Is this the real reason why Farage and Rees-Mogg want a speedy Brexit?
The EU's forthcoming anti-tax avoidance rules could be a big boost for our public services but, as Chevan Ilangaratne and Dami Olatuyi explain, they will be binned if Farage and Rees-Mogg get their way.
In all honesty, tax and law are an unattractive couple. Even specialists in the field will admit as much. That said – few doubt the necessity of tax. It pays for new hospitals and schools. It builds new houses. It keeps us safe on the streets. It helps us care for children and the elderly.
Thus the value of taxpayers' money cannot be understated – however discouraging it is to see chunks of your earnings go to tax collectors. The same applies to businesses – big or small – who pay corporation tax... well, that's when they pay it.
In recent years, the likes of Google, Amazon, Apple and Starbucks have come under the spotlight for large-scale tax avoidance. This means they've arranged their finances rather cleverly – albeit within the law – to dodge tax obligations they would otherwise have to fulfil. Less tax paid by these huge companies means less money to invest in our public services – we all lose out!
Well the EU have had enough.
As from the start of 2019, yes coincidentally just as the Brexit deadline looms, all EU member states will have to apply the Anti Tax Avoidance Directive (ATAD). It's an EU law designed to tackle businesses shirking their tax-paying responsibilities.
The likes of Nigel Farage, Jacob Rees-Mogg and a host of wealthy Brexit donors are unlikely to warm to ATAD. It fact, it might be one of reasons why some Brexiteers are hell-bent on pushing for the hardest Brexit possible.
How will ATAD work?
The directive seeks to tackle the thriving culture of corporate tax avoidance. For example, consider the scenario in which an EU company shifts profits to a related company in a low-tax country reducing the tax paid on these profits: under ATAD, a company could still do this, but the profits will be taxable at EU rates.
Another situation is where EU businesses developing a new product move it to a low tax country to avoid paying larger taxes on the profits once it is developed. Thanks to ATAD this tactic won't work as member states can levy tax on the product before it is moved.
Even with ATAD, you might argue companies – through their nifty lawyers – will find new loopholes to avoid tax, right? The EU thought of that: ATAD provides a general anti-abuse rule to counteract these regimes where national laws have failed to address them.
There are many other measures in ATAD which you will no doubt be inspired to research. But before you do that, you will hear people air grievances that this Directive is another example of how the EU hates business or that it is another instance of Brussels encroaching on our sovereignty.
Dealing with the first allegation, anti-tax avoidance laws are not developed to harm businesses. Their objective is to ensure companies play ball in a competitive market which means paying their fair share of tax. Flowing from this, in a globalised market, agreeing a set of rules to encourage fair trade is hardly an encroachment upon sovereignty. It is an acceptance that the world today sometimes requires countries to come together and agree on things for mutual benefit.
Vital for our schools and hospitals
Britain becoming a low-tax haven economy on the shores of Europe is a Brexiteer fantasy – and ATAD compliance poses a direct threat to that. But a low-tax haven for the rich will thrash the public services upon which the vast majority of us rely on and deepen inequalities in modern day Britain.
Most of us can agree tax is far from ideal but a means to very vital end. If the likes of Google or Amazon were going to be put out of business by following the ATAD one could see the logic in rallying against it. But we know these major corporations will be just fine; meanwhile our schools and hospitals are left in crisis.
• Chevan Ilangaratne and Dami Olatuyi are members of the organisation Lawyers Against Brexit.
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Super-rich prepare to leave UK 'within minutes' if Labour wins election
The super-rich are preparing to immediately leave the UK if Jeremy Corbyn becomes prime minister, fearing they will lose billions of pounds if the Labour leader does “go after” the wealthy elite with new taxes, possible capital controls and a clampdown on private schools.
Lawyers and accountants for the UK’s richest families said they had been deluged with calls from millionaire and billionaire clients asking for help and advice on moving countries, shifting their fortunes offshore and making early gifts to their children to avoid the Labour leader’s threat to tax all inheritances above £125,000.
The advisers said a Corbyn-led government was viewed as a far greater threat to the wealth and quality of life of the richest 1% than a hard Brexit.
