Just for starters, consider the fact that in 2007, one third of the 700 largest companies in the UK paid no tax at all. Much of this is because they manage to hide their earnings using secretive off-shore tax havens. If the UK governments latest plans for corporation tax reform go through, I think that we can safely assume that the proportion who manage to get away with paying nothing will increase.
But Shaxson's detailed analysis of how the entire tax-haven system has developed demonstrates just how evil the whole system is, and just how difficult it will be to overturn.
In the last chapter, he comes up with a list of 10 things that could be done in response to the threat.
- Pursue transparency. In particular, multinationals should be forced to provide country by country details of their activity.
- Introduce reforms that prioritise the needs of developing countries - currently, the system means that for every dollar of development aid going into such countries, about 10 times that amount is extracted and used to fill the accounts of crooks using the tax haven system.
- Confront the UK's "spiders web" based on the City of London, the most important and most aggressive single element in the global offshore system.
- Reform onshore taxation, by introducing (for example) taxation based on the value of land.
- Leadership and unilateral action (instead of waiting for everyone to agree).
- Tackle the intermediaries and the private users of offshore.
- Financial sector reform.
- Rethink corporate responsibility.
- Re-evaluate corruption.
- Change the culture.
These are all worthy aims, and will no doubt help. But it seems to me that the most powerful way to crack down on all the abuse would be to introduce a flat-rate financial transaction tax. By taxing the transactions, rather than profits, it would become pointless to try and hide profits in offshore tax havens. It's odd that he didn't include this... I'll have to mention it to him.
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