either gets with the international momentum for tax justice, or else comes out openly as the last big defender of tax havenry.
You can help us pressure the UK to back the Biden plan by signing and sharing our petition.
Image by: Chris Devers
A poll last year found that people are delaying having families, because the future looks insecure.
Recently the Financial Times asked young people about their hopes for the future. It’s not only “just about managing” families facing an uphill struggle. According to the FT, it’s also company directors, city traders and computer programmers too.
The thing that unites these people is that they are young and have almost no chance of earning their way to wealth.
Having a good job is no longer a guarantee of a comfortable and secure lifestyle. As the Institute for Fiscal Studies pointed out this week, inheritance is set to be a key factor driving inequalities in future years. Whether you can afford to buy a place to live is increasingly determined by whether your parents own property.
This is made worse by the tax system. At Tax Justice UK, we’ve pointed out that wealth is taxed at a lower rate than income from work. This is just one way that the truly wealthy have access to unfair tax advantages.
It’s hard to see how governments can ignore this problem forever. And as the Financial Times' economics editor has said: "the left is winning the economic battle of ideas".
All parents and grandparents want the best future for their children. Everyone deserves a fair shot at building a secure life for themselves and their kids.
As we build back from Covid we will campaign to have a tax system that works for all of us. We will make sure this is an issue that stays at the top of the list for politicians.
For a longer read on how access to wealth is key to understanding class in modern Britain take a look at this excellent essay from Christine Berry for the think tank Autonomy.
Image by Álvaro Millán
The Manchester United player Marcus Rashford is a footballing genius. He is also a formidable anti-poverty campaigner.
In many ways Rashford represents all that is glorious about the beautiful game. A local boy made good and he’s deeply committed to tackling injustice when he sees it.
He’s an example to all.
However, we learned this week that at the same time that Rashford was campaigning for free school meals, some of football's billionaire owners were plotting to create a breakaway football league. The proposed European Super League would have been a closed competition for making these billionaires even richer.
It’s yet another example of a small group of very powerful, and very wealthy, people profiting at the expense of everyone else.
Fans, politicians, and even Prince William were outraged. The new league looks unlikely to happen after the six English clubs backed away from the idea.
It probably isn't the last time we hear of plans for a super league in football. But for now at least we can take a message of hope that it is possible for popular outrage to make usually unaccountable billionaires back down.
Football has a long history of inequality and murkiness. The Tax Justice Network have investigated the offshore structures used to run the game. They found that owners can become entirely unaccountable. Questionable financial decisions have condemned century-old institutions like Rangers FC to liquidation.
The Super League was yet another example of the dangers of unequal wealth. Concentration of economic power is a bad idea. The Balanced Economy Project has been established to look into precisely this issue. As they say: "dominant firms are using raw economic and political muscle to squeeze the life out of our economies".
We need to stand up to this and demand a different way of running the economy for the benefit of all of us.
New analysis suggests that the UK would raise an extra £13.5 billion a year from a global minimum corporate tax rate set at 20%. This would rise to over £22 billion a year if the rate was set at 25%. Companies like Amazon, Apple, Facebook and Google could face significantly higher tax bills.
President Joe Biden has proposed a sweeping overhaul of how big international companies are taxed. This includes a new minimum tax rate which would help crack down on corporate tax avoidance.
The public is fed up with major companies getting away with paying ultra low rates of tax. A new minimum corporate tax rate would bring in billions of pounds to support public services and would deal a blow to tax dodging. As we build back from covid we should ask big business to contribute more given the support they’ve had during the pandemic.
The Biden administration has suggested a global minimum corporate tax rate of 21%. The Independent Commission for the Reform of International Corporate Taxation has proposed a minimum rate of 25%. Rishi Sunak has pledged to increase the UK’s corporate tax rate to 25% in 2023.
So far the UK government has been silent on whether it backs the US corporate tax reform plan.
The government should stand up and support these proposals. The UK and its tax haven network have long promoted a global race to the bottom on corporate taxes - this needs to end.
A new minimum corporate tax rate would have a big impact on places like Ireland, the Netherlands and the Cayman Islands which have ultra-low corporate tax rates. The plan comes as international negotiations on global tax reform at the OECD club of rich nations gather momentum.
The analysis is contained in a soon to be published paper by international tax experts on how to implement a global minimum effective tax rate (METR) for multinational companies. The paper breaks down the expected revenue for a number of countries for different minimum tax rates based on a methodology from the OECD club of rich nations.
