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Showing posts with label multinational. Show all posts
Showing posts with label multinational. Show all posts

Thursday 4 July 2019

Inside the 21st-century British criminal underworld

There are almost 5,000 criminal gangs in the UK. But the old family firms are gone – today’s big players are multinational, diversified and tech-savvy writes Duncan Campbell in The Guardian


Who rules the underworld today, and where do they conduct their business? Once there were the familiar mugshots and Runyonesque nicknames, the clubs and pubs where the usual suspects gathered, plotted and schemed. Now organised crime is run like any other business, and its leading figures look like every other broker or tycoon. We have entered into a world of what Sir Rob Wainwright, until recently Europe’s most senior police officer, calls “anonymised” crime. The underworld has become the overworld.

The National Crime Agency has estimated that £90bn of criminal money is being laundered through the UK every year, 4% of the country’s GDP. London has become the global capital of money-laundering and the beating heart of European organised crime. English is now the international underworld’s lingua franca. Crime is an essential part of the British economy, providing hundreds of thousands of jobs, not just for professional criminals – the NCA reckons there are 4,629 organised crime groups in operation – but for police and prison officers, lawyers and court officials, and a security business that now employs more than half a million people.

Just as the names of familiar shops have been departing from the high street, the old family firms of criminals are disappearing, whether in London, Glasgow, Newcastle or Manchester. And just as British football fans have had to learn how to pronounce the names of the legions of new foreign players, detectives have had to learn to do the same for the increasing number of new criminals. Britain was once dealing with drugs imports from half a dozen countries; now it is more than 30. A young person who would in the past have sought an apprenticeship in a trade or industry may now find that drug dealing offers better career prospects. And, apart from drugs and guns, British trading channels now facilitate the trafficking of women from eastern Europe and Africa for prostitution and children from Vietnam as low-level drug workers.

The underworld’s modus operandi has shifted in the past quarter century. “The international nature of crime and technology are probably the two biggest changes,” says Steve Rodhouse, the NCA’s head of operations. Speaking at the NCA’s unprepossessing headquarters in Vauxhall, south London, Rodhouse explains how the agency’s work has mushroomed. “Pretty much all of the NCA’s most significant ‘high-harm’ operations now involve people, commodities or money transferring across international borders. The days of having a drugs gang, a firearms gang or a people-trafficking gang have changed because of the concept of polycriminality. Groups satisfying criminal markets, whatever they may be, is now much more common. These are businesses and people are looking to exploit markets, so why confine yourself to one market?”

Wainwright, who served as Europol chief for nine years, has also noted this internationalisation of crime. Addressing a Police Foundation gathering just after his retirement last year, he said that Europol, the European equivalent of Interpol, having expanded since its foundation in 1998 when “it consisted literally, of two men and a dog – admittedly, a sniffer dog – in Luxembourg,” now dealt with 65,000 cases a year. By 2018, he reckoned that 5,000 organised crime groups were operating across Europe and the mafia model had been replaced by a “more nimble” model, with 180 different nationalities operating, mixing legal with illegal business and working with between 400 and 500 major money-launderers. This was multinational business with specialists in recruitment, movement, money-laundering and the forging of documents.

The internet, of course, is a major factor. Wainwright likened its effect on crime to that of the motorcar in the 1920s and 30s, when suddenly criminals could escape at speed and take advantage of new markets. He cited the dark web, which he said was selling 350,000 different illegal items – 60% of which were drugs – but including everything from guns to pornography and even operating a ratings system for speed of dispatch and quality. The combination of new faces of whom the British police – and often Interpol and Europol – were unaware, along with an increasingly tech-savvy pool of criminals able to disguise their identities, made for a toxic cocktail. Crooks anonymous.

One group with little interest in anonymity are the Hellbanianz, a gang of cocky young Albanians based in Barking, east London. They went online in spectacular fashion in 2017 via Instagram and YouTube rap videos to flaunt their ill-gotten wealth and firepower.

Their most prominent member, Tristen Asllani, who lived in Hampstead, was jailed for 25 years in 2016 for drug dealing and firearms offences which included possessing a Škorpion submachine gun. He was caught after a police chase in north London which ended when he crashed his car into a computer repair shop in Crouch End. A photo of Asllani, showing him stripped to the waist after he had apparently spent long hours in the prison gym, appeared on a social media page called My Albanian in Jail, with a caption saying “Even inside the prison we have all conditions, what’s missing are only whores”.

The flashy cars and bundles of banknotes on display in the Hellbanianz videos were the result of the importation of cocaine and cannabis, but the gang was also involved in the weapons trade. The pictures showed £50 notes wrapped around a cake and their HB logo written in cannabis. After they were arrested and jailed, other gang members have posted pictures of themselves, taken with smuggled mobile phones, from inside prison where they cheerfully inscribe their gang name on the walls.

Muhamed Veliu, an Albanian investigative journalist, who knows London well, says that the Hellbanianz have been on the crime scene in east London for many years. “They are sending a bad message to young Albanians. By seeing such photos, they think the streets of UK are paved with gold … Bizarrely, despite the fact they are in the prison, they show the outside world photos of their life behind the bars.” He said that there was a concern that the British media stereotyped all Albanians as criminals but, he added, the 2006 Securitas robbery, in which two Albanians played key roles in the theft of £53m from a depot in Kent, was regarded with some national pride back home. “It was ‘the crime of the century’, it was seen as very different from making money from prostitution, which is the lowest form of crime. It is wrong, of course, but they did need bravery to get involved, and at least they went for a bank – that was the feeling in the Albanian community.” There are currently around 700 Albanians in British jails.

“Albania is Europe’s largest producer of cannabis,” says Tony Saggers, the former head of drugs threat and intelligence at the NCA. “It is important not to stereotype, but the Kosovan war led to Albanians pretending to be Kosovan in order to get asylum in the UK. Many of the people who came just wanted a better life, but there were criminals among them who were able to set up illicit networks … The UK criminal has a get-rich-quick mentality while the Albanians’ strategy was get-rich-slow, so they have driven down the price of cocaine in the UK. They knew that if they expanded, they could undercut the market.” It helped that their reputation preceded them. “The Albanian criminals may be ruthless and potentially murderous when controlling their organised crime,” said Saggers, “but when they come to the UK they try to be more charismatic and they use fear – ‘We’re here, we need to get on,’ that sort of approach. So there is little violence from the older Albanian criminals in the UK, because they know that violence attracts more attention.”

The Albanians had already established themselves in a darker fashion when 26-year-old Luan Plackici was jailed in 2003 and said to have made more than £1m from trafficking “poor, naive and gullible” young women who thought they were on their way to jobs as waitresses or barmaids. Some had to service up to 20 men a day to pay for the £8,000 “travel bill” from Romania and Moldova.

The international nature of people-trafficking was exposed fully in 2014 by a trial of a gang that imported more than 100 women into Britain. The trial ended with the gang leader, Vishal Chaudhary, being jailed for 12 years. Chaudhary, who lived the high life in Canary Wharf in London, contacted young women through social networks in Hungary, the Czech Republic and Poland, offering work as receptionists, nannies or cleaners in England. But when they got to the UK, the women were forced to work in brothels. Chaudhary’s team, all of whom were jailed, consisted of his brother, Kunal, who worked for Deloitte in Manchester, a Hungarian heavy called Krisztian Abel and the latter’s sister, Szilvia, who helped recruit the women.

