Without curbing corporate power the G8 have no chance of combating tax avoidance

Prem Sikka is one of the academics from around the world attending the Belfast G8 Pre-Summit conference organised by the School of Politics, International Studies and Philosophy, Queen’s University Belfast and the G8 Research Group at the University of Toronto.
G8  venue

G8 venue

 

A day earlier he had written: “Corporate power is so deeply embedded in neoliberalism that politicians have failed to consider its corrosive effect. I will be highlighting that in my talk”.

The “capture” of the state by economic elites
Professor Sikka

Professor Sikka

In his Conversation article, “Without curbing corporate power the G8 have no chance of combating tax avoidance”, he reflects that one of the recurring themes in social sciences is the “capture” of the state by economic elites. This enables them to advance their economic interests, shape public policies and choices. He adds:

“This is nowhere more relevant than in debates about tax avoidance, a key item on the agenda for next week’s meeting of G8 nations in Ireland . . . one thing it won’t discuss is the colonisation of the state by economic elites, a key reason for the continuing failure to tackle organised tax avoidance.

“In recent months, multinational corporations, such as Google, Apple, Microsoft, eBay, Apple, Vodafone, HSBC and Amazon have been hitting the headlines for their tax avoidance and other anti-social practices.

“The Big Four accountancy firms – PricewaterhouseCoopers, Ernst & Young, Deloitte and Ernst & young – have been grilled by the UK parliamentary committees for devising and marketing tax avoidance schemes, many of which have been declared to be illegal by the courts. Yet the same economic interests play a key role in devising and enforcing UK tax laws”.

He gives two examples of damaging legislation

First a new piece of tax legislation known as the Patent Box which came into operation with effect from 1st April, drafted by a working party consisting entirely of representatives of major corporations, including GlaxoSmithKline, Rolls-Royce and Shell.

The controlled foreign companies (CFC) is another piece of legislation crafted by corporate interests. The working parties crafting the legislation included representatives from Diageo, Tesco, Vodafone, Shell, Rio Tinto, GlaxoSmithKline, Kraft, Cable and Wireless, HSBC, Prudential and Avia. All have a vital economic interest in securing compliant tax laws. There was no representation from any civil society organisation, trade unions or critics.

The combined effect of the CFC and the Patent Box legislation could reduce corporate tax bills by about £5 billion a year, at a time when ordinary people are facing massive hardships.

From 1st July 2013, a General Anti-Abuse Rule (GAAR) will come into effect. This requires HMRC to apply a ‘double reasonableness’ test. Sikka asks: “Who will decide whether the state of affairs is reasonable? The procedure is that HMRC will have to put its request to a panel of so-called independent experts . . .  most likely to consist of directors of companies and accountancy firms . . . A recent advertisement invites unpaid individuals to sit on the GAAR panel. Inevitably they will come from corporations who can continue to pay them whilst on secondment to HMRC . . .Thus the tax avoidance industry and companies implicated in tax avoidance will be in a position to shackle HMRC”.

In common with many others the UK state is too close to corporate interests

No fight against tax avoidance is ever going to be effective until there is some distance between big business and the tax authorities, but in common with many others the UK state is too close to corporate interests.

Curbing corporate power and realigning political institutions to the needs and concerns of ordinary people should be on the agenda of G8, but regrettably it will not be and tax avoidance is likely to remain rampant.

Prem Sikka is Professor of Accounting, Essex Business School at University of Essex – see the university website for an account of his message.

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Posted on June 15, 2013, in Banking and finance, Civil servants, Conflict of interest, Corporate political nexus, Democracy undermined, Government, Lobbying, Parliamentary failure, Vested interests and tagged , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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