The power of Transnational Corporations and the quest for tax justice!

On Monday, 16 March Naomi Fowler from the Tax Justice Network gave a presentation at Nottingham University as part of the Centre for the Study of Social and Global Justice’s (CSSGJ) seminar series. Formed in 2003, the Tax Justice Network includes many former employees in the financial industry amongst its activists and the monthly Taxcast is one of the key ways of influencing political debate.

The problem of corruption – whose corruption?

Traditionally, corruption is associated with African dictators living in luxury mansions while their people endure conditions of abject poverty. As Naomi Fowler, however, made clear, this is only possible because of the secrecy in the banking sector of developed countries, which allows these dictators to stash away their money in secret accounts in countries such as Switzerland. In fact, the majority of tax havens are actually located in OECD countries, generally described as ‘clean countries’, when it comes to corruption. 

Photo by Ryan Morrison

As the former Nigerian Education Minister Professor Aliya Babs Fafunwa said in 2005 during negotiations to secure the repatriation of assets stolen by former Nigerian President Sani Abacha, ‘it is rather ironical that the European based Transparency International does not think it proper to list Switzerland as the first or second most corrupt nation in the world for harbouring, encouraging and enticing all robbers of public treasuries around the world to bring their loot for safe-keeping in their dirty vaults’ (quoted in Christensen 2007: 4).

In other words, ‘corrupt money’ is only possible, because of secret bank accounts in clean countries. This is well reflected in the financial secrecy index of the Tax Justice Network, which highlights who are the really corrupt countries in the global political economy. 

Corrupt money and the role of the UK

The UK considering the role played by the City of London, the three Crown Dependencies (Jersey, Guernsey and the Isle of Man) and 7 of its 14 Overseas Territories (including the Cayman Islands and Bermuda) is at the heart of this well-oiled machine of tax avoidance, tax havens and ultimately corruption. In a research report for the Public and Commercial Services Union (PCS) in 2014, Richard Murphy concludes ‘that the UK’s tax gap may now be £122 billion a year’ (Murphy 2014: 2), ‘tax gap’ referring here to the sum of tax that could be collected, but is not. This enormous sum is much higher than what the UK government currently inflicts on the poorest members of British society through its austerity cuts. 

When trying to explain why the UK government does not attempt more sincerely to close the tax gap, Naomi Fowler refers to the way in which political party funding depends on the City of London. Equally, the father of the current Prime Minister David Cameron uses tax havens in his business dealings, as does the Deputy Prime Minister Nick Clegg. Banks are simply not prepared to give up secrecy, which is at the heart of their profits, and their close relationships with the political world ensure that there is little political pressure applied on them. The finance sector is simply too deeply embedded in the political hierarchy.

This is also reflected in the ‘revolving door’ between politics and finance. Dave Hartnett, the former head of HM Revenue & Customs, responsible for negotiating the favourable deals for Vodafone, Goldman Sachs and other large corporations, now works for HSBC and is responsible for advising the Ukraine on how to set up its tax system. 

What future for tax justice?

What does the future hold for tax justice internationally? Naomi Fowler’s outlook was rather pessimistic. ‘We are experiencing a deregulatory race to the bottom, in which countries compete with each other over attracting companies through lowering corporation taxes,’ she argued. Unless the issue of tax justice is addressed, we may end up with an end to corporation tax as such. Further losses in tax would inevitably result in further cuts in public services and corporate welfare may replace the welfare state for citizens (see also The Tax Justice Network October 2014 Podcast). It is the fight against such a future, to which the Tax Justice Network is committed when lobbying political parties and informing the general public.

In discussions of Naomi Fowler’s presentation, CSSGJ colleagues queried whether it was actually adequate to explain the insufficient efforts by British governments against tax avoidance simply through referring to the funding of political parties by wealthy donors from the financial industry. Is there not something more systemic within capitalism, which pushes large TNCs to increase their profits by whatever legal and at times illegal means? If so, then more change would be necessary than simply new governments and laws. The capitalist social relations of production as a whole would have to be questioned.

Be that as it may, Naomi Fowler’s presentation highlighted the importance of tax justice for developed and developing countries alike. The Tax Justice Network is leading this important struggle.   

Prof. Andreas Bieler

Professor of Political Economy
University of Nottingham/UK

Andreas.Bieler@nottingham.ac.uk
Personal website: http://andreasbieler.net

2 April 2015