This week we talk tax with accountant Richard Murphy from The Tax Justice Network (www.taxjustice.net) and author of the book, The Courageous State.
The Occupied Times: In a nutshell, what is a tax haven?
Richard Murphy: I call tax havens ‘ secrecy jurisdictions’. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation, or regulation of another jurisdiction. To facilitate their use, secrecy jurisdictions also create a deliberate, legally backed veil of secrecy ensuring that those making use of them cannot be identified to be doing so.
In essence, tax havens let people from one place hide their transactions in another place to avoid regulation. The most obvious regulation they avoid is tax law.
OT: People talk a lot about ‘jumbo directors’ when it comes to tax havens – can you explain what is meant by this?
RM: A jumbo director is someone who lends their name to maybe hundreds of companies in a tax haven, about which they really know nothing. They are just nominees helping people hide behind the front they provide.
OT: What financial document, audit or balance sheet would you like to see?
RM: I want country-by-country reporting from multinational corporations – that would require a profit and loss account from them for every country including the tax havens in which they work. Then we’d know what they were hiding and where, which would make it much harder for them to do it. I’m biased. I created the idea in 2003.
OT: Why is it so hard to get tax out of vast companies with huge revenues?
RM: Large companies can move their profits legally between locations because they are based in so many places. So by trading between companies they own in different places they can shift profits – and the evidence is that they do this, shifting billions in the process. That fact and the fact that they have vastly more resources than any tax authority means they are so far always a step ahead of tax authorities. Country-by-country reporting is designed to help tax authorities catch up.
OT: What particular transactions are furthest from the light?
RM: Transactions furthest from the light are those hidden in limited companies which are in turn owned by trusts, with no apparent connections with real people – and hidden in places like the British Virgin Islands, or the British Vampire Islands as they might be better termed. These transactions are designed to make sure they’re as impenetrable as possible.
OT: You’ve become Chancellor of the Exchequer for the day – what’s your first bit of legislation?
RM: Only one? That would be to require all UK banks to report the details of all bank accounts they open and close for companies in the UK to make sure we can track which ones are trading, but deny it. I think this abuse alone might cost the UK £16 billion a year in tax evasion.
OT: Why shouldn’t companies be allowed to operate tax efficiently?
RM: They can! I have no objection to them tax planning within the law. I object when their tax planning abuses the law. They have the choice about which to do.
OT: What do you feel about the practice of the big four accountancy firms: PriceWaterhouseCoopers, Deloitte, Ernst & Young and KPMG?
RM: They are in all the world’s major tax havens without exception. Why are they in the British Virgin Islands? There are only 23,000 people there, so the only reason is to service the tax abuse based from there. And as such they give that abuse credibility even if they don’t do the worst forms themselves. They’re culpable for lending that air of credibility to such pernicious behaviour and in the process helping to undermine democracy.
OT: Will the big money always dodge regulation and taxation?
RM: To some extent yes, it will always try. But we’ve laid out an agenda now that is viable that could contain it a lot. That’s worth doing.
OT: Do you see a link between tax-dodging and poverty?
RM: They’re inextricably linked. Poverty is both absolute and relative. Relative poverty is directly increased by tax dodging. Absolute poverty is fuelled by a lack of funding. Tax dodging is class warfare.
OT: What keeps you pushing for tax justice? And are you making any headway?
RM: I fight because of a sense of social injustice and anger that so many needs of so many people are not being met and could be if only tax was paid; tax payment that would not seriously, if at all, harm the well-being of those who should pay. Are we winning? Yes. And we’re winning with governments too. The mood is changing!