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?
Showing posts with label MNC. Show all posts
Showing posts with label MNC. Show all posts
Tuesday, 8 November 2016
Sunday, 9 October 2016
A Free Market in Tax
Nick Cohen in The Guardian
Donald Trump’s tax affairs are as nothing compared to those of the great global corporations
Keeping it offshore: Jost Van Dyke in the British Virgin Islands, a tax haven for the world’s rich. Photograph: Alamy
Donald Trump is offering himself as president of a country whose federal income taxes he gives every appearance of dodging. He says he is fit to be commander in chief, after avoiding giving a cent more than he could towards the wages of the troops who must fight for him. He laments an America where “our roads and bridges are falling apart, our airports are in third world condition and 43 million Americans are on food stamps”, while striving tirelessly to avoid paying for one pothole to be mended or mouth to be filled.
Men’s lies reveal more about them than their truths. For years, Trump promoted the bald, racist lie that Barack Obama was born in Kenya and, as an unAmerican, was disqualified from holding the presidency. We should have guessed then. We should have known that Trump’s subconscious was trying to hide the fact that he was barely an American citizen at all.
He would not contribute to his country or play his part in its collective endeavours. Like a guest in a hotel who runs off leaving the bill, Trump wanted to enjoy the room service without paying for the room. You should never lose your capacity to be shocked, especially in 2016 when the shocking has become commonplace. The New York Times published a joint piece last week by former White House ethics advisers – one to George W Bush and one to Barack Obama, so no one could accuse the paper of bias. They were stunned.
No president would have nominated Trump for public office, they said. If one had, “explaining to the senate and to the American people how a billionaire could have a $916m ‘loss carry-forward’ that potentially allowed him to not pay taxes for perhaps as long as 18 years would have been far too difficult for the White House when many hard-working Americans turn a third or more of their earnings over to the government”.
Trump’s bragging about the humiliations he inflicts on women is shocking. Trump’s oxymoronic excuses about his “fiduciary duty” to his businesses to pay as little personal tax as he could are shocking. (No businessman has a corporate “fiduciary duty” to enrich himself rather than his company.) Never let familiarity dilute your contempt.
And yet looked at from another angle, Trump is not so shocking. You may be reading this piece online after clicking on a Facebook link. If you are in Britain, the profits from the adverts Facebook hits you with will be logged in Ireland, which required Facebook to pay a mere €3.4m in corporate taxes last year on revenues of €4.83bn . If you are reading on an Apple device, Apple has booked $214.9bn offshore to avoid $65.4bn in US taxes. They are hardly alone. One recent American study found that 367 of the Fortune 500 operate one or more subsidiaries in tax havens.
Trump may seem a grotesque and alien figure, but his values are all around you. The Pepsi in your hand, the iPhone in your pocket, the Google search engine you load and the Nike trainers you put on your feet come from a tax-exempt economy, which expects you to pick up the bills.
The short answer to Conservatives who say “their behaviour is legal” is that it is a scandal that it is legal. The long answer is to invite them to look at the state of societies where Trumpian economics have taken hold. If they live in Britain or America, they should not have to look far.
The story liberal capitalism tells itself is heroic. Bloated incumbent businesses are overthrown by daring entrepreneurs. They outwit the complacent and blundering old firms and throw them from their pinnacles. They let creative destruction rip through the economy and bring new products and jobs with it.
If that justification for free-market capitalism was ever true, it is not true now. The free market in tax, it turns out, allows firms to move offshore and leave stagnant economies behind. Giant companies are no longer threatened by buccaneering entrepreneurs and innovative small businesses. Indeed, they don’t appear to be threatened by anyone.
The share of nominal GDP generated by the Fortune 100 biggest American companies rose from 33% of GDP in 1994 to 46% in 2013, the Economist reported. Despite all the fuss about tech entrepreneurship, the number of startups is lower than at any time since the late 1970s. More US companies now die than are born.
For how can small firms, which have to pay tax, challenge established giants that move their money offshore? They don’t have lobbyists. They can’t use a small part of their untaxed profits to make the campaign donations Google and the other monopolistic firms give to keep the politicians onside.
John Lewis has asked our government repeatedly how it can be fair to charge the partnership tax while allowing its rival Amazon to run its business through Luxembourg. A more pertinent question is why any government desperate for revenue would want a system that gave tax dodgers a competitive advantage.
What applies to businesses applies to individuals. The tax take depends as much on national culture as the threat of punishment, on what economists call “tax morale”.
No one likes paying taxes, but in northern European and North American countries most thought that they should pay them. Maybe I have lived a sheltered life, but I have no more heard friends discuss how they cheat the taxman than I have heard them discuss how they masturbate. If they cheat, they keep their dirty secrets to themselves. Let tax morale collapse, let belief in the integrity of the system waver, however, and states become like Greece, where everyone who can evade tax does.
The surest way to destroy morale is to make the people who pay taxes believe that the government is taking them for fools by penalising them while sparing the wealthy.
Theresa May promised at the Conservative party conference that “however rich or powerful – you have a duty to pay your tax”.
I would have been more inclined to believe her if she had promised, at this moment of asserting sovereignty, to close the British sovereign tax havens of the Channel Islands, Isle of Man, Bermuda and the British Virgin and Cayman Islands.
But let us give the new PM time to prove herself. If she falters, she should consider this. Revenue & Customs can only check 4% of self-assessment tax returns. If the remaining 96% decide that if Trump and his kind can cheat, they can cheat too, she would not be able to stop them.
