Yesterday’s Panama Papers leak exposed the huge scale of tax avoidance and evasion among the world’s rich and powerful. It is a timely reminder of the vast inequalities that exist between the richest and the rest of us.
We’ll hear a lot over the coming days on exactly how this has been achieved, terms like shell companies and bearer shares will be trotted out, and a light will, belatedly, be shone on the apparently shady dealings of certain tax lawyers and accountants.
But don’t be fooled. This isn’t the result of a few bad apples taking advantage of historical quirks in international tax law. This is endemic. It represents not only a failure of legal and financial systems on a grand scale, but a systemic refusal, over many years, to challenge the rich and the powerful, and to require them to pay their fair share of tax.
This isn’t just about what is right or fair either, tax evasion and aggressive tax avoidance have significant consequences for ordinary people here in the UK. If you want, as most do, a state that provides an adequate safety net for the disadvantaged and the vulnerable, it costs money. If you believe in the existence, and importance, of public goods like education and health, that help people realise their potential, then that costs money too. These are services that not only help people to live dignified lives, where they can participate fully in society, they also help to reduce inequality.
We keep hearing that the only way to pay for these services is through a dynamic and growing economy. Equally important of course is to effectively gather the taxes that should derive from (and help underpin) a successful economy. But this seems to have passed policymakers by. Especially those who’ve hobbled our tax-gathering powers by scaling back HMRC’s resources.
The inevitable result is the commitment to do more with less, with round after round of spending cuts and supposed efficiency savings. In some cases, as with cuts to Universal Credit, this means a straightforward reduction in the incomes of some of the poorest workers – an obvious inequality increasing measure. What the Panama Papers show us, at least in part, is that this may not be necessary, if the political will is there for a tax system that effectively taxes the very rich.
The temptation in all this may be to shrug our shoulders and say “what did you expect, this is the world we live in”. But it’s not the world we have to live in. We don’t need half measures from political leaders now, we need comprehensive action to prevent industrial scale tax evasion and avoidance, and the huge inequality it inevitably helps to perpetuate. Nothing less will do.
John Hood, Media and Communications Manager