Tax and the G8
John O’Farrell casts a critical eye over the forthcoming G8 summit.
I learnt two useful things on Budget Day, and neither fact came from Gideon Osborne. I learnt from April’s Prospect magazine that the act of stretching and yawning simultaneously is called ‘pandiculation’ and that “Jersey has become the world’s largest exporter of bananas.”
According to an essential article* from Oxford professor of economics Paul Collier, June’s G8 shindig in Fermanagh is the last best hope for effective action on tax dodging. Professor Collier has been advising David Cameron on the importance of challenging the apathy of a global corporate racket which is costing the world $21 trillion stashed away in tax havens “of which around $9 trillion is from developing countries.”
The gist of his argument is that the fleecing of the Third World by tax scams and corporate opacity, which has dwarfed the amount donated as aid, is now becoming a crisis for developed nations, such as the G8. The UK’s tax gap is around £120 billion annually, equal to the annual deficit which austerity is supposed to be tackling.
The antics of vodafone and Google have crystallised the idea in the public imagination that corporates are not paying their way. All the waffle in corporate mission statements about ‘corporate social responsibility’ is hypocritical spin if your CEO pays less tax than his office cleaner and local cafés contribute more to the health and education of their workforce than Starbucks.
Transfer pricing and other shady mechanisms are used to aid Google in avoiding their due taxes. The intellectual copyright for its algorithms resides in Bermuda, despite its geeks hanging out in California, and this is related to its European HQ sitting in Dublin. That is why Starbucks sources its coffee from Switzerland, why horsemeat lasagnes are linked to Luxembourg and Cyprus, and why Jersey adds layers of meaning to the term ‘banana republic’.
Tax havens are parasites on the global economy, and ought to be treated like pariah states. Some are already. German distaste for the Irish Financial Services Centre is believed to be a severe hindrance to alleviation of Dublin’s distress. Germans are now paying reparations for the IFSC’s ‘light-touch regulation’ which contributed to the collapse of Depfa Bank, which dragged down Hypo Real Estate, costing the German tax-payer over €100 billion in guarantees and credit lines.**
It certainly is behind the savage punishment meted out to Cypriot bank depositors. It has also been a revelation of the priorities of President Putin, that he rushed to defend the interests of hot money evaporating from his country. So the chances of getting him to challenge the modus operandi of his oligarchs and cronies are about as likely as him leading this year’s gay pride parade in Moscow.
Is it worth asking exactly how Northern Ireland is going to benefit from the G8? Apart from the shamelessness of using the presence of the global great’n’good to request that Northern Ireland become an onshore tax haven itself, the policing costs will be astronomical.
Fermanagh, and much else, will be closed down by security heavies and the only added value will be to bridal suites in lakeside hotels. There will be a photo op on a golf course. Putin may bare his chest. Angela Merkel could scowl a lot. Cameron will look chummy and hope for a nice pic with Obama. No-one will recognise the token Italian. It will rain.
The only socially useful thing about the G8 is its educational opportunities. We will have a clear and present reason to think about money and power on a bigger canvas than our wee provincialism. For a weekend, in faraway Belfast, there will be a series of public events and lectures organised through the IF campaign. Aid, land, transparency and tax will be the focus of discussion and debate at venues across Northern Ireland. Join in. As for the boondoogle on Lough Erne, the best response is pandiculation.