 
A cannabis farm discovered in a house in Oldham in 2013. Photograph: Christopher Thomond/The Guardian

There are numbers of young people involved in what the legal system terms “forced criminality”. The lawyer Philippa Southwell has specialised in such cases, which apply in particular to young Vietnamese people brought illegally into the UK by traffickers and forced to work in cannabis farms to pay back debts of up to £30,000 that their parents have undertaken in order for them to have a new life in Europe.

“The modus operandi of criminal organisations is to target children or young adults, trafficking them across the world in a journey that can take months,” Southwell says. “Those being trafficked from Vietnam, often transit via Russia, Germany and France, by boat, lorry and even by foot. Once at their destination, they will be locked in a premises and made to tend the cannabis plants, by watering them and ensuring the lighting is on. These cannabis grows are sophisticated multi-million-pound drug operations, with the electricity often being extracted illegally and high-value equipment used. The windows of the buildings may be nailed shut. The farms normally operate in rural areas where the chance of detection is reduced.”

The boys and young men were in a form of debt bondage, but no matter how hard they worked, their debt never seemed to be paid off. “There is a misconception within the criminal justice system that they are free to leave because the doors may not always be locked,” says Southwell, “but the reality is that they have nowhere to go – they are controlled through threats of violence, debt bondage, isolation, fear and other complex control methods that are regularly used by traffickers.”

From the Chinese opium dealers in the 1920s, the Italian gangsters in the 30s, the Maltese pimps in the 50s, the West Indian Yardies in the 60s, the Turkish heroin dealers in the 70s to the east Europeans gangsters and Nigerian fraudsters today, there has long been an unfair tendency to blame foreigners as dominant figures in the underworld. While they may have all had their parts to play, the homegrown British villain – whether artful dodger or ruthless kingpin – has always been the bedrock of the underworld.

“Everyone wants to be a gangster,” says BX, a young former gang member from north-west London. “Everyone’s seen it on TV and that’s what they want to be. They look at music videos and it looks like the people in them are making hundreds of thousands of pounds, although the reality is that they are still living at their mum’s house. Most of them come from estates and they see their parents going to work, struggling to pay the bills. They come home, their mum’s not there, and all the places where kids could play are closing down. Nine times out of 10, they leave school without qualifications. So if you’re broke, if you can’t get a job, you’re going to take the opportunity. My parents had no clue what I was up to – I didn’t come back with any marks on my face.”

The recent upsurge in knife attacks has focused attention on gangs. At one stage last year, there were six separate knife murder trials underway at the Old Bailey, all gang-related, all involving more than one defendant, none older than 22. “It’s not a black thing, it’s not a white thing, everyone’s doing it,” says BX. “There’s no: ‘I’m black, he’s white, we can’t get along’ any more.” There were still ample opportunities for smaller-time dealers: “You can make a grand a week.”


An organised gang carrying out robberies on scooters in London in 2018. Photograph: MET Police

The hierarchy of gangs remained a key factor. “If you’re a drug dealer, you have to find people who will do your dirty work for you. The way it works is the elders, who are, say, 24 or 25, they see you doing well, so they might take you under their wing. The young kids acting as look-outs, they’re thinking: ‘I’m part of that guy’s enterprise. That could be me in however many years, I could get promotion.’ As they say, loyalty brings forth royalty.”

Territory is important commercially. “If you’re doing five keys (kilos) a week and then suddenly you’re only doing three a week, it doesn’t take long to realise that someone’s out there taking your customers. So you have to eliminate the opposition. How do you do that? By either taking them out, or tipping off the police. You are never supposed to snitch, but I know one guy, from Southall, who’s a millionaire now; he was in competition with a guy from the same area so he informed the police.” There’s a not-unfounded suspicion that some informers have continued to commit crimes while under police protection. “All the old-school rules – they’re gone. I know people who work with the police to get immunity for themselves. I know one who everyone knows works with the police, he’s even been shooting people, but you type his name into Google you won’t find anything about him and, believe me, his record is way longer than my arm.”

The risks are high. “Of the people I grew up with, only three of us haven’t been to jail, although I’ve been arrested many times. My older brother has been in and out of jail – nine months here, six weeks there. But there are less police than ever, so that gives you the incentive, and even if you get arrested, you’re not going to do that long.”

While the young gangs have largely replaced the old family-based crews, so have young, helmeted, scooter-riding robbers smashing their ways into jewellers and mobile phone shops taken on the role of the old sawn-off shotgun-wielding bank robbers.

While those smalltime home-grown villains may still thrive, an increasing number of members of the British underworld have followed old imperial traditions and headed abroad to cut out the middle-man, establishing themselves not only in the traditional bolt-hole of Spain, but in the Netherlands, Thailand and South Africa. The person who was to rewrite the rulebook on drug dealing is the street-smart Liverpudlian Curtis Warren, better known by his nicknames Cocky or the Cocky Watchman. Born in 1963, his criminal career started at the age of 12 with a conviction for car theft. By 16, he was on his way to borstal for assaulting the police. Other offences followed, but it was only when he moved into the drugs business, working out of Amsterdam, that he established his reputation as one of the most prolific traffickers of modern times – Interpol’s “Target One” and the subject of a joint British–Dutch investigation codenamed Operation Crayfish.

While Warren’s move to Amsterdam, where fellow British dealers also established themselves, seemed like a smart idea in that he was less exposed to the British police, it was also a weakness, because the Dutch authorities were able to tap his phone without restriction and secure the evidence they needed. (Although they also required English help in translating Liverpudlian for them.) In October 1996, police in the Netherlands seized 400kg of cocaine, 60kg of heroin, 1,500kg of cannabis, handguns and false passports. Nine Britons and a Colombian were arrested, and Warren was soon portrayed as the biggest fish in the net. He was jailed for 12 years for a conspiracy to import what was claimed to be £125m of drugs into Britain. The Observer suggested he was “the richest and most successful British criminal who has ever been caught”, and he was the only drug dealer to make it on to the Sunday Times rich list. T-shirts with an old mugshot of Warren on them were still for sale in Liverpool 20 years after Operation Crayfish.

After his release from jail in the Netherlands in June 2007, Warren was only a free man for five weeks. He headed to Jersey, but was under constant surveillance and soon arrested. In 2009, he was convicted of conspiring to import £1m of cannabis into Jersey and jailed for 13 years. Warren was alleged to have invested his wealth in everything from petrol stations to vineyards, football clubs to hotels. A Jersey court ordered him to pay £198m after he failed to prove his business empire was not built on the proceeds of cocaine trafficking. Detectives had secretly recorded him boasting during a 2004 prison visit of funnelling huge amounts of cash via a money launderer. “Fuckin’ ’ell, mate, sometimes we’d do about £10m or £15m in a week,” he told some of his visitors. “I was bragging like an idiot and just big-talking in front of them,” was Warren’s explanation later. The Jersey attorney general, Timothy Le Cocq QC, described him as “one of Europe’s most notorious organised criminals”. His failure to pay the money resulted in a further 10 years’ jail time.