Donald Trump’s tax affairs are as nothing compared to those of the great global corporations
Keeping it offshore: Jost Van Dyke in the British Virgin Islands, a tax haven for the world’s rich. Photograph: Alamy
Donald Trump is offering himself as president of a country whose federal income taxes he gives every appearance of dodging. He says he is fit to be commander in chief, after avoiding giving a cent more than he could towards the wages of the troops who must fight for him. He laments an America where “our roads and bridges are falling apart, our airports are in third world condition and 43 million Americans are on food stamps”, while striving tirelessly to avoid paying for one pothole to be mended or mouth to be filled.
Men’s lies reveal more about them than their truths. For years, Trump promoted the bald, racist lie that Barack Obama was born in Kenya and, as an unAmerican, was disqualified from holding the presidency. We should have guessed then. We should have known that Trump’s subconscious was trying to hide the fact that he was barely an American citizen at all.
He would not contribute to his country or play his part in its collective endeavours. Like a guest in a hotel who runs off leaving the bill, Trump wanted to enjoy the room service without paying for the room. You should never lose your capacity to be shocked, especially in 2016 when the shocking has become commonplace. The New York Times published a joint piece last week by former White House ethics advisers – one to George W Bush and one to Barack Obama, so no one could accuse the paper of bias. They were stunned.
No president would have nominated Trump for public office, they said. If one had, “explaining to the senate and to the American people how a billionaire could have a $916m ‘loss carry-forward’ that potentially allowed him to not pay taxes for perhaps as long as 18 years would have been far too difficult for the White House when many hard-working Americans turn a third or more of their earnings over to the government”.
Trump’s bragging about the humiliations he inflicts on women is shocking. Trump’s oxymoronic excuses about his “fiduciary duty” to his businesses to pay as little personal tax as he could are shocking. (No businessman has a corporate “fiduciary duty” to enrich himself rather than his company.) Never let familiarity dilute your contempt.
And yet looked at from another angle, Trump is not so shocking. You may be reading this piece online after clicking on a Facebook link. If you are in Britain, the profits from the adverts Facebook hits you with will be logged in Ireland, which required Facebook to pay a mere €3.4m in corporate taxes last year on revenues of €4.83bn . If you are reading on an Apple device, Apple has booked $214.9bn offshore to avoid $65.4bn in US taxes. They are hardly alone. One recent American study found that 367 of the Fortune 500 operate one or more subsidiaries in tax havens.
Trump may seem a grotesque and alien figure, but his values are all around you. The Pepsi in your hand, the iPhone in your pocket, the Google search engine you load and the Nike trainers you put on your feet come from a tax-exempt economy, which expects you to pick up the bills.
The short answer to Conservatives who say “their behaviour is legal” is that it is a scandal that it is legal. The long answer is to invite them to look at the state of societies where Trumpian economics have taken hold. If they live in Britain or America, they should not have to look far.
The story liberal capitalism tells itself is heroic. Bloated incumbent businesses are overthrown by daring entrepreneurs. They outwit the complacent and blundering old firms and throw them from their pinnacles. They let creative destruction rip through the economy and bring new products and jobs with it.
If that justification for free-market capitalism was ever true, it is not true now. The free market in tax, it turns out, allows firms to move offshore and leave stagnant economies behind. Giant companies are no longer threatened by buccaneering entrepreneurs and innovative small businesses. Indeed, they don’t appear to be threatened by anyone.
The share of nominal GDP generated by the Fortune 100 biggest American companies rose from 33% of GDP in 1994 to 46% in 2013, the Economist reported. Despite all the fuss about tech entrepreneurship, the number of startups is lower than at any time since the late 1970s. More US companies now die than are born.
For how can small firms, which have to pay tax, challenge established giants that move their money offshore? They don’t have lobbyists. They can’t use a small part of their untaxed profits to make the campaign donations Google and the other monopolistic firms give to keep the politicians onside.
John Lewis has asked our government repeatedly how it can be fair to charge the partnership tax while allowing its rival Amazon to run its business through Luxembourg. A more pertinent question is why any government desperate for revenue would want a system that gave tax dodgers a competitive advantage.
What applies to businesses applies to individuals. The tax take depends as much on national culture as the threat of punishment, on what economists call “tax morale”.
No one likes paying taxes, but in northern European and North American countries most thought that they should pay them. Maybe I have lived a sheltered life, but I have no more heard friends discuss how they cheat the taxman than I have heard them discuss how they masturbate. If they cheat, they keep their dirty secrets to themselves. Let tax morale collapse, let belief in the integrity of the system waver, however, and states become like Greece, where everyone who can evade tax does.
The surest way to destroy morale is to make the people who pay taxes believe that the government is taking them for fools by penalising them while sparing the wealthy.
Theresa May promised at the Conservative party conference that “however rich or powerful – you have a duty to pay your tax”.
I would have been more inclined to believe her if she had promised, at this moment of asserting sovereignty, to close the British sovereign tax havens of the Channel Islands, Isle of Man, Bermuda and the British Virgin and Cayman Islands.
But let us give the new PM time to prove herself. If she falters, she should consider this. Revenue & Customs can only check 4% of self-assessment tax returns. If the remaining 96% decide that if Trump and his kind can cheat, they can cheat too, she would not be able to stop them.
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