The METR proposal is authored by Sol Picciotto, Jeffery M. Kadet, Alex Cobham, Tommaso Faccio, Javier Garcia-Bernardo, and Petr Janský. In advance of the forthcoming study, details of the proposal are available here.
The UK’s 54 billionaires saw their wealth increase by £40 billion during the pandemic, an increase of 36%.
At the same time, the number of people who needed some form of social security jumped 98% to six million people.
Barely a day passes without fresh evidence of how this pandemic has been soft on the super-rich and hard on those on lower incomes. This is making the inequality crisis in our country even worse.
However, there are dissenting voices among the wealthy who want to see this change. Last weekend the Guardian magazine told the story of a global group of millionaires who are campaigning for higher taxes on the rich. They include Abigail Disney, granddaughter of one of the founders of the Walt Disney Company and the UK’s Gemma McGough.
She told the paper: “The economy is so damaged from Covid, I am happy to pay my share. If you’re making more than £150,000 or £200,000 a year, you should be paying more. If you’re earning £200,000, paying a higher rate of tax on earnings above that is not going to make you poor, is it?”
Wealth in the UK is woefully undertaxed compared to income and Covid has made inequality worse.
As we build back better, it’s clear that profitable companies and those with substantial wealth need to pay their fair share.
Tax Justice UK is working with Gemma and others, to make sure this happens.
We're looking across the pond for inspiration. President Biden has just announced plans for $2 trillion of investment in America’s crumbling infrastructure.
Biden wants to upgrade roads, railways and bridges. The plan includes money to green the economy, as well as investment in looking after vulnerable Americans. This is transformative amounts of money.
The infrastructure plan would be paid for by increasing taxes on companies. The President wants to reverse some of Donald Trump’s tax cuts. Biden is going after multinational companies that pay too little tax.
Biden has also said that it’s time for countries to end the “race-to-the-bottom” on how companies are taxed.
This is music to our ears.
It fits with a growing pattern of politicians making the case for higher taxes on companies. In the UK, the Chancellor, Rishi Sunak, has said that the corporate tax rate will go up to 25% from the current 19%.
At the moment we have promises. And we all know that politicians are often bad at turning their rhetoric into reality.
But it gives us hope to see President Biden setting out a vision for high quality public services backed by a more progressive tax system.
At Tax Justice UK we will work to make sure that our political leaders take notice.
If you haven't already, sign up to our weekly tax justice roundup here.
We’re a year on since the UK went into lockdown for the first time. It’s been an extremely hard time for all of us, especially those that have lost loved ones.
This weekend the Guardian reported that some wealthy tax exiles have benefited from furlough. It’s galling to see wealthy business owners who are tax exiles use state bailouts when times are tough.
Their employees deserve the right to go on furlough. Workers shouldn’t be punished for the behaviour of their bosses.
But it’s not fair that some very wealthy individuals can move offshore to pay less tax, but still benefit from UK government spending.
This is just another example of how the financial impact of the pandemic hasn’t been even.
Wealthier people have on average saved money during lockdown.
Whereas poorer people have lost their jobs in greater numbers. They are also more likely to have gone into debt or dipped into their savings.
As we build back from this crisis we need a fairer tax system. Our Executive Director, Robert Palmer, has written what this should look like here. We need to start with profitable companies and really wealthy people paying more in tax. This would support the high quality public services we deserve. Fairer taxes would also help tackle inequality.
Along with our allies we will be campaigning to make this vision a reality. There’s all to play for.
The government released 30 consultations on tax reform on what it had dubbed as “tax day”. However, this has turned out to be a bit of a flop. The Treasury has announced some worthy tinkering around the edges. But the big issues in the tax system - how to tax wealth properly, what to do about property taxes and tackling the climate crisis - have been largely punted to another day.
At Tax Justice UK, we have set out an ambitious set of proposals for progressive tax reform as we build back from the pandemic. It’s likely that the government will announce further tax changes at the autumn budget. We will campaign to ensure that these are as progressive as possible.
The government has proposed some small changes to tackle professionals who enable tax avoidance. This is a big problem. Often the promoters of tax dodging schemes get away with no punishment for helping clients slash their tax bills. The Treasury is planning to require all promoters of tax schemes to get insurance and is consulting on giving HMRC extra powers, including the ability to freeze the assets of promoters to ensure any penalties can be paid.
However, this doesn’t go nearly far enough to tackle the problem. TaxWatch has recently highlighted how lightly tax fraud is treated compared to benefit fraud. Instead, what is needed is a big infusion of money into HMRC enforcement; prosecutions for tax dodgers and their professional enablers; and giving HMRC the data it needs to target those not paying their fair share.
