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UKUncut: Stop Scaremongering & Help Us Help People

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Dear UKUncut,

I'd like to speak to you about your message, your method and your aims. So, I'm going to take your mission statement (or, what I perceive to be a summary of it -- you don't have a mission statement) from your website and put it here:

We are told that the only way to reduce the deficit is to cut public services. This is certainly not the case. There are alternatives, but the government chooses to ignore them, highlighting the fact that the cuts are based on ideology, not necessity.

  • One alternative is to clamp down on tax dodging by corporations and the rich, estimated to cost the state £95bn a year
  • Another is to make the banks pay for a crisis they created: last year they paid out over £7bn in bonuses and just four banks made £24bn in profit

The tax avoided and evaded in a single year could pay for the £81bn, four-year cuts programme.

Let's ignore the banks for now, and concentrate on UKUncut's mission against corporate tax avoidance, because certainly if we can just increase tax yield by £95 billion a year, it's well worth looking at.

First of all, we need to distinguish tax evasion, which is the illegal non-payment of tax via false accounting or other methods, from tax avoidance, which is finding legal loopholes in order to pay less tax than is required.

UKUncut Vodafone

It is a fact that some businesses do use tax loopholes to avoid taxation which they should pay. It is also true that some businesses which UKUncut have targetted are in fact only guilty of not paying tax twice on the same profits.

Taken from this IEA report:

Vodafone has been attacked over a supposedly unpaid tax bill of £6bn, based on profits of its German subsidiaries. However, it is not – and never can be – a principle of tax law that a company should pay both UK tax and German tax on the activities of the German parts of the business.

German corporation tax is approximately 30.2% including Trade Tax, Corporation Tax and Solidarity Tax (like many German laws, it's not simple), compared to the UK's rate of 26%. It doesn't stand up to scrutiny that Vodafone are 'choosing' to pay German tax instead of UK tax.

Surely UKUncut don't believe Vodafone are liable for UK tax on German profits which have already had German tax paid on them?

UK Uncut Outside Boots

From the same report:

Boots has also been attacked without justification. A Swiss company, it pays UK tax on its UK profits. However, the company financed its operations through borrowing, and, as a cost of doing business, the interest paid was perfectly legally written off against profits before tax. It should also be noted that those who lent money will have paid tax on the interest they received.

Again, it looks like UKUncut have clearly failed to observe all of the facts, and the same again for Barclays from the same report:

Barclays, the final target, has also applied a completely reasonable principle of tax law. Barclays reduced its corporation tax bill in the last tax year by offsetting losses made in previous years. If companies were not allowed to do this, those companies involved in risky businesses where profits fluctuate would pay much more tax than companies with stable profit streams – even if they made the same amount of cumulative profits.

All of this having been said, it doesn't detract from UKUncut's message re: tax avoidance and we shouldn't allow the fact that their targets are wrong to nullify or subside this message.

Flushing Money Down the Drain

So, let's take a look at their £95 billion figure, which comes from the Public & Commercial Services Union, and can be broken down into:

  • £70 billion lost revenue in tax evasion
  • £25 billion lost revenue in tax avoidance

However, it is worth noting that HMRC estimates a total of £40 billion lost to tax evasion and avoidance, of which £8.9 billion is corporation tax (page 8), breaking down into £5.5 billion corporation tax evasion (of which a lot is attributed to inaccurate returns from SMEs, and only £1.3 billion to large enterprises) and £3.4 billion corporation tax avoidance.

I'm obviously not trying to say 'Oh, it's only £40 billion, it's not a problem!' because obviously that's a lot of money, but it is somewhat naive (or possibly ideological) for advocates of UKUncut to choose statistics from a Union which double the estimates from HMRC.

Ultimately, corporation tax avoidance, which is the major point which UKUncut is protesting about, using HMRC's statistics, boils down to £3.4 billion per year. Again, I'm not going to say this is insignificant, but to say that a saving of £3.4 billion a year will make any significant difference to how many cuts need to be made is flatly wrong.

Elephant in the Room

I'm not going to accuse UK Uncut of not caring about people, or of being overly ideological. I'm going to invite UK Uncut to support another movement for financial security in the UK now and in the future. Come to the Rally Against Debt, and help us battle the interest which we pay on our national borrowing, which would have been £70 billion a year under Labour by 2015.

This is more than twenty times the amount lost to corporate tax avoidance. It's nearly twice the total tax gap including avoidance and evasion. Please, UKUncut, stop ignoring the elephant in the room.

A balanced budget is not a partisan issue, it's not a left-right issue.

I can't back you on the banks or the NHS, and I don't expect you to back me on climate change or health reform, but that doesn't mean that we're a different species, or that we can't find anything in common to agree about.

I'm more than willing to back your cause on tax evasion and on tax avoidance, as long as it's based on facts and not hyperbole. Like debt interest, this isn't a partisan issue or a left-right issue. It hurts all of us.

What I can't support is your modus operandi of preventing companies operating, some of which might actually be doing nothing wrong. Tax evasion & avoidance is an issue which we need to deal with at Westminster, not on a case-by-case basis of company protests.

Shaking Hands

The £40 billion tax gap is a very big issue for all of us, and so is the £60 billion debt interest. We can find common ground in making sure the country and the people benefit from better economic management in both of these areas.

We can have the argument later about how best to use the £100 billion we save, whether that's tax cuts or more public services, but we should all be able to come together and realise these two inefficiencies are of the same ilk, and that all of us should be against both.

Hope to see at least some of you there, guys.

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