He told Guardian journalist Helen Pidd, when she interviewed him in jail in Jersey, that he disapproved of drugs: “I’ve never had a cigarette in my life or a drink. I’ve never tasted alcohol or anything. No interest.” His ambition after he was freed was to leave England – “and never come back”. He added: “I just wish I’d not been such a worry to me mum.”

Few people were better qualified to comment on Warren than former NCA man Tony Saggers, who was an expert witness in Warren’s trial and proceeds hearing. “Curtis Warren was a forerunner,” he said. “You get people like him who come from a tough background, a council-house environment, and he had a sort of bare-faced courage in some respects, to put himself in places like Venezuela and Colombia, which were probably even more dangerous then than they are now. He put himself at the other end of the supply chain, and in a way established that pattern for the elite drug trafficker. But nowadays, high-level, high-profile criminals play less and less of a role, and make use of others below them in a detached way.”

Other British criminals have also cast their nets wide during the past two decades. One of the best-known was Brian Wright, once one of Britain’s most active cocaine smugglers, who was nicknamed The Milkman – because he always delivered. He operated from both Turkish-controlled Northern Cyprus and Spain. In 1998, he was alleged to have imported almost two tonnes of the drug, with the result, according to one customs investigator, that “the cocaine was coming in faster than people could snort it”. The Dublin-born Wright owned a villa near Cadiz, which he named El Lechero – the Spanish for milkman – and had a box at Ascot, a flat in Chelsea’s King’s Quay and used some of his proceeds to fix races on which he then bet, thus laundering his drug profits. Finally arrested in Spain, he was brought back to England and, in 2007, at the age of 60, found guilty at Woolwich crown court of conspiracy to supply drugs and jailed for 30 years.

Some very successful scams have been perpetrated on elderly Britons. John Palmer, who had been involved in the Brink’s-Mat bullion robbery (from whence he got his nickname “Goldfinger”) made his fortune in a crooked timeshare business in Tenerife. A ruthless operator, he took advantage of thousands of gullible souls, many of them elderly holidaymakers, who believed his spiel about the fortunes they could make by investing in timeshare apartments that were never built. Outwardly, he appeared to have it all: the yacht, the cars with the personalised number plates, dozens of properties. He even made it to No 105 in the Sunday Times rich list. “Remember the golden rule,” was the motto he loved to quote, “he who has the gold makes the rules.” But in 2001, he was convicted of a timeshare fraud in which 16,000 victims lost an estimated £33m and served eight years in prison.

Then, in 2015, Palmer was shot dead by a hitman in his garden in Essex. There were rumours that he was killed because he might have been cooperating with the Spanish police over another fraud case. His co-accused were convicted in Spain in May this year and the police in Britain have duly issued a fresh appeal for help to find his killer – with a reminder that there is a £100,000 reward on offer in case that tempts an elderly underworld grass.

Any notion that Spain might still be a safe haven for expat criminals was dispelled in 2018 when Brian Charrington – a close associate of Curtis Warren and regarded as one of the major international drug dealers of his generation – was jailed for 15 years for trafficking and money-laundering in Alicante in 2018. Described in the Spanish press as “el narco que escribia en Wikipedia”, because of his reputation for updating and correcting his Wikipedia entry, the former car-dealer from Middlesbrough had been arrested in 2013 at his villa in Calpe, on the Costa Blanca, an area where some estate agents offer bulletproof glass as a special feature along with the spa bath and barbecue area. There had been wild rumours of crocodiles in his swimming pool, but disappointingly, the police found none.

Charrington was alleged to have brought vast quantities of drugs into Spain via a yacht docking in Altea, north of Benidorm. He claimed his money came legitimately. “I buy and sell villas and I pay my taxes,” he told the court, but was still fined nearly £30m. Following a lengthy investigation involving Spanish, British, Venezuelan, Colombian and French police, his assets, including a dozen houses and his cars and boats, were impounded. After his sentence, his Wikipedia entry was speedily updated.

The titles of true crime memoirs published in the past decade or so tell their own tale. The Last Real Gangster by Freddie Foreman came out in 2015; The Last Gangster: My Final Confession by Charlie Richardson arrived just after his death in 2012; The Last Godfather, the Life and Crimes of Arthur Thompson, was published in Glasgow in 2007. A requiem for the old British underworld.

In many ways, it was already slipping into a haze of nostalgia. The television series Peaky Blinders has spawned its own fashion accessory industry. You can now buy Peaky Blinders cufflinks shaped like razor-blades, or wear a Peaky Blinders cap and waistcoat from the new David Beckham clothing line, something that might have prompted a dark smile from the ruthless and acquisitive 1920s Birmingham gang on whom the series was based. The website henorstag.com even recommends “the Peaky Blinders look” as perfect for a stag night: “For a theme the ladies will love, you will need to capture the stylish world of the early 20th century with black peak caps, stylish grey or black suits with waistcoat, as well as a dusty black coat and shoes in order to complete the look.” (Add a cosh and a cut-throat razor and you’ll really slay ’em.)

While the Kray twins brand continues as the underworld’s equivalent of Marks & Spencer – a framed letter from Ronnie Kray in Broadmoor is currently on offer on eBay for £650 – changes in the law have made criminals less prepared to boast about past crimes. In the old days, under the “double jeopardy” rule, once you were acquitted of a murder, you could never be tried for it again. That rule was overturned with the 2003 Criminal Justice Act, so the days when a villain could explain in their memoirs how they got away with a crime have gone. The 2009 Coroners and Justice Act made it an offence for criminals to profit from accounts of their crimes, so they could no longer sell their stories, or at least officially. The 2002 Proceeds of Crime Act and its increasing use against career criminals has meant that illicit incomes can be seized.

No wonder the Hatton Garden burglary of 2015 – that “one last job” carried out by the elderly “diamond wheezers” – received such attention. Even one of the “last of the last”, Fred Foreman, was hoping he was going to be offered a role in it. “I heard that Terry (Perkins, one of the ringleaders) was looking for me, not long before the burglary took place, so I presume that would have been what it was about,” he says.

Perkins died in his cell in Belmarsh prison last year. Foreman, who made his name with the Krays in the 1960s, now lives in sheltered accomodation in west London. He doubts that the current generation of gangsters will ever write their memoirs: “I don’t think that anyone who has turned to crime these days is going to live long enough to build up a reputation, are they?”

But the recruiting sergeants of the underworld – poverty, greed, boredom, envy, peer pressure, glamour – will never be short of volunteers, whether they live long enough to make a name for themselves or not.

Tuesday 8 November 2016

In Brexit Britain there will be no benefit caps for the multinationals

Aditya Chakrabortty in The Guardian


Take back control. Those three words now govern our politics. They sum up why Britain is leaving Europe, and they make up the yardstick by which Theresa May will be judged. Yet already, in the past few days, their hollowness has been exposed.