Already heavily trailed, the government is planning to slash Air Passenger Duty on domestic flights. To compensate, it’s looking at increasing the levy on long haul flights.
In the face of the climate crisis, it seems foolish to be cutting the cost of flying. The government should have followed France’s approach, where the French government bailed out Air France on the condition that the airline scrapped short haul domestic flights that could be made by high speed train.
Disappointingly, the Treasury also effectively ruled out a Frequent Flier Levy. This was a proposal for a progressive way of taxing flying - with every extra flight a person takes being taxed at an increasingly higher level.
Tax Day was another opportunity for the government to begin the task of tackling the historic under-taxing of wealth in the UK. There are several opportunities to make the tax system fairer. As our research shows, the public wants to see a fairer tax system.
For example, the Fairer Share campaign, which we support, is calling for the government to replace the broken council tax and stamp duty with a proportional property tax. At the moment, poorer households pay much of their income in council tax than richer ones.
Or the Chancellor could close the loophole that leaves unearned wealth taxed less than income from work. Aligning capital gains tax rates with income tax would make economic sense. A recent poll found 61% support for this measure. The Office of Tax Simplification estimates it could raise up to £14bn a year.
We’ll have to wait till the autumn budget to see potential action on these areas.
Last weeks’ budget did little to move the dial on gender equality. Our friends at the Womens’ Budget Group (WBG) highlighted that the £14bn a year in planned public service cuts will hit women and the poorest hardest. At the same time, the so-called ‘super deduction’ to capital allowances will give business the ‘biggest tax cut in modern history’.
Importantly the Treasury failed to publish a comprehensive Equality Impact Assessment of the budget. This makes it impossible to judge whether they have met their obligation under the Public Sector Equality Duty to have ‘due regard’ to equality. This is particularly concerning given that Covid-19 has worsened the situation for many women in terms of health, employment and unpaid work, resulting in increased levels of poverty, debt and mental health deterioration.
We know that the financial impact of the Covid-19 pandemic has not been even. Wealthy people have increased their wealth by saving while poorer people are more likely to have borrowed money in order to get through this crisis. This potentially makes a bad situation worse.
Even before the pandemic wealth in the UK was deeply unevenly distributed. As our Executive Director, Robert Palmer, wrote on openDemocracy, this is a feminist issue, as women typically own fewer assets than men. Gendered wealth inequality has real world consequences, including shorter lives, poorer health and a more precarious existence. This problem is exacerbated by the tax system, which treats wealth much more generously than consumption or income from work. Addressing wealth inequality, and in particular ensuring that women have better access to resources, should be a government priority.
Our submission to the Commision for a Gender Equal Economy set out evidence illustrating how wealth inequalities disproportionately affect women. For example, once women have children, they are much more likely to have little, or nothing, in the way of savings. This means that ownership of wealth is fairly even between men and women until people reach their 30s, when men start to pull away. Overall women have only 40% of the UK’s stock of personal wealth.
There are particularly stark differences in wealth when it comes to the ownership of financial assets, which are often lightly taxed. For example, women are less likely to have private pension pots, and if they do, the size tends to be much smaller. By the time a woman is in her early 60s, her average pension pot is a fifth the size of that of a man her age. Women also receive significantly less income from property, interest, dividends and investments than men.
So what can politicians do about this?
The government could invest in the care-led recovery WBG and many others are calling for. Investing in care would create 2.7 times as many jobs as the same investment in construction. 50% more can be recouped by the Treasury in direct and indirect tax revenue from investment in care than in construction. And investment in care is greener than in construction, producing 30% less greenhouse gas emissions.
One thing the government is considering and might decide to do is to tax income from wealth at the same level as income from work. The current approach, where capital gains are taxed at a lower rate than income tax, is regressive. It also favours men, since they are much more likely to receive income from capital gains. Increasing the tax rates on capital gains to the same level as income tax could raise up to £14bn a year according to government estimates. Our own research found that 74% of people want the wealthy to pay more tax.
Other options include curbing the very generous tax reliefs on pension savings. Higher earners receive the bulk of pension tax relief, despite making up a small proportion of the working population. The Resolution Foundation suggests a flat rate of relief at 28%, which would be revenue neutral.
While neither of these were in the budget, we expect to hear more announcements from the government on tax on 23 March and a further budget is due to take place in the autumn.
We will be discussing gender justice and tax justice in more detail together with the Women’s Budget Group on Friday, 19 March. Please join us here for this free event.
The event is part of the global days of action to make taxes work for women by the Global Alliance for Tax Justice.
You can watch the event on gender and tax here.