Sneaky tax avoid­ance by su­per wealthy elite is not vic­tim­less

The Irish Times - Business - - BUSINESS - Kar­lin Lilling­ton

The Par­adise Pa­pers – the vast tranche of leaked doc­u­ments re­veal­ing the tax af­fairs of the wealthy and the cor­po­rate world – has ex­posed the com­plex struc­tures that en­able in­di­vid­u­als and or­gan­i­sa­tions to duck taxes.

Such struc­tures are, as big tech firms such as Face­book and Ap­ple and Google re­mind us so charm­lessly, le­gal. Some ar­gue that ethics thus do not en­ter the equa­tion. Com­pa­nies, af­ter all, have a duty to share­hold­ers to op­er­ate ef­fi­ciently and max­imise profit.

So, tax struc­tures such as those re­vealed in the Par­adise Pa­pers en­able Ap­ple to con­tinue to use Ire­land as an in­trin­sic part of its in­ter­na­tional tax min­imis­ing regime, even af­ter the Govern­ment here (even­tu­ally) closed the in­fa­mous “dou­ble Ir­ish” loop­hole. But it’s le­gal. Then there are the elu­sive struc­tures that ben­e­fit wealthy in­di­vid­u­als. We learned this week that sev­eral wealthy Ir­ish en­trepreneurs used a nifty dodge to buy pri­vate jets, yet avoid pay­ing VAT, by im­port­ing them through the Isle of Man.

And that some ac­tors in the hit show Mrs Brown’s Boys ben­e­fited by hav­ing pay­ments run through off­shore trusts .

And that Bono had some prop­erty in­vest­ments qui­etly struc­tured through Malta. The U2 singer said in 2015, in re­la­tion to his band’s tax-avoid­ance mea­sures: “It’s just some smart peo­ple we have work­ing for us try­ing to be sen­si­ble about the way we’re taxed.” And yes, U2 and other wealthy in­di­vid­u­als do (rightly) pay a lot of tax com­pared with you and me, and also fund im­por­tant phil­an­thropic work. But isn’t it cu­ri­ous that cor­po­rates and in­di­vid­u­als take such pains to route in­vest­ments, pur­chases and rev­enue in such a way that they re­main so opaque, of­ten hid­den from Rev­enue?

Tax­less ju­ris­dic­tions, com­pli­cated lay­ers of shell com­pa­nies, off­shore trusts and di­ver­sion­ary lo­ca­tions for as­sets and in­tel­lec­tual prop­erty, re­sid­ing on pa­per rest­ing in in­vis­i­ble ac­counts. Smart. Sen­si­ble.

Some of these tax struc­tures are al­ready con­sid­ered iffy. An EY ac­coun­tant in Cork ad­vised the jet-pur­chas­ing busi­ness­men that with the Manx VAT dodge “there is a pos­si­bil­ity of a Rev­enue chal­lenge”.

And if all is legally above board – even if be­low the wa­ter line in terms of vis­i­bil­ity – why do so many sto­ries about the in­di­vid­ual cases emerg­ing from the Par­adise Pa­pers note that tax au­thor­i­ties are now ex­am­in­ing po­ten­tial tax li­a­bil­i­ties?

Still: if it is le­gal, or prob­a­bly le­gal (es­pe­cially if no one clar­i­fies the po­si­tion by di­rectly ask­ing Rev­enue) – is it un­eth­i­cal? Of course it is. Child labour is also le­gal in many parts of the world, and max­imises prof­its too. But, it’s widely recog­nised as un­eth­i­cal and rightly so.

Fund­ing losses

Sneaky tax avoid­ance is not vic­tim­less. It di­rectly re­sults in state fund­ing losses for in­fra­struc­ture, schools, li­braries, trans­port, roads and so­cial wel­fare sup­ports for the poor­est. These are lost taxes in wal­lop­ing amounts. A mil­lion lost in VAT on a sin­gle jet. A cou­ple of mil­lion that would oth­er­wise be owed on salary pay­ments. Hid­den in­vest­ments. Some of those pri­vate in­vest­ment ser­vices were, un­til re­cently, pro­vided by Ire­land’s two main banks, even af­ter they’d been bailed out by tax­pay­ers who con­tinue, per­son­ally, to fund that bailout through an un­avoid­able an­nual tax charge. Which we pay.

In the case of multi­na­tion­als, bil­lions of euro have been lost in this ju­ris­dic­tion and oth­ers. Money that, in the case of big firms like Google and Ap­ple, goes into colos­sal off­shore cash piles. In Ap­ple’s case, this off­shore cash is worth more than $250 bil­lion. Bil­lion. That’s more than the GDP of many en­tire na­tions.

That’s why the “per­fectly en­ti­tled to do what­ever is le­gal to build the com­pany/re­turn value to share­hold­ers” line is lu­di­crous. Many of these com­pa­nies have astro­nom­i­cal wealth al­ready. Many of them sit on that wealth, await­ing an­other of the reg­u­lar US tax amnesties to repa­tri­ate their bil­lions at a slashed tax rate. If they are such in­no­va­tors, why rely on tax dodges?.

And all those in­di­vid­u­als us­ing “smart peo­ple” to avoid oth­er­wise-due tax can­not use the ex­cuse of phi­lan­thropy as a moral off­set. Phi­lan­thropy cou­pled with large-scale tax avoid­ance is just ego-en­hanc­ing crumbs tossed se­lec­tively from the (very) wealthy ta­ble. And phi­lan­thropy, con­ve­niently, has (le­gal) tax ben­e­fits, too.

Off­shore ma­noeu­vrings

Murky off­shore ma­noeu­vrings are sim­ply a le­gal (maybe) song and dance to avoid ex­ist­ing tax laws by peo­ple and com­pa­nies that al­ready have wealth be­yond imag­in­ing.

Of course, the same coun­tries that moan about such dodges gen­er­ally don’t rush to change na­tional tax laws that al­low them to hap­pen, even once ex­posed.

De­press­ingly, it’s all a same-as-it-ever-was rigged per­for­mance that needs out­rage and an eth­i­cal mind­set, in­ter­na­tional co-op­er­a­tion, and pres­sure from or­di­nary cit­i­zens, to change. This in­volves tac­tics such as re­fus­ing to buy cer­tain prod­ucts or ser­vices and cam­paign­ing for bet­ter cor­po­rate ethics (as has hap­pened with some suc­cess on ex­ploita­tive child labour).

Em­bar­rass­ing leaks such as the Par­adise Pa­pers might give the whole sys­tem the kick in the fat, hyp­o­crit­i­cal be­hind that it needs. But I doubt it.

Gov­ern­ments are mostly happy to look the other way. Na­tional rev­enue ser­vices find it too chal­leng­ing to un­ravel the com­plex struc­tures, es­pe­cially when they’ve no idea they are be­ing used. And peo­ple want their shiny new iPhone X.

Same old same old.

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