This story moves fast – and begins with a threat. Not a subtle moue of displeasure from behind an expensive pair of cufflinks, but a bluntly put, publicly issued ransom. At the end of September the boss of Nissan, Carlos Ghosn, goes to one of the car industry’s biggest annual events, the Paris Motor Show, and declares to reporters that Brexit means the UK now has to cut him “a deal”. If cars made in Britain are to face tariffs on export to Europe, he wants “some kind of compensation”.

Extraordinary: one of the biggest manufacturers in Britain effectively wants danger money to carry on investing here. Even more remarkably, Nissan has behind it the full might of the Japanese government, which sent 15 pages of demands on behalf of some of the country’s biggest businesses – along with the veiled threat to pull out of the UK.

Faster than you can say Micra, Ghosn is invited to Downing Street. Within two weeks he has a face-to-face with the prime minister. The UK has just opted to sever four decades of relations with its biggest trading partner, the government has no fiscal policy and her own party is in turmoil – yet May still clears her diary for the Nissan boss.

Then, a few days back, Ghosn announces Sunderland will not only carry on working, but will now make the new-model Qashqai. The obvious question is: what did his company get from our government? Yet business secretary Greg Clark refuses to divulge any detail of how much or even what kind of taxpayer support has been offered to Nissan – after all, it’s only our money. Instead, he waves off the deal as just a slightly prickly chat in the senior common room.

“One can overcomplicate these things,” he airily tells MPs at the end of October. A mere month after Ghosn made his initial threat, what apparently changed his mind was the government’s “intention to find common ground and to pursue discussions in a rational and civilised way”.

To say this doesn’t add up is beside the point: it’s not meant to. Clark and May obviously don’t want a rival carmaker or any other multinational operating in Britain to know how far they will go to keep them onshore. But if the multimillionaire boss of a £33bn auto giant only wanted a “rational and civilised” discussion, , he could try a Melvyn Bragg podcast. The Qashqai has been a massive seller for Nissan; the company would not have opted to make the next model out of Sunderland merely on the basis of some comforting ministerial purrs.

A source tells Reuters that “the government gave Nissan a written commitment of extra support in the event Brexit reduces its competitiveness”. The carmaker itself acknowledges that its executive committee made its decision upon receiving the “support and assurances of the UK government”. And the former deputy prime minister, Nick Clegg, warns that such deals could cost the taxpayer “colossal amounts of money”. How much? Were the EU to slap on 10% extra on British-made cars, the tariff bill for Nissan UK alone would come to just shy of £300m a year. If May and Clark were to try to cover half of that, they would be extending an unprecedented level of subsidy to just one company. Now imagine those same terms replicated for the other big car exporters: Toyota (which before the referendum warned of cutbacks if Britain left the EU), Honda, Jaguar Land Rover …

What you’ve just seen, then, is a foretaste of the way big business will deal with the government in Brexit Britain. First the threat, then the bargain, and finally, with unministerial haste, an expensive handshake behind closed doors. Each time, the public will be none the wiser, even as their government commits them to perhaps costly support for some company or sector, each one claiming strategic importance. And don’t think it will stop at cars.
Within 48 hours of the Brexit vote, the National Farmers’ Union was preparing for an extraordinary meeting of its council to draw up demands for Downing Street. Top of the list was the £2.4bn in subsidies that farmers get each year from Brussels. Within weeks, the new chancellor Philip Hammond was promising to carry on the handouts until the end of this decade. He made similar offers to universities and businesses reliant on EU grants.


Almost inevitably, the British state becomes even more of a milch-cow for big businesses


Put these numbers in context. Starting this week, the government will cut the benefits it gives to 88,000 families. That is huge turmoil – and it will cut just £100m from the welfare bill. Yet at the same time, billions are being committed to keep sweet businesses from the pharmaceutical giants to the landowners of the south-west.

These are businesses that have already done very well out of taxpayers. Consider Nissan UK: Kevin Farnsworth, lecturer in social policy at the University of York and an expert on government subsidies, calculates that over the past two decades it has taken £782m in loans, grants and handouts from the British and European public. In upfront cash transfers alone that comes to £130m.

Farnsworth has calculated this figure by combing Nissan accounts as well as the grant documents from the British government and its various agencies. He has compiled a database for other major businesses, to be found at corporate-welfare-watch.org.uk.

Where this takes you is to the dirty secret of the British business model. From Margaret Thatcher onwards, successive governments have lured multinational investors by promising them access to the single market, a cheap, biddable workforce and a bunch of corporate sweeteners. It was the same offer Dublin made to the tax avoiders of Silicon Valley and – within its own narrow confines – it worked. As Farnsworth points out, Britain has reliably taken in proportionately more foreign direct investment than most of its competitors.

The problem is that now the UK can no longer guarantee access to 500 million European consumers, it will need to make its workers cheaper and even more flexible and offer more handouts.

Surveying this debacle, it strikes me that Lord Acton got it wrong. It’s not power that corrupts; it’s powerlessness. What do you bargain with, when three decades of deregulation and weakening of local and central government mean you have hardly any cards left in your hand? Almost inevitably, the British state becomes even more of a milch-cow for big businesses. Forget about foreigners coming over here and taking our benefits; now think about multinationals cherry-picking our benefits. That trade-off isn’t rhetorical: it’s real. That money will come from our social security, our hospitals, our schools. Brexit Britain: a soft touch for corporate welfare. Is this what was meant by control?

Sunday 19 May 2013

It's time for a global companies to pay a Global Profit Tax


Ben Chu

The cascade of revelations in recent months showing multinational companies doing a huge amount of business here and yet paying virtually no corporation tax has provoked widespread public demands for something to be done. But people tend to be rather hazier on what that "something" should be.

To define a solution we first need to grasp the nature of the problem: a global tax loophole. In our age of liberalised cross-border trade and free capital flows, multinational companies find themselves with a considerable level of freedom to choose where they pay tax on profits.

With some sophisticated planning from their accountants, many of these corporations (especially those whose commercial value is derived from a piece of intangible intellectual property such as a search engine algorithm or a drug patent) are able to register their profits in tax havens.

Here's how it works. A multinational typically registers its intellectual property in a subsidiary company based somewhere like Bermuda or the Cayman Islands. This subsidiary then charges another subsidiary operating in a big customer market, such as Britain, a massive fee for the right to use that intellectual property. So any trading surplus resulting from activities in the large market is offset by the cost of the fee. And then the profits accumulate in the tax haven.

National governments could and should try to put a stop to this egregious "profit shifting" on their own. But a unilateral approach is plainly second best.

The natural solution is to secure an agreement by all the world's governments to tax the profits of multinational firms collectively and to divide up the revenues fairly between them. This division could be based on the amount of business done by the multinational in their various territories as revealed by their turnover and number of employees.

It sounds complicated, but American states have long operated a system designed along these lines known as "apportionment". Another name used is "unitary taxation". Those names are a bit of a turn-off to the layperson. What's required is a reform banner that the general public can easily understand. I suggest: "Global Profit Tax". After all, doesn't it make sense that global companies should be compelled to pay global taxes?

