Tax avoidance is nothing new. For as long as there have been taxes levied, there have always been people willing to jump through every loophole they can find to avoid paying their fair share. It’s unlikely that any tax system will ever be perfect, and the problem has grown as the financial and business environment has become ever more complex.
But over recent decades we have seen the development of a far more pervasive culture of greed and selfishness, which underpins the modern deregulated free market economy. In that context tax avoidance has taken hold on nothing less than an industrial scale. Legal mechanisms are exploited to hide vast amounts of corporate profit and private wealth, protecting giant corporations and rich individuals from taxes which the rest of us pay. As this situation has come to be the norm in the global economy, most governments have concluded that they have no option but to play along, competing with each other to offer low tax environments in order to attract the wealthy.
And so the tax havens continue to operate, the public revenues decline, and the wealth of the economy – wealth we all help to generate – is increasingly hoarded by those who need it the least. The City of London itself increasingly resembles a tax haven, and there are also dangers to Scotland’s reputation from tax avoidance mechanisms.
Last year, following work done by my colleague Andy Wightman, I raised the issue of Scottish Limited Partnerships and asked the Scottish Government to acknowledge the scandalous use of these legal entities for tax dodging. They are openly marketed as tax avoidance vehicles, and as the Herald has shown they are also implicated in money laundering, gun running and other forms of corruption. I got a less than robust response on that occasion, but the issue has been subject to more scrutiny over recent months both in the media and in politics, and the SNP’s reaction has begun to change.
So I was deeply disappointed this week to see an attempt by SNP MPs at Westminster, to secure Government commitments to act on this issue, rejected. UK Ministers were unwilling to accept the case for urgent action to deal with this scandal, and it’s clear that if we want action taken we cannot accept that as the final word.
Oxfam in Scotland have also become involved, with a campaign to encourage all politicians to sign up to a statement of opposition to tax avoidance in general, and the abuse of SLPs in particular. Yesterday I asked the First Minister to support this campaign, and I was pleased with the positive reply.
If we’re serious about dealing with tax avoidance in Scotland, we will need to be bold, and creative in how we go about it. We don’t have control of all the powers we’d really need, and if we’re taken out of the EU we’ll also lose the opportunity to co-operate properly with other countries to deal with cross-border aspects of the problem.
But there are important steps we can take. I’ve previously made the case that taxpayer-funded business support services, such as Regional Selective Assistance grants, should not be available to companies which behave unethically, from issues like tax compliance to paying a real Living Wage; from employee-ownership to environmental performance. Many such actions are promoted by voluntary schemes at the moment, but if those companies which ignore them are still able gain publicly funded support we’ll never make real progress.
So the half-billion pound scheme the First Minister announced this week, which will provide loans and guarantees to companies in Scotland with a view to boosting the economy, must also be designed to ensure that we’re promoting businesses which uphold the highest standards of behaviour.
Because of the nature of this new scheme, it may not involve an overall cost either to the Scottish or UK Government, but if it works it will represent real value to the businesses which are helped. Yet if we put emphasis only on narrow measures of direct economic impact, we will risk giving a benefit to those whose businesses exploit people, damage our environment, and fail to pay their fair share toward the common good. Every business depends for its success on public goods, from transport and infrastructure to the health and education of the population. When they make a profit, it is indefensible that they hide it from the tax system.
The corporate kleptomania which has become normal in today’s economy cannot be allowed to stand. Those who perpetuate it cannot expect to be helped with funds provided by those who do contribute to society by paying their taxes.
I look forward to seeing detail from the Scottish Government, including a commitment to lock the tax dodgers out from all forms of public support.
This article first appeared in the National