When talking tax havens, don’t let facts get in the way

It is classic displacement activity. It proved a great favourite of General Franco in the past, and more recently has seen Argentina’s Christina Kirchner wielding the cudgel over nearby foreign possessions.

The technique is simple; the result is self-satisfying. It galvanises the domestic population and conveniently deflects them from dwelling on internal deprivation and turmoil.

So it was a bitter disappointment to learn that the Prime Minister, beset by poll reverses and back-room political rebellions, should have stooped to conquer a far more acquiescent ‘villain’ on his own southern doorstep by deploying a similar technique.

He might have been emboldened by the brave crusade of his Downing Street neighbour against the devious Islanders and their UK-crippling LVCR, but our political headmaster’s well-publicised letter admonishing his disobedient pupils will be long remembered for its opportunistic finger-wagging and an affront to those with whom he should really be wanting to do business.

Those who study the theatre of these things will remind us that its contents were released in the run-up to an EU summit meeting which was preparing to discuss the thorny subject of tax payments, against a background that revenues, particularly from global conglomerates, are slipping through the EU net to the tune of one trillion euros a year.

Having publicly nailed his colours to the anti-avoidance mast, there was obviously a desire for the PM to bring some individual crumbs to the banquet. Predictably, it all ended with the resolve that ‘EU leaders are committed to tackling tax evasion and will push for global action to curb banking secrecy’.

And so they might, given that round the table sat Austria and Luxemburg, which operate a ring of steel around their banking operations. Moreover, despite considerable envy, there is little they can do about continental neighbours such as Switzerland, Liechtenstein and Monaco.

Faced with such an embarrassment, the name ‘tax haven’ becomes etched ever deeper on an avenging political wand. So for a country like the UK, which is so deeply dependent on its own finance industry, the existence of a thriving offshore centre remains something of a running sore. Take no notice of its compliance with international treaties and regulatory probity, mud will stick whether thrown from outside or within the national tent.

And while we’re about it, those irritating Crown Dependencies should really be put in their place. Of course, we can’t close them down because if we were to do that, the City of London would be very seriously affected, so let’s just settle for low-level attrition and bank the Brownie points.

It’s not surprising that tax avoidance has achieved such a high profile. It is a very emotive issue, and the sums that are apparently being hidden in a whirl of smoke and mirrors by big names such as Google, Amazon, Apple and Starbucks would go a long way to support the economy of many a small nation.

As citizens, we have been brought up to accept that you pay your taxes where you work and reside. Such is the principle that has been exercising MPs on the House of Commons’ Accounts Committee, prompting its populist chairwoman, Margaret Hodge, to score a cascade of opportunist sound-bites at the expense of ‘evil’ and ‘devious’ multi-nationals.

The rhetoric is well landed, until it is argued that despite it being unpalatable, those in the dock are acting quite legally and the fault lies with lax law-making.

The high-profile denunciations were not helped by the fact that while Google was being so roundly castigated, its boss was being hosted at Number Ten by none other than the Prime Minister himself, and that the issue of dodging, avoiding or evading tax was definitely not on the menu.

Sadly, an ambivalent approach to tax liability and collection is widespread. Furthermore, it is encouraged to attract inward investment.

What, for example, is the difference between George Osborne offering tax breaks to international film-makers to tempt them to make their movies in the UK, and international corporations choosing to pay their taxes in low-tax overseas accounts? Under the cloak of business opportunity, it’s easy to construe this as simply depriving other jurisdictions of the chance of legitimate revenue.

Furthermore, while the HMRC hammer fails to crack the largest concealed nuts, it pulverises the smallest grains offered up by the well-regulated and the vulnerable. Institutional amnesia also obliterates inconvenient facts such as that the vilified ‘tax-dodging’ stars owed their notoriety to a UK-organised scheme which just happened to be administered in the Channel Islands – and was also, let’s remember, totally legal. But don’t let the facts get in the way of prejudice.

YET while we were licking our wounded pride, events on Woolwich High Street wrenched the national focus away from revenue wrangles, back-room political rebellions on Europe, revolts over gay marriage and swivel-eyed insults. In response to the bloody outrage perpetrated by a pair of zealots unhinged by drugs and flummery, the Prime Minister made a precipitate exit from those sticky discussions in Europe and hastily summoned his defence paraphernalia.

He has now resolved to set up a task force to combat extremism and radicalisation and slipped away to holiday in Ibiza.

So, Prime Minister, as you are in a writing mode, if you are minded to send us a postcard you can be reassured that while it is painful to be beaten up by your friends, they can be both useful and won back by reasoned and consistent argument.

Good faith is earned, not imposed.