Saturday 18 May 2013

In truth bosses want cheap labour - People are told EU migrants steal jobs


 

The Conservatives are determined to be seen as the anti-Europe party, but an EU referendum that took Britain out of the union would be a disaster for the party
England - cliffs of Dover
Island nation … leaving the EU won’t isolate the UK. It will isolate England. Photograph: David Parry / PA Wire
Having a referendum on membership of the EU is a bit like having a referendum on membership of the moon's gravitational pull. You can vote to leave it all you like, but it will still be there, exerting the natural influence of its mass. Even China has EU regulations on its statute book, because it needs them to trade with Europe. The best that can be said of a possible withdrawal is that at last Westminster will have only itself to blame. Oh, and of course there will be an end to the regular convulsions of drama over the possibility of having a referendum on membership of the EU. Which admittedly does sound nice.
The poor old Tories – Europe drives them so bonkers. They're like cartoon characters whose eyes turn into pound-signs, except their pupils are shaped like crosses, for votes. The Conservatives are keen to be seen as the anti-Europe party. But Ukip has stolen their thunder. This is a disaster for the Tories for two reasons.
First, it destroys a carefully cultivated Tory image, whereby they can make tough-looking gestures to play to the grassroots.
Second, it destroys the second most important electoral advantage the Conservatives have left (the most important being the first-past-the-post voting system). The coalition has weakened the left's long-standing electoral problem, which was that the leftish vote was split while the rightish vote was a one-stop shop. Ukip has provided a protest vote for disenchanted Tories, just as – up until the moment when David Cameron promised Nick Clegg a rose garden – the Lib Dems provided an alternative to Labour. Now, they are more likely, if anything, to provide another alternative to the Conservatives. Oh, the irony.
Beyond party politics, however, there is not much logic in Conservative Europhobia. In fact, it runs contrary to many of the Conservatives' other long-cherished beliefs. How can people who were so against devolution for the UK's member states be so determinedly in favour of devolving away from Brussels? That's an easy one, isn't it? Devolution within the UK takes power away from Westminster, while leaving the EU will, the poor darlings imagine, give it more. But Scotland will want to stay in Europe, as Nigel Farage's short shrift in Edinburgh this week demonstrated. Wales will want to stay in Europe. Northern Ireland will want to stay in Europe. Withdrawal from the EU won't isolate the UK. It will isolate England, making lukewarm support for full independence, especially in Scotland, a great deal more attractive. The Conservatives, despite their interminable resentment of Europe, really haven't thought this through.
More intractable is the Conservatives' supposed commitment to globalisation and free trade, and supposed horror of protectionism and restrictive practices. Europe, for all its reputation as some kind of dastardly machine for the promotion of crypto-communism, is really just a hothouse environment in which the promised fruits of neoliberalism are forced into ripening more quickly. Whether or not it was right to huddle under the glass with so much of the rest of the continent (and at the risk of labouring a metaphor to death), the process of hardening off out in the global garden is likely to kill a few tubers.
Not Conservative tubers, though. The most deep hypocrisy of the right is seen in its attitude to immigration. The Conservatives are keen to promote themselves as the anti-immigration party, and shake their heads in disgust over the mass immigration that took place under Blair and Brown. However, Labour policy on immigration dates back to the "prawn cocktail offensive", under which New Labour persuaded the City of London that it would look after its interests. Look after them, Labour did, not only turning a blind eye to all kinds of tax dodges, but also obliging the Confederation of British Industry and the Institute of Directors, both of which are institutions stuffed with Tories whose political views took a poor second place to their passion for keeping wages down. Were the Tories to manage to get a referendum on Europe, win it, and put a curb on EU immigration, then, yes, there would be British jobs for British workers, probably alongside a nice non-EU regulation setting the minimum wage at the same level as universal benefit in order to make employing someone pay. People are told that immigrants stole their jobs. In truth, it was employers who wanted a ready supply of workers unused to the living conditions that it took the second world war for the ordinary people of Britain to achieve. The goal of neoliberal globalisation is supposedly a redistribution of wealth around the planet. It also, as the EU itself is discovering, redistributes poverty.
There can be no doubt that the EU is not an entirely successful experiment. It most definitely went too far, too fast. Certainly, there can be few people in Britain who are not now relieved to be outside the eurozone. But, even within Britain one can see the trouble with having disparate parts of the country, with disparate economic needs, all dancing to the same economic tune. Only too well.
The truth is that what's needed is for devolved and local government to be strengthened, and given more fiscal powers. But although the Conservatives like to proclaim their hatred of centralised and distant government, they are not too keen on that. Again, of course, it's all about power. If local government were to become more powerful, then Westminster would find itself either the government of the home counties or simply a mini-EU, passing legislation that allowed the regions of Britain to trade fairly and equally; legislation that would no doubt look uncannily similar to EU legislation. Because it's not the EU that is an extra layer of government that no one really needs – it's Westminster. The European parliament is an institution with a democratic deficit precisely because it exists only to enact what the heads of member states have agreed. Local government in Britain is similarly hampered by the directives of Westminster. Across Europe, national governments are struggling against the advent of their own irrelevance, desperate to stop the leak of any more power either above or below, even as countries fall to government by technocrat. The nation state itself is in crisis, and the denizens of Westminster are the people least likely to see or accept that.
A Britain outside Europe would be governed by multinationals, who would be attracted by low taxes and a population compelled to work, however disabled or ill or elderly they may be. Of course, the Conservatives are keen on a referendum. But they fail to understand that if they got their way, it would be a pyrrhic victory. All those who believe that mass immigration was some sort of politically correct leftwing conspiracy would soon get wise to the fact that they'd been had. In the end, if the Conservatives got their wish, and took Britain out of Europe, they'd be finished.

Tuesday 30 April 2013

Cash-hungry countries have encouraged the rise of tax havens


HAMISH MCRAE in The Independent
Tuesday 30 April 2013

 

