Richard Murphy, Dirty Secrets: How Tax Havens Destroy the Economy, Verso, £12.99, 9781786631671
Earlier this year, Jeremy Corbyn released the following statement regarding his personal finances: ‘I am publishing the detail of my tax return here, on my constituency website. I have made it clear that I think it is right for party leaders to be open and transparent about their tax arrangements. As you can see, my total income for 2015-16 was £114,342 and I paid £35,298 in tax’. His tax return was subject to considerable media scrutiny – the question of his £21,192 leadership pay being classified as ‘benefits’ was particularly confusing to his critics. Others were less cynical: here was a frank and honest attempt to pay the correct taxes, to disclose that which was earned, and to promote financial transparency in the process.
Corbyn is, of course, not the first politician to release his tax returns. During her leadership campaign in 2016, Theresa May did likewise, stating: ‘It is clearly important for all leadership candidates to be open and transparent about their tax affairs. I was very happy to publish mine today, and hope others will follow suit’. Her statement and actions then were laudable. It is to her discredit that she failed to publish her tax returns again this year.
Media and public interest in the tax arrangements of our political leaders is a familiar story, though it is no less important for its familiarity. Donald Trump’s refusal to publish his tax affairs dogged him during the election campaign and dogs him still. Here in Britain, in April of 2016, the Panama Paper revelations that David Cameron had profited from an offshore trust set up by his father required significant political repair. ‘I obviously can’t point to every bit of money,’ he said in an interview to ITV, ‘and dad’s not around for me to ask the questions now’. Setting aside the moral difficulties involved in the then PM profiting from an offshore trust, Cameron’s confession that he was unable to track all his father’s investments should not be viewed merely as a political convenience but, rather, as a simple statement of fact. As Richard Murphy points out in his book Dirty Secrets: How Tax Havens Destroy the Economy, it is precisely this opacity that makes tax havens attractive.
Quoting the Tax Justice Network’s submission to a House of Commons Select Committee in 2008, Murphy points out that ‘secrecy is key to most tax haven operations. Without it many of those using tax haven structures would not do so.’ One reason for this, as David Cameron discovered, is the damage that discovery does to reputations. ‘It is very hard,’ Murphy notes, ‘for anyone using a tax haven to be tax compliant.’
This lack of compliance has a significant cost, and nowhere is that cost felt more keenly than in the developing world. Murphy quotes a 2008 report undertaken by Christian Aid that suggested ‘corporate tax losses to the developing world might be as much as $160 billion a year, which was somewhat more than the combined aid budgets of the whole rich world.’ One predictable consequence of such losses is continuing aid dependency. For developing countries: ‘[t]his dependency removes their autonomy, leaving them exposed to the political will of other countries. At the same time, it denies their elective representatives some of the real choices that would be available if such aid funding could be eliminated and replaced by taxes. The cost of tax havens to these places is thus seen in the degradation of both their democratic processes and their identity as nation states’.
Unfortunately for those disenfranchised by tax havens, the battle against financial secrecy is one in which the business world has a considerable advantage. Quoting the UK’s House of Commons Public Accounts Committee, Murphy notes that of the big accounting firms that were operating in the UK in 2013, the top four alone employed nearly 9,000 people to provide tax advice to companies and wealthy individuals. Much of this work was, naturally, aimed at minimising tax paid. Particularly telling is the example Murphy gives of transfer specialists: 250 employed by the big four compared to 65 working for HMRC: ‘[T]he number of transfer pricing specialist employed by the HMRC has increased since (2013), but the odds remain stacked in favour of the companies undertaking the trades.’
There is little evidence that the odds are going to sway away from the corporations any time soon, though Murphy proposes a number of ways in which those odds could be improved: public country-by-country reporting is one, full registers of beneficial ownership of companies and trusts is another. In other words, before we can collect tax we must first collect reliable information. It is a persuasive argument, for as Thomas Piketty showed in his Capital in the 21st Century, ‘truly democratic debate cannot proceed without reliable statistics’.
Robin Jones lives in Paris where he works as an English teacher. His fiction, articles and reviews have appeared in the Edinburgh Review, Gutter, Jacobin, the Dark Mountain Project and Huffington Post.