Tax dodgers beware: the government finally reacts

Image: Rajan Manickavasagam

Image: Rajan Manickavasagam

With the announcement of the Autumn Statement, the Chancellor of the Exchequer has revealed the long-awaited measures to challenge large corporations that use clever but unfair methods to avoid paying their taxes.

This is one of those rare taxes that the public keenly demands, and one that has been required for many years. Indeed, it was recently discovered that Facebook has avoided paying corporation tax in Britain for the second year in a row (Private Eye, Issue No. 1378). Just like Google, the misbehaviour of which has earned the Chancellor’s new plan the name “the Google Tax”, it has diverted its UK-based accounts to Ireland and avoided paying some of its taxes. Chancellor Osborne hopes to raise somewhere around £7,000,000,000 through a variety of investigations into what is described as “aggressive tax avoidance”.

There is no law explicitly stating that this kind of behaviour is illegal, but it is certainly an unfair practice. Companies like Facebook, Google and Amazon avoid paying the taxes their bosses know they must pay by exploiting the system. Sometimes investigators can do nothing when they realise this arguably immoral behaviour is permitted by the law. This has of course led to the protests and movements we have seen in recent weeks, most notably championed by Russell Brand. (Ironically, Brand is hardly the person to lead these movements. His book, Revolution, was published by a company that uses tax avoidance schemes ran through Luxembourg (Private Eye, Issue No. 1378) and pays the rent of his £2,000,000 home to a company that operates in the very tax havens against which he protests! (The Independent)).

Despite this satisfying announcement, some of the detail left out of Autumn Statement may be an embarrassment for the Chancellor and his party: according to the figures, their financial predictions and promises have not been met. The government is borrowing more money than it promised, and the reduction of the deficit has not been at all as great as Conservative economists had assured us that it would be.

Chancellor Osborne’s remedy is “continued austerity and belt-tightening” (R. Mason and K. Allen, The Guardian), an approach that has not at all been popular in recent months! In response to this criticism, the Conservatives propose that the economic policies advocated by the Labour Party would only halt the recovery of the national economy. Higher spending and higher borrowing would only undo the great progress made by the Chancellor. Nonetheless, austerity is causing damage to society too. By tightening belts and making cuts, services are underfunded, lessened or even scrapped altogether in the quest for net growth.

Looking forward to the General Election in May, the approach to the economy will likely be the defining factor of how people vote, but importantly the economy defines and shapes the society in which we live. It seems to me that if one wants an economy that finally well-and-truly escapes the effects of recession, at the expense of public services and arguably the creation of jobs, then one should vote for the Conservative Party; if one wants to maintain and indeed add to public services, especially the National Health Service, at the risk of borrowing more and spending more (which could lead us down a familiar unpleasant road) one should vote for the Labour Party. Overall, this is an economy vs. society debate – which one is more important? Has this Autumn Statement won the favour of the public?

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