A desire to protect the oppressed, and generate revenue, has got us to here



So why don’t the major countries do something about tax havens? Is it that they can’t, or might it just be that permitting tax havens to exist rather suits them?
The mood against tax havens is running hot and strong, fuelled by extreme examples of tax avoidance by multinationals and rich individuals, and the main governments, including our own, are pledged to do something about it. But, for most of us, the puzzle is that the whole system was allowed to grow up in the first place. We can just about understand why our racing drivers choose to live in Monaco but when multinationals flip their earnings through several different jurisdictions, with affiliates busy lending to each other, and end up paying hardly any tax – well, it does all seem a bit rum.
The easiest way to get one’s mind round this extraordinarily complex world is to divide it into two categories: tax havens for individuals; and tax havens for companies. Though the two blend into each other. Take individuals first.
There are really two forces that have pushed countries to create tax havens for people. One has been the desire to protect people fleeing from oppression. Thus the British “non-dom” status goes back to the Napoleonic Wars, when people were fleeing from the Continent. The Swiss banking secrecy was formalised in 1934 after the Nazis came to power, largely to enable Jewish people to get their money out and not be traced by the authorities in Germany. Both systems have been abused and belatedly are now being reformed, but the origins were honourable.
The other has been a simple quest for revenue. The Channel Islands, Andorra, Monaco and the like are all short of natural resources. Having a tax regime that is attractive to rich individuals is a way of exploiting one competitive advantage: the freedom to set tax rates. Again, there have been abuses, and there are downsides such as the impact on property prices (Monaco is prime London, doubled). But if people live in a place, they pay the local taxes. If they need to keep a log of their movements to prove they really live there, so be it.
For companies, it is more complicated. Governments around the world seek to attract investment. So they build foreign firms’ factories, give grants for training, pay for improved infrastructure and so on. For manufacturing, it was all fairly clear, though there have been abuses, where companies take the money, build their washing machines or whatever for a few years, then declare the business unprofitable and bunk out. While many of these incentives made little sense, the photo opportunity for a politician to open a factory in a marginal constituency proved a powerful driver.
But now much international investment is not in physical capital – a factory – but rather in financial and intellectual capital. So countries have developed elaborate schemes to attract these forms of capital, too. The Netherlands has focused on intellectual capital, which is why pop groups locate there. (Yes, pop music is intellectual capital.) Luxembourg has majored on financial capital, attracting fund managers – as indeed has Ireland. Cyprus had a huge offshore banking business, and the money there is now being eagerly courted by other eurozone centres.
If a government in an established democracy creates an incentive, it will attract business. The great advantage of luring financial and intellectual capital is that it is cheap to do so. Politicians may not get the kudos from opening the factory but they don’t have to stump up the funds to build it. Yet the host still gets tax revenue from the deal. The Netherlands, Luxembourg and Ireland are decent, established democracies. The problem is that the effect of these incentives is to deny revenue to other decent democracies.
The solution? There will, of course, have to be better coordination on this to check the most egregious examples of such manipulation – and there will be. But do not expect a revolution. Why else would both the present British Government and its predecessor boast about bringing down UK corporation tax rates to attract investment from other, more onerous jurisdictions? One country’s incentive is another country’s loophole.

Sunday 10 February 2013

Forget Starbucks – what UK companies are doing to avoid tax is far worse


ActionAid investigation looks into financial arrangements of British multinationals
Rainbow, Victoria Falls, Zambia
The Victoria Falls in Zambia, one of the world's poorest countries. Photograph: Nicole Cambre/Rex Features
 
That the world's biggest companies avoid tax on a grand scale is no longer much of a revelation. We know only too well how Starbucks' Dutch royalties, Amazon's Luxembourg hub and Google's Irish operations diminish their tax bill.

But today's investigation by ActionAid into the financing arrangements of an African subsidiary of Associated British Foods plc, the FTSE 100 company behind brands ranging from Ovaltine to Primark, shows how similar practices are hitting some of the world's poorest countries.

Africa's largest sugar producer, Zambia Sugar plc, deploys the familiar techniques of making tax-deductible payments to related companies in distant locations.

Such amounts represent relatively small savings for a conglomerate like Associated British Foods, with annual global pre-tax profits of £750m, but they are a devastating loss for countries like Zambia. Corporate taxes account for more than 20% of total tax revenues of $4bn in a country where 8 million people live in absolute poverty.

And if, as parliament's public accounts committee has discovered, countries like Britain are struggling to counter such "transfer pricing" arrangements, those with even scarcer resources and less expertise have no chance. Or, as one of the Zambian tax authority's advisers put it: "On transfer pricing we are, pardon my language, getting fucked."

ActionAid rightly holds companies responsible for this, but it also points out how they are exploiting international tax law – written by richer northern nations under the auspices of the Organisation for Economic Cooperation and Development – that is biased against poorer countries.

Enforced through bilateral taxation treaties between countries, the rules of the game compel tax authorities to respect transactions such as the payment of interest, royalties and fees between companies within the same multinational group, even when the recipients are based in tax havens and the arrangements have little purpose beyond tax reduction.

Reform to this system is evidently long overdue but, with hundreds of countries signed up to it, progress is glacial. In the meantime political rhetoric such as David Cameron's Davos call for companies to "wake up and smell the coffee" stands as no more than a futile plea to the world's multinationals' better natures.

What will have an impact are George Osborne's relaxations of the UK's "controlled foreign companies" laws governing the diversion of corporate profits into tax havens. The changes are designed, a Treasury memo revealed, "so that [the laws] have a better fit with the way in which [multinational companies] structure their commercial operations…" That is, to facilitate "tax efficient supply chain management".

There is a smell coming from the Government's response to corporate tax dodging at the expense of the world's poor, but it's not coffee.

Richard Brooks is the author of The Great Tax Robbery, to be published by Oneworld Publications next month.

• This article was amended on 10 February 2013. Associated British Foods has said in response to this piece that they do real business in Mauritius and other locations distant from Zambia. They also say that capital tax allowances available in Zambia at the time of the company's investment are the reason for the low Zambian corporate tax revenues.

Friday 18 January 2013

'Buddy' scheme to give more multinationals access to ministers


Controversial scheme which gives corporations privileged government access to be extended to a total of up to 80 firms
Shell is part of the multinational-ministerial 'buddy' scheme
Figures suggest Shell has had the greatest access to ministers under the 'buddy' scheme, with 56 face-to-face meetings since May 2010. Photograph: Robin Utrecht/EPA
 
The government is expanding a controversial scheme which pairs dozens of multinational companies with a ministerial "buddy", giving them privileged access to the heart of government, the Guardian has learned.

The minister for trade Lord Green launched the "strategic relations" initiative in July 2011, giving 38 companies, including oil, telecoms and pharmaceutical giants, a direct line to ministers and officials.
The Guardian has obtained a list of 12 further companies which have now been added to the programme, and understands that UK Trade and Investment is considering up to 30 more for addition over 2013.

Analysis of official registers reveals the 38 companies in the first wave of the initiative – more than two-thirds of which are based overseas – have collectively had 698 face-to-face meetings with ministers under the current government, prompting accusations of an over-cosy relationship between corporations and ministers.

The full degree of contact between the chosen companies and the government is not known as telephone calls, emails, and meetings with officials are not recorded on the registers.

Campaigning groups expressed alarm at the level of access that some of the businesses appeared to have to ministers. The Guardian figures, which looked at the meetings the companies held with No 10 and the three departments involved in the buddy scheme – Business, Culture, and Energy and Climate Change – suggested Shell had the greatest access to ministers. The oil giant has had 56 face-to-face meetings since May 2010.

Greenpeace said this consistent access was showing through in government policy.
"The concern about the government's buddy system was always that policy would end up skewed towards narrow corporate interests rather than the wider public good, and these revelations will do nothing to allay those fears," executive director, John Sauven, said.

Other signs of the scheme bearing fruit for business have arisen in public statements made by the universities minister David Willetts. Last week he urged officials to prescribe more of an Astrazeneca drug, and in November he met Novartis officials about streamlining and accelerating UK research and development and clinical trials – something advocated by many clinicians, as well as businesses.
Among the first wave of "buddied" firms were some which have been targeted by campaigners for paying little or no UK tax, or making "sweetheart" deals with tax authorities, including Google and Vodafone. A spokeswoman for UK Uncut, which campaigns against tax avoidance and spending cuts, said the regularity of government access for big business was drowning out other voices.

