These words come from the title track of an album, Trouble Man, by Marvin Gaye in 1972, a soundtrack to the blaxpoitation film and are preceded by the words: "there's only three things that's for sure," maybe he didn't have tax havens in mind, which is what I want to bang on about today, but I'm hoping I got your attention. I guess none of us like paying taxes, but they are a fact of life, the dictionary describes tax as "a compulsory contribution to state revenue", it's the price we all pay to be part of society.
Do you ever listen to the financial news early in the morning? You're laying there in bed, not quite awake but you think you should pay attention in case it's something important. Then they introduce someone, sometimes with a double-barrelled name, who might be a market analyst, or something else that you're not entirely sure what they do, who proceeds to tell you what's happening in the world of finance. Even on the days you do pay attention you're always left with the feeling you don't quite understand.
Well that's the case with me but I caught some financial news just the other day that I understood only too well. I was having my tea and caught the back end of the Channel 4 news. The lead in to this bulletin that left me open-mouthed was: "98 of the FTSE 100 companies use tax havens." The FTSE 100 Index is a list of the top one hundred most valuable companies registered on the London Stock Exchange. This item stemmed from a report compiled by ActionAid , who were founded in 1972 as a child sponsorship charity that works in over 40 countries.
Before I go on to talk about what this report says, I must just say that what these companies and multinationals are up to is LEGAL. In fact this government is currently considering relaxing the UK anti tax haven rules, which according to Treasury estimates, will mean a tax break of some £840 million for the multinationals that use tax havens.
Definitions according to the Concise Oxford English Dictionary:
tax evasion. n. illegal non-payment or underpayment of tax.
tax avoidance. n. the arrangement of one's financial affairs to minimize tax liability within the law.
So that means what these 98 companies are doing falls into the second category. What ActionAid are claiming is that the FTSE 100, the UK's most valuable companies, suffer from an "addiction" to tax havens; tax avoidance. Between them, the FTSE 100 companies have 34 216 subsidaries, of which almost 25%; 8492, are in tax havens.
Banks and the banking sector are making some of the heaviest use of tax havens. The "big four" (ie Barclays, HSBC, Lloyds TSB and the RBS group - which includes the Natwest and RBS) banks have a total of 1649 tax haven companies between them. However the biggest tax haven user on the FTSE 100 index is the advertising company WPP, who describe themselves on the homepage of their website as " a world leader in marketing communications". WPP has 611 tax haven subsidaries.
So it would seem everybody's at it and nobody bats an eyelid. In Jersey there are 600 FTSE 100 subsidiary companies, 400 in the Cayman Islands and 300 in Luxembourg.
In 2010 Corporation Tax was 28%, Chancellor George Osborne cut this by 2% in April 2011 and will cut it annually by 1% which will mean it will be 23% by 2014. Myself I don't really have a problem with big corporations, banks, including the "big four", WPP, whoever, paying tax. According to HM Revenues and Customs, one is only liable to the main rate of Corporation Tax when profits are at a rate exceeding £1.5 million. Like I said earlier it's the price we all pay to be part of society, particularly so one would think, when that is the society that you trade with.