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How Offshore Tax Avoidance Can Be Stopped in London

Closing tax havens starts at home.
April 15, 2016, 10:59am

(Photo by Sam Sergeant)

Tax havens mask and obscure our vision, hiding the true dynamics of power. As the secrets of Mossack Fonseca tumble out, we've been given a rare glimpse into the world of the global elite, who – nestled among the spies and gun-runners – continue to determine what our government will do next and what the future will hold for us.

Today, via its overseas territories, Britain is the single biggest administrator of tax havens. Over half of the estimated £21 trillion hidden offshore moves through the world's original tax haven: London.

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For Ronen Palan – professor of international political economy – the modern tax haven is characterised by the commercialisation of sovereignty. In effect, nation-states use their authority to develop legal systems designed for sale to the highest bidder, creating fortified castles of secrecy. By enabling the wealthy to slip through the cracks of national laws into international obscurity, the offshore industry renders the rich effectively untouchable.

From the scribes of Ancient Egypt to the tributes of Imperial Europe, taxation has historically been about financing warfare. It was usually imposed on populations by unaccountable rulers under the threat of violence. As modern states developed, so did a social consensus that fought and won the right to vote – often under the banner of "no taxation without representation". Framing tax as a moral question about contributing to a collective good is a relatively recent proposition, intimately bound to a class compromise that birthed social democracy: the policies that, for a few decades, gave us rising living standards, wages and life expectancy – funded by stopping the rich from becoming the super-rich.

The 1970s and the Thatcherite mantra that "greed is good" saw a dangerous reversal of these gains. Like lifting the lid off an old ashtray, the Panama Papers assaults the room with the odious stench of private wealth mixed with state power. Entire countries now function solely as private bank vaults for the rich and dirty. The result is tax havens that are driving a global race to the bottom, in which the powerful demand ever-lower taxes under the implied threat of moving ever-more offshore. Cameron asserts "wealth is not a dirty word", but when 300,000 people depend on food banks as they cannot afford to eat – due to savage austerity demanded by their party and their class – such wealth isn't just a dirty word; it's morally unjustifiable.

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In responding to the Panama Papers, Cameron spoke of supporting those who want to "support their families". It was a clear attempt to get what would probably be termed the "aspirational middle-class" on side, but who is he really supporting? This political crisis hasn't happened because some people have nice houses, some savings and can take the kids on a holiday or two every year. Who doesn't want those things? No – the wealth Cameron is protecting is that of the kind of billionaire who accumulates an oligarch lifestyle through collecting rent, providing second rate public services, selling stocks or selling weapons.

On Thursday, George Osborne announced new regulations that will lead to the automatic sharing of information about the true owners of complex shell companies and overseas trusts. The Chancellor called this "a hammer blow" against tax avoidance, but transparency campaigners are already pointing out that many tax-dodge trusts are excluded, so will continue to get away with it. There will also be an investigation by the Serious Fraud Office. That will be in conjunction with HM Revenue and Customs – an agency directed by a man who described taxation as "legalised extortion", and who was a senior tax lawyer for a major London firm that acted for Blairmore Holdings and other companies named in the leak.

Ahead of a global anti-corruption summit presenting a real opportunity for change, a junior minister confirmed that Britain will do precisely fuck-all to rein in the tax havens it controls. Little wonder that the president of the Cayman Islands – a leading tax haven – responded to the government's plans in the Guardian saying: "This is what we wanted, this is what we have been pushing for for three years."

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It would be ludicrous to pretend we will see any meaningful action on tax havens from Cameron's administration. Waiting four more years in the hope of a Corbyn government to challenge austerity is a luxury we cannot afford when every day more of our collective wealth is asset-stripped and squirrelled away.

In 2012, Boris Johnson wrote that instead of directing hatred towards that poor and maligned minority – the super rich – we should thank them as "tax heroes" – "wealth creators" responsible for feeding and clothing us with their benevolent hands. But it's these wealth-creating heroes, with their offshore trillions, who say there is no money left, so we must sell them everything that belongs to us before renting it back off them. While our institutions and our future are destroyed, we must all get poorer and the sick must die: austerity, they tell us, is the only responsible course of action. If the Mossack Fonseca affair teaches us anything, it's to say fuck that: bite the hand that feeds you.

It's encouraging that so many gathered outside Downing Street last Saturday to call for accountability. But when the government does not give a shit about the British steel industry, it is unlikely to change course on tax because a road had to be closed off for a few hours. Just as the tax havens give power to the elite, we need to build bases of power ourselves.

If the rich won't pay their taxes, why should anyone else? Through secrecy and cash payments we could build our own personal tax-havens; a thousand petty treasons, amounting to mass refusal to engage with a demonstrably unjust system.

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If that sounds like too much effort, we could always go after theirs. Thanks to international flight capital and the open arms of Boris Johnson, the United Kingdom came second only to Hong Kong as the largest originator of the companies utilised by Mossack Fonseca. The theft enacted by the global elite might be registered in the sunshine, but its deals are made in the grey towers of city law firms and the dark warmth of Mayfair drinking dens.

It is this – the physical infrastructure of the tax avoidance networks hidden in plain sight in London – that enables the farce to continue. It would be interesting to see how long government inaction could continue in the face of sustained, popular disruption of these places. That might sound fanciful, but it's worth remembering that it was exactly this tactical programme deployed by UK-Uncut that first pushed tax avoidance up the British political agenda.

When everyone already knows that they are all in it together, the Panama Papers bring into sharp relief just how staggering the inequality is that blights our future. While the assets may be offshore on paper, the power centres that administer them are very much onshore. Closing the tax havens starts at home: to have the resources necessary to address our problems – from endemic poverty, a housing catastrophe, climate change and to secure the future we all deserve – they cannot continue operating unimpeded. The Mossack Fonseca scandal shows that it's Us vs Them. Now is the time to pick a side.

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