"There are hundreds of thousands, if not millions, of people who have marched, written to MPs, gone on strike, protested and occupied over the cuts and privatisation which are devastating our lives," she said.

"These demands by ordinary people have been ignored by a cabinet of millionaires which is choosing to only take the calls, the meetings and the dinners with big business and the banks to introduce policies which benefit them and the wealthy minority in this country."

The new companies to be given ministerial buddies – but not yet publicly disclosed – include the property firms Atkins and Balfour Beatty, which have been paired with climate change minister Greg Barker, who is overseeing work on the government's green deal and zero-carbon homes programmes.
David Heath of the Department of Agriculture is paired with food businesses Nestlé, Unilever, Mondeléz (formerly part of Kraft, and includes Cadbury) and Associated British Foods (owner of Primark and Kingsmill). Statoil is added to the oil companies already in touch with Vince Cable; foreign office minister Hugo Swire has been buddied with Procter and Gamble, and David Willetts with Cisco. The culture minister Ed Vaizey is paired with Telefonica (O2) and Everything Everywhere (Orange and T-Mobile), while Green adds engineering firm GKN to his list.

A spokesman for UK Trade and Investment confirmed the government was considering adding "around 30" more companies to the strategic relations programme over 2013.

"As previously, companies will be selected based on a range of criteria, including the complexity of their relationship with government (and hence the need for strong co-ordination) and their existing or potential contribution to the UK economy," he said.

"Understanding business concerns and being clear about government's own priorities can make a real difference to trade and investment."

A Department for Business, Innovation and Skills spokesperson said Willetts was responsible for the "strategic relationship management" for several pharmaceutical companies, including AstraZeneca. "He regularly meets with companies to discuss issues of importance to them, and has a strong interest in making sure that the environment for the life sciences industry is conducive to innovation and growth."

The Federation of Small Businesses defended the relationship with the government, saying members had good access to ministers through representation by the federation at regular meetings with ministers, but the government could do more.

A spokeswoman said: "We support schemes where multinationals support small businesses in the supply chain and give advice and support through mentoring, for example, such a scheme was announced between UKTI and Diageo in 2012. We would like the government to play an important role in encouraging, promoting such schemes, and engaging small businesses more in the process."
The FSB had 34 meetings with ministers in the four departments analysed by the Guardian between May 2010 and June 2012.

Thursday 3 January 2013

Martin Sorrell's peculiar vision of corporate social responsibility

Outlook Sir Martin Sorrell has expressed himself on the great corporation tax debate. What firms need to understand, the advertising magnate said today, is the imperative of corporate social responsibility.
"Doing good is good business," he told the likes of corporate black sheep such as Starbucks and Amazon, which have faced obloquy in recent months for paying less than their fair share of profit taxes in the UK. I'm afraid this is richer than the Christmas pudding that your grandmother oversoaked in alcohol. For Sir Martin's record on tax hardly resembles a model of virtuous corporate citizenship.

For several decades the British state has had a system whereby a UK-based multinational is required to pay corporation tax on its worldwide profits. In 2007 the Labour government proposed to move to a system where firms would only pay tax on their UK profits, a so-called territorial regime. This was good news for the multinationals, implying a smaller tax bill. But they didn't trust Labour to deliver.

So they upped sticks in a kind of pre-emptive protest. Pharmaceutical giant Shire shifted its headquarters to the Irish Republic. So did United Business Media. The exhibitions and magazines group Informa scurried off to Switzerland. The office accommodation provider Regus went to Luxembourg. And, making the biggest song and dance of all was Sir Martin, who shuffled his WPP advertising empire to the Emerald Isle.

Faced with this exodus the Labour Chancellor, Alistair Darling, redoubled his efforts to establish a territorial tax regime. And Sir Martin made it his business to seal the deal. He extracted a guarantee from Mr Darling's successor, George Osborne, that the new territorial regime would definitely come into force. And, in return, Sir Martin announced last year that WPP would be returning its HQ to London. The territorial corporation tax regime came into full force this week. And WPP is, as Sir Martin promised, on its way back.

The trouble is the new territorial tax regime looks even more open to corporate tax avoidance. Under the old system HMRC could, in theory, go after tax on profits anywhere in the world. It seldom did this effectively. But now, with its territorial remit in place, it is even less likely to do so. And there is still more room for clever accountants to register profits overseas by registering intellectual property rights in tax havens.

This compounds the advantage of multinationals in relation to smaller, domestic firms. We have long known that income tax tends to be for the little people. It increasingly looks like corporation tax is only for the little companies.

The only solution is harmonised international governmental agreement to prevent multinationals playing off national governments against each other on profit tax rates.

As for Sir Martin, he might like to consider whether quitting the country and promising to return only when a law you dislike is changed can be considered "doing good".

Wednesday 31 October 2012

A roll call of corporate rogues who are milking the country


Starbucks TUC protest Oxford Street
Police officers protect a Starbucks outlet in Oxford Street during the TUC anti-austerity protest in London on 20 October 2012. Photograph: Suzanne Plunkett/Reuters
 
'Only the little people pay taxes," the late American corporate tax evader Leona Helmsley famously declared. That's certainly the spirit of David Cameron and George Osborne's Britain. Five years into the crisis, the British economy has just edged out of its third downturn, but construction is still reeling from government cuts and most people's living standards are falling.

Those at the sharp end are being hit hardest: from cuts to disability and housing benefits, tax credits and the educational maintenance allowance and now increases in council tax while NHS waiting lists are lengthening, food banks are mushrooming across the country and charities report sharp increases in the number of children going hungry. All this to pay for the collapse in corporate investment and tax revenues triggered by the greatest crash since the 30s.

At the other end of the spectrum though, things are going swimmingly. The richest 1,000 people in Britain have seen their wealth increase by £155bn since the crisis began – more than enough to pay off the whole government deficit of £119bn at a stroke. Anyone earning over £1m a year can look forward to a £42,000 tax cut in the spring, while firms have been rewarded with a 2% cut in corporation tax to 24%.

Not that many of them pay anything like that, even now. The scale of tax avoidance by high-street brand multinationals has now become clear, in no small part thanks to campaigning groups such as UK Uncut. Asda, Google, Apple, eBay, Ikea, Starbucks, Vodafone: all pay minimal tax on massive UK revenues, mostly by diverting profits earned in Britain to their parent companies, or lower tax jurisdictions via royalty and service payments or transfer pricing.

Four US companies – Amazon, Facebook, Google and Starbucks – have paid just £30m tax on sales of £3.1bn over the last four years, according to a Guardian analysis. Apple is estimated to have avoided over £550m in tax on more than £2bn worth of sales in Britain by channelling business through Ireland, while Starbucks has paid no corporation tax in Britain for the last three years.