Geoffrey Todd, a partner at the law firm Boodle Hatfield, said many of his clients had already put plans in place to transfer their wealth out of the country within minutes if Corbyn is elected.
“Lots of high-net worth individuals are worried about having to pay much higher taxes on their wealth and have already prepared for the possibility of a Corbyn government,” he said. “Transfers of wealth are already arranged – in many cases, all that is missing is a signature on the contract.
“There will be plenty of people on the phone to their lawyers in the early hours of 13 December if Labour wins. Movements of capital to new owners and different locations are already prepared, and they are just awaiting final approval.”
Dominic Samuelson, the chief executive of Campden Wealth, which advises more than 3,500 rich families, said: “From the ultra-high net worth perspective, a Labour government under Corbyn is a much greater threat to them and their businesses and their wealth than Brexit.”
On Thursday, Corbyn singled out five members of “the elite” that a Labour government would go after in order to rebalance the country.
He claimed Mike Ashley, the billionaire owner of Sports Direct and Newcastle United, was a “bad boss” who exploited his workers through zero-hours contracts. Ashley hit back, telling the Financial Times: “Corbyn’s not only a liar but clueless.”
The Labour leader also named the “greedy banker” Crispin Odey, the hedge fund manager who made £220m betting against the pound in the run-up to the EU referendum. Odey responded by telling the Daily Telegraph: “Luckily they [Labour] can’t even run a campaign, let alone the country.”
The others singled out by Corbyn were: Jim Ratcliffe, the chemicals billionaire who has left the UK for tax-free Monaco; the Sun and Sunday Times owner, Rupert Murdoch; and the Duke of Westminster, who has a large central London property empire.
The shadow Treasury minister Clive Lewis went further than the Labour leader, telling the BBC’s Newsnight programme: “Billionaires shouldn’t exist. It’s a travesty that there are people on this planet living on less than a dollar a day.
“There are people, when I walk into parliament, who are sleeping rough on the streets of this country – the sixth-wealthiest in this world.” He also described private schools as “engines of inequality”.
Josie Hills, a senior tax manager at Pinsent Masons, said not being able to educate their children at Eton, Harrow or Winchester was a key worry for many of the law firm’s rich clients, who were considering moving to Switzerland and other low-tax countries with well-regarded private schools.
“I would say 80% of our clients have thought about the implications of a Corbyn government,” she said. “They tend to say they sincerely hope it won’t happen but they want to be ready if it does. If that means uprooting themselves and their families then so be it.”
John Caudwell, the billionaire founder of Phones4u, has already vowed to leave the country if Corbyn becomes prime minister. Caudwell, who has an estimated £1.6bn fortune, said a Corbyn-led government would be “a complete fiasco” and he would “just go and live in the south of France or Monaco”.
Corbyn has not set out precisely how he would target the rich, but Labour’s 2017 manifesto pledged to impose a 45p tax rate on those earning more than £80,000 and a 50% rate above £123,000. At present, the highest income tax rate is 45% for those earning more than £150,000.
Labour would also significantly increase capital gains tax and might replace inheritance tax with a “lifetime gifts” levy, with a tax-free allowance of £125,000 – less than half the current £325,000. There are also plans to increase the corporation tax rate to 26%, up from the current rate of 19%.
Corbyn’s plans for workers’ rights, with ideas floated including a four-day working week and giving employees 10% of the shares of big firms, are also of concern to the wealthy.
Peter Hargreaves, who has an estimated fortune of £3bn and co-founded the stockbroker Hargreaves Lansdown, warned Corbyn’s plans would be an “own goal and leave the country much worse off”.
He added: “It has been proven time and time again: there is only so much you can tax a nation before the tax take starts to go down because people will leave. My family will not be leaving, I love this country and I have always been enormously patriotic.
“But certainly the very, very wealthy people will consider leaving if you make it intolerable. People are petrified of him [Corbyn], and what he might do.”
Hargreaves said the stockbroker employed about 1,700 people and had “created a vast amount of wealth for this country”.
He added: “If you create a tax regime that is not going to welcome and support people like me who create wealth then you are going to rapidly reduce the health of your economy.”
Hargreaves said he paid about £40m in tax last year, and “if 50 of us [the biggest taxpayers] got on a plane and left, that would put a big hole in the chancellor’s budget”.
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