Cameron’s vow to tackle tax avoidance ‘disingenuous and hypocritical’
Cameron’s comments follow recent controversy over the manner in which mammoth firms such as Facebook, Google, Apple, Amazon, and Starbucks flout tax on revenues generated in Britain.
Speaking to RT on Friday, Murphy dismissed the prime minister’s pledge to tackle tax avoidance in Britain as hollow rhetoric. Lauded as 2013’s 7th most influential person on the international tax stage, Murphy has been instrumental in placing tax havens on the global agenda. But the economist and anti-poverty campaigner holds little hope for a tangible tax policy shift from the current coalition.
“The problem is that David Cameron’s walk and his talk are completely inconsistent. The truth is that he’s almost always on the side of the companies that are not paying tax,” he said.
— Richard Murphy (@RichardJMurphy) October 31, 2014
In the case of tech giant Facebook, it transpired last week that the company had failed to pay tax in Britain for the second year running, despite generating sales of £50 million (US$79.8 million).
The firm, headed by US-based Mark Zukerberg, saved money by funneling a large proportion of its revenue through an aggressive tax avoidance scheme in Ireland known as the 'Double Irish.'
— Richard Murphy (@RichardJMurphy) October 18, 2014
Dublin is an emerging haven for software development and tech companies. Home to Facebook’s European headquarters, Irish policy makers and global tech investors have dubbed the coastal capital Europe’s Silicon Valley.
The Irish government announced it will scrap the Double Irish earlier this month, following the European Commission’s (EC) allegation that Apple’s tax agreement with Ireland amounts to “illegal state aid.”
But replacement legislation is yet to emerge. Meanwhile, Irish taxpayers are burdened with a startling 42 percent of the Eurozone crisis' bank debt.
Dr Andy Storey, a leading professor of international relations based at University College Dublin (UCD), told RT on Friday EC documentation "clearly reveals that Ireland was granting Apple illegal state aid by letting it determine its own tax bill."
Storey said the Irish government "effectively just accepted Apple's own arbitrary calculation of how much tax they would pay" and made no real attempt to "independently assess what proportion of Apple's revenues should have been eligible for tax in Ireland."
Reflecting on the prevalence of tax avoidance in Britain, Cameron suggested on Thursday that the nation’s corporate culture is changing. Officials “sitting in boardrooms” are coming to the realization that tax avoidance generates poor publicity for their firms, he argued. The PM made the statement in response to a question posed by an employee of telecommunications company O2 during a visit to one of its call centers.
Cameron's criticism of tax-avoiding multinationals follows an Organisation for Economic Co-operation and Development (OECD) tax agreement secured on Wednesday.
— Public Accounts Comm (@CommonsPAC) October 30, 2014
Central to the pact, signed by tax chiefs and finance ministers from 51 states, is a pledge to share tax information in an open and transparent fashion. Germany’s minister for finance said the cross-border agreement would bring an end to tax evasion. But the US, home to some of the largest multinationals in the world, has failed to sign it.
Murphy holds little hope for an immediate tax policy shift in a UK economic climate that facilitates tax avoidance, and is shrouded in financial secrecy.
He argues Cameron’s vow to tackle tax dodging directly contradicts the coalition government's tax policies. Murphy stresses the Prime Minister has overseen policy changes, which make it easier for companies based in Britain to take advantage of tax havens.
“David Cameron has changed our fundamental corporation tax law so companies can pay tax on income they receive in the UK – but not on their worldwide income,” he said.
The UK economist added the government has purposefully created a new loophole the EU insists is facilitating aggressive tax avoidance.
The loophole relates directly to a tax incentive called the 'Patent Box'.
According to UK campaign and advocacy group the Tax Justice Network, the Patent Box "reduces the effective UK corporation tax rate to 10 percent (as compared to 21 percent) on income attributable to patents subject to certain conditions.”
The tax justice campaign recently denounced the loophole central to this tax avoidance strategy as “nasty, disingenuous and hypocritical.”