The Tory MP and tax lawyer Charlie Elphicke estimates 19 US-owned multinationals are paying an effective tax rate of 3% on British profits, instead of the standard rate of 26%. It's all entirely legal, of course. But taken together with the multiple individual tax scams of the elite, this roll call of corporate infamy has become an intolerable scandal, when taxes are rising and jobs, benefits and pay being cut for the majority.

Not only that, but collecting the taxes that these companies have wriggled out of would go a long way to shrinking the deficit for which working- and middle-class Britain's living standards are being sacrificed. The total tax gap between what's owed and collected has been estimated by Richard Murphy of Tax Research UK at £120bn a year: £25bn in legal tax avoidance, £70bn in fraudulent tax evasion and £25bn in late payments.

Revenue and Customs' own last guess of £35bn has been widely recognised as a serious underestimate. But even allowing for the fact that it would never be possible to close the entire gap, those figures give a sense of what resources could be mobilised with a determined crackdown. Set them, for instance, against the £83bn in cuts planned for this parliament (including £18bn in welfare) – or the £1.2bn estimated annual benefit fraud bill – and you get a sense of what's at stake.
Cameron and Osborne wring their hands at the "moral repugnance" of "aggressive avoidance", but are doing nothing serious about it whatever. They've been toying with a general "anti-abuse" principle. But it would only catch a handful of the kind of personal dodges the comedian Jimmy Carr signed up to, not the massive profit-shuffling corporate giants have been dining off.

Meanwhile, ministers are absurdly slashing the tax inspection workforce, and even introducing a new incentive for British multinationals to move their operations inbusiness to overseas tax havens. The scheme would, accountants KPMG have been advising clients, offer an "effective UK tax rate of 5.5%" from 2014 (and cut British tax revenues into the bargain).

It's not as if there aren't any number of measures that would plug the loopholes and slash tax avoidance and evasion. They include a general anti-avoidance principle (of the kind the Labour MP Michael Meacher has been pushing in a private member's bill) that would outlaw any transaction whose primary purpose was avoidance rather than economic; minimum tax (backed even by the Conservative Elphicke); and country-by-country financial reporting, and unitary taxation, to expose transfer pricing and limit profit-siphoning.

The latter would work better with international agreement. But there is already majority support in the European Union, and it is governments in countries such as Britain – where the City is itself a tax haven – that are resisting reform. When you realise how closely the tax avoidance industry is tied up with government and drawing up tax law, that's perhaps not so surprising.

But when austerity and cuts are sucking demand out of the economy, fuelling poverty and joblessness and actually widening the deficit, the need to step up the pressure for corporations and the wealthy to pay their share as part of a wider recovery strategy couldn't be more obvious.

The target has to shift from "welfare scroungers" to tax dodgers, and the campaign go national. Companies that are milking the country at the expense of the majority are especially vulnerable to brand damage. Forcing them to pay up is a matter of both social justice and economic necessity.

Tuesday 28 February 2012

Trust Business above all is David Cameron's motto.

Britain is being rebuilt in aid of corporate power

Trust business, Cameron tells us, self-regulation is a force for social good. Silly me – I thought it was an invitation to disaster
pudles2802
Illustration by Daniel Pudles
 
They used to do it subtly; they don't bother any more. Last week a column in the Telegraph argued that businesses should get the vote. Though they pay tax, Damian Reece maintained, they have "no say in the running of local or national government". To remedy this cruel circumscription, he suggested that elections in the UK should follow the example set by the City of London Corporation. This is the nation's last rotten borough, in which ballots in 21 of its 25 wards are controlled by companies, whose bosses appoint the voters. I expect to see Mr Reece pursue this noble cause by throwing himself under the Queen's horse.

Contrast this call for an extension of the franchise with a piece in the same paper last year, advocating an income qualification for voters. Only those who pay at least £100 a year in income tax, argued Ian Cowie, another senior editor at the Telegraph, should be allowed to vote. Blaming the credit crisis on the unemployed (who, as we know, lie in bed all day devising credit default swaps and collateralised debt obligations), Cowie averred that "it's time to restore the link between paying something into society and voting on decisions about how it is run". This qualification, he was good enough to inform us, could exclude "the majority of voters in some metropolitan areas today". The proposal was repeated by Benedict Brogan, the Telegraph's deputy editor.

No representation without taxation: wasn't that Alan B'stard's slogan in the satirical series The New Statesman? Votes for business, none for the poor: this would formalise the corporate assault on democracy that has been gathering pace for the past 30 years.

This column is a plea for distrust. Distrust is the resource on which democracy relies. Distrust inspires the scrutiny and accountability without which representation becomes a lie. Distrust is all that stands between us and bamboozlement by people who, like Reece, Cowie and Brogan, channel the instincts of the billionaire owners of newspapers and broadcasters.

Last week David Cameron argued that those who say business "isn't really to be trusted" do so as a result of "snobbery". Business, in fact, is "the most powerful force for social progress the world has ever known". Not democracy, education, science, justice or public health: business. You need only consider the exemplary social progress in Zaire under Mobutu, Chile under Pinochet, or the Philippines under Marcos – who opened their countries to the kind of corporate free-for-all that Cameron's backers dream of – to grasp the universal truth of this statement.

He gave some examples to support his contention that regulation can be replaced by trust. The public health responsibility deal, which transfers responsibility for reducing obesity and alcoholism to fast-food outlets, drinks firms and supermarkets, reaches, Cameron claimed, the parts "which the state just can't".

Under the deal, Subway and Costa are "putting calorie information up front when people are buying". The state couldn't possibly legislate for that, could it? Far better to leave it to the companies, who can decide for themselves whether they inform people that a larduccino coffee with suet sprinkles contains no more calories than the average Olympic sprinter burns in a month. He forgot to mention the much longer list of companies that have failed to display this information.

Another substitute for regulation, he suggested, is a programme called Every Business Commits. Through its website I found the government's list of "case studies of responsible business practice". Here I learned that British American Tobacco is promoting public health by educating and counselling its workers about HIV. The drinks giant Diageo is improving its waste water treatment process. Bombardier Aerospace is enhancing the environmental performance of its factories, in which it manufactures, er, private jets. RWE npower, which runs some of Britain's biggest coal and gas power stations, teaches children how to "to think about their responsibilities in reducing climate change".

All these are worthy causes, but they are either peripheral to the main social harms these companies cause or look to my distrustful eye like window dressing. Nor do I see how they differ from the "moral offsetting" that Cameron says happened in the past but doesn't today. But this tokenism, in the prime minister's view, should inspire us to trust companies to the extent that some of the regulations affecting their core business can be removed.

We are living through remarkable times. The government, supported by the corporate press, is engaged in a naked attempt to rebuild the life of this country around the demands of business. Extending the project begun by Tony Blair, Cameron is creating an economy in which much of the private sector depends on state contracts, and in which the government's core responsibility is to provide them. If this requires the destruction of effective public healthcare and reliable state education, it is of no concern to an economic class that uses neither.

The corporations gaining ever greater powers will be subject to less democratic oversight and restraint, in the form of regulation. Despite the obvious lesson of the credit crunch – that self-regulation is an invitation to disaster – Cameron wants to extend the principle to every corner of the economy. Trust them, he says: what can possibly go wrong?