Panama tax scandal : how can we fight the great tax robbery?
Working class people across the world are looking on in disgust as the truth comes to light regarding the use of tax havens by the super-rich to hide their wealth. At a time of never ending austerity we are being made to pay for a crisis caused by the capitalist system whilst the rich continue to hoard their wealth to avoid paying taxes. It is a case of tax havens for the rich, austerity for the rest of us! The question now is ‘what needs to be done?’
As a contribution to the debate about how to solve this crisis, we republish an article by Paul Hunt which features in the current edition of The Socialist. Written before the Panama scandal broke in the press, it puts forward a socialist response to the issue of tax avoidance and evasion. If you agree with the article, we urge you to join the Socialist Party. You can also fill in the form at the end of the article.
Fighting the great tax robbery: taxes and regulation or socialist nationalisation?
Tax avoidance has been in the headlines lately, provoking renewed calls to tax the rich and big business. The Socialist campaigns for closing loopholes, and increasing wealth and corporation taxes. But, writes Paul Hunt, you can’t control what you don’t own: only socialist nationalisation can end the great tax robbery.
It is a time of seemingly never-ending austerity. Workers across the UK and the world are being forced to pick up the tab for a crisis caused by the capitalist system.
So the news that massive corporations are engaged in massive tax avoidance is a source of understandable bitterness and anger.
As previously reported in the Socialist, huge multinationals such as drugs firm AstraZeneca and telecom company Vodafone pay zero corporation tax in the UK. After a ‘sweetheart’ deal with the Tory cabinet, internet giant Google agreed to pay £130 million – just 2.8% of its profit.
Little wonder people are up in arms when the government says there is no money for libraries, play centres, vital public services or pay rises.
With government credibility already shot to pieces regarding its ‘all in it together’ slogan, the Tories have continued to make swingeing cuts to HM Revenue and Customs. The ability to collect tax has been weakened further.
In an illustration of how the balance has shifted towards giving big business an easy ride, the rate of corporation tax in the UK in 1981 was over 50%. It is 20% in 2016!
It is no surprise that demands for the rich to pay their share are gaining ground. People see the increase in the gap between rich and poor in their everyday experience. This has been a large part of the rise of the likes of Jeremy Corbyn in the UK and Bernie Sanders in the United States. People are looking for answers to the crisis that they see around them.
For example, the website of the Sanders campaign states that, if elected, he would start by “demanding that the wealthy and large corporations pay their fair share in taxes. As president, Senator Sanders will stop corporations from shifting their profits and jobs overseas to avoid paying US income taxes.
“He will create a progressive estate tax on the top 0.3% of Americans who inherit more than $3.5 million. He will also enact a tax on Wall Street speculators who caused millions of Americans to lose their jobs, homes, and life savings.”
Here in the UK, the fact that we have a Labour leader prepared even to talk about rising inequality, and say ordinary people shouldn’t foot the bill for the crisis, is an important step forward. Arch-Blairite Peter Mandelson, architect of New Labour, famously declared his party was “intensely relaxed about people getting filthy rich.”
In his campaign for the Labour leadership last year, Jeremy Corbyn set out his economic vision in the document ‘The Economy in 2020’. He sets out some laudable aims. These include collecting £120 billion of avoided and evaded tax, creating a system where the rich pay more (the rate is not specified), and creating a “level playing field” between small and big businesses.
Demands for the rich to pay their taxes, and proposals like a ‘Robin Hood’ tax on big finance institutions’ transactions, are not new. In fact, for most of Labour’s history – not including the Blair-Brown New Labour years – they were common currency. These ideas have recently made a partial comeback through the publicity work of groups like 38 Degrees and the Tax Justice Network, as well as being raised by Jeremy Corbyn.
The Socialist Party supports many of the measures he proposes, but are they enough to solve the crisis for working class people?
Recent events in France show once again that, whatever the intentions, taxing the super-rich is not a straightforward question.
François Hollande of the Parti Socialiste (equivalent of the Labour Party) promised higher taxes on the super-rich during his 2012 election campaign. He pledged to tax incomes over €1 million at 75%.
Under pressure from the capitalist class, in practice he reduced this to 50%, before dropping the policy altogether. High earners were threatening to leave the country – and take their wealth with them.
According to reports from the French finance ministry, Hollande’s increase only brought in the relatively small sums of €260 million in 2013 and €160 million in 2014. This was in relation to a budget deficit at that time of €84.7 billion!
No doubt a firmer stand on the rate, closing loopholes and enforcing collection could have improved these figures. Certainly they in no way mean we oppose higher income taxes on the super-rich.
A genuine socialist government would combine such measures with taking democratic control of all imports and exports. This means enforcing a state monopoly of foreign trade and exchange, including movements of capital, with democratic control of all imports and exports. That would prevent the tiny super-rich elite from trying to flee the country with their plunder.
What about the corporations? In Britain, around 150 big companies control the majority of economic activity. Surely, you might say, we can tax them further?
Yes, is the answer. Substantially increasing both income tax for the rich and corporation tax for big business could, if actually implemented, provide enough money to reverse all cuts to public services, increase public sector workers’ pay, and a lot more. However, as long as we live in a capitalist society, where wealth and power are concentrated in the hands of the 1%, they will use all means at their disposal to avoid handing over even a penny of what they’ve got.
The experience of Syriza in Greece shows that half-measures – or more accurately, quarter-measures – can lead to a situation where a left party ends up implementing brutal capitalist austerity.
Even if such governments succeed in redistributing some of the wealth controlled by big business, that is not the end of the story. Britain’s 1945 Labour government created the welfare state and operated far greater taxation and regulation than today’s establishment parties. But over the following decades, the capitalists took every opportunity to claw those gains back.
In Chile and Venezuela in the 20th century, left governments even faced mass sabotage by capitalists. ‘Why supply goods and services,’ they reasoned, ‘for countries that won’t even let us keep most of the profits?’
The clear answer to companies that threaten closures, job losses or sabotage is to take them into public ownership.
As Karl Marx, scientific socialism’s founding thinker, put it in his ‘Critique of the Gotha Programme’:
“The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of non-workers in the form of property in capital and land…. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically.
“If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one.”
Marx’s words, despite being written in 1875, are totally relevant today. You can’t plan what you don’t control, and you can’t control what you don’t own.
The mass inequality we see is a logical consequence of the capitalist system, whereby wealth production is owned and controlled by a tiny minority in its own interests. Year on year the wealth gap is widening further as the capitalists react to economic stagnation and crises by making the working class pay.
Neoliberal economic commentators suggest that taxes should be cut to entice more wealth into the country and encourage businesses activity. But the so-called ‘trickle down’ approach has only ever achieved the opposite, as is clearly the case today.
What is needed is a genuine, full, socialist programme. This means breaking the power of the capitalists – by nationalising not only the banks, financial institutions, plus companies threatening job losses and so on – but all the big corporations which control the majority of economic activity.
A publicly owned economy, under the democratic control and management of workers, could actually start to plan production in the interests of the 99%.
Fight for bold socialist policies: take the wealth off the 1%!
- Reverse all cuts to HM Revenue and Customs – collect the uncollected tax, and increase taxes on the super-rich and big business
- Nationalise the banks, top 150 corporations and tax avoiders under the democratic control and management of workers and service users. Compensation only to be paid on the basis of proven need
- For a socialist, democratically planned economy to meet the needs of all, not make obscene profits for a few
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