Thursday, August 23, 2012

George Osborne's 3rd World tax loophole

There are two main causal factors in the Tory party's slump in popularity in 2012; the fact that George Osborne's "cut now, think later" economic policies have driven the UK back into recession and Osborne's spectacularly ill thought out "Millionaire's budget", described by one Tory backbencher as having been drawn up on the back of a cigarette packet.

Pretty much everyone is tired of hearing Osborne's lame excuses for the economic nosedive he has masterminded: "Labour left us a mess", "The Royal wedding", "the Eurozone crisis", "The Jubilee bank holiday",  "the winter was too cold",  "the spring was too wet", "leaves on the line", "the dog ate my homework"... And pretty much everyone has heard about Osborne's half baked budget policies; "the Granny tax", "the millionaire's tax cut", "the pasty tax", "the philanthropy tax", "the static caravan tax" and all of the subsequent U-turns required because his budget was quite clearly based upon a foundation of ideology, not evidence.

One aspect of Osborne's "millionaire's budget" that has until now, not received a lot of attention is the changes he made to Controlled Foreign Companies (CFC) rules, which will allow British registered companies with foreign operations to begin evading tax in their host countries from January 2013, by shifting their profits into tax havens. This is a regulatory change that should be of grave concern to British taxpayers, since many of these counties are in receipt of British foreign aid. It would be frankly absurd for the British taxpayer to fund these struggling economies to the tune of tens of millions a year, only for British based corporations to use Osborne's tax loophole to extract hundreds of millions a year to be stashed in tax havens. If these changes do go through, Osborne will not only be facilitating theft from poor countries, he will be facilitating theft from the British taxpayer that supports these economies through foreign aid donations.

Given all of his rhetoric about tackling tax-dodgers, forcing through a regulatory change that has clearly been designed with the express purpose of allowing British corporations to dodge their taxes in other countries, is yet another case of glaringly obvious Tory tax hypocrisy.

The charity ActionAid have estimated that Osborne's regulation changes will end up costing Third World countries £4 billion a year in lost tax revenues. The government can't refute the figures since no impact assessment has actually been done to estimate the consequences of this regulation change (as is Osborne's way of doing things). Various international organisations (including the barkingly right-wing IMF) have demanded that the UK government conduct impact assessments before formalising these tax changes, however Osborne and the Tories remain reluctant to embrace the concept of evidence based policy, presumably because they fear that many of their other harebrained and ideologically driven schemes would spectacularly fail any rigorous evidence based analysis.

The public are already increasingly aware that George Osborne is an economic liability, however two more things are absolutely clear from this forgotten aspect of Osborne's budget; Osborne is a tax hypocrite who regularly sounds off about the immorality of tax-dodging, then goes on to introduce legislation that is clearly designed to allow British corporations to steal £ billions in tax revenues from the Third World; and that Osborne is not just reluctant to embrace the concept of evidence based economic policy, he is downright opposed to it, preferring to base his economic strategy for the UK upon a foundation of ideologically driven neoliberal pseudo-economics instead.

 
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