Panama Papers: Tax Is Political, Not Personal

New Statesman David Cameron

In the wake of the Panama Papers leak, Prime Minister David Cameron published a summary of his tax returns from 2009-10 to date (something, incidentally, he originally spoke of in 2012). From that point on, it was somewhat inevitable that a slew of leading politicians would follow suit, to one extent or another.

Chancellor George Osborne published a tax return summary (albeit for just one year), as did Boris Johnson (for four years). Labour leader Jeremy Corbyn and SNP leader Nicola Sturgeon also released tax information, as did leader of Welsh party Plaid Cymru, whilst Liberal Democrat leader Tim Farron, also pledged to publish his tax return. The only notable absentee was UKIP leader Nigel Farage, who refused to do so.

But the truth is, none of this matters.

There is an inherent implication that if a politician is not involved in something whilst they are in office, that there is no conflict of interest. Clearly, this is not true. There are a number of ways politicians can be influenced without having a direct and immediate benefit from policy decisions.

What these releases are doing, therefore, is distracting from the far more important structural issues that go to the very heart of this (and every other) issue regarding government policy.

 

The Revolving Door

Jobcentre Sign
Image Source: The Guardian

It is perfectly natural for people to leave one job for another. However, when you have been responsible for regulating an industry and are then given a job in that industry (or hired as a “consultant”), you shouldn’t be surprised to see more than a few raised eyebrows.

Perhaps the most high-profile example of this was former Permanent Secretary For Tax at HMRC, David Hartnett. Having famously arranged a number of “sweetheart deals” that allowed companies, including Starbucks and Vodafone, to avoid billions in tax, he left to work for accountancy firm Deloitte, which works for Vodafone. These deals were found to be a High Court judge as lawful but “not a glorious episode in the history of the revenue”.

He is far from being alone. In January of this year, it was revealed in The Mirror that “[a]t least 25 former top government ministers”, which includes “five former members of David Cameron’s cabinet” are now working in the “relevant industries” they previously oversaw.

Such moves (including those by civil servants), which are overseen by the Advisory Committee on Business Appointments, “approved more than 800 applications to take up positions with potential conflicts of interest” since 2010, according to The Sunday Times. However, they also reported, “more than 30 others did not submit their new jobs for approval”.

In addition, the AcoBA was described by chairman of the Public Administration and Constitutional Affairs Select Committee, Bernard Jenkin, as “effectively a voluntary arrangement which has no sanctions or teeth”.

There is nothing illegal about any of this, but one would have to be incredibly naïve to think that potential employment and earnings would have no effect on behaviour.

And of course, doors work both ways. For example, cabinet secretary, Jeremy Heywood, is described by The Guardian as “the living embodiment of the revolving door, having moved effortlessly from the Treasury to Blair’s office to the investment bank Morgan Stanley and back to work for Cameron.” Again, he is far from alone.

It was found in 2013-14 that “30% of full-time senior civil service positions were recruited from the private sector, frequently from interested corporate parties,” according to Dr Abby Ines, of the European Institute at the London School of Economics.

Speaking on the issue of tax avoidance in The Financial Times professor of accounting at the University of Essex, Prem Sikka, said the following. “One reason why the big four are getting away from the heat of their tax avoidance schemes is because they have penetrated the state. They are part of the state. No government dares to take them on”.

Why this would not apply to offshore havens and pretty much all other areas of government is not at all obvious. But policy is not just influenced from within.

 

Lobbying

David Cameron pointing at poor people

“It is the next big scandal waiting to happen. It’s an issue that crosses party lines and has tainted our politics for too long, an issue that exposes the far-too-cosy relationship between politics, government, business and money.”

Thus spoke David Cameron in 2010, before he became Prime Minister. It was only a couple of years later that then Tory Party co-treasurer Peter Cruddas was filmed apparently offering access to Cameron and George Osborne for a donation to the Conservative Party of up to £250,000.

In the video, over which he subsequently resigned, he was reported to have said “If you’re unhappy about something, we will listen to you and put it into the policy committee at No 10 – we feed all feedback to the policy committee.”

There are several examples of this sort of behaviour, but they are generally viewed as aberrations. Yet there is little doubt that lobbying works, which is why in the UK it is a £2 billion industry (the third largest in the world). On top of this, Transparency International “identified 39 examples of lobbying loopholes across the UK where rules allow behaviour that can open the door to corrupt activity and lobbying abuses.”

This is not to say that campaign contributions and lobbying are the only influences on policy (things like inter-party politics, as well as, to an extent, public opinion also play a role), nor that there is rampant corruption. But, like tax avoidance schemes, these have “penetrated the state”. They are part of the daily life of politics. Like the tax havens, they might not be illegal, but that doesn’t make them right.

The fact of the matter is that by worrying about whether or not any particular politician is directly benefiting from an offshore tax scheme is to completely miss the larger picture. Benefits come in many shapes and sizes and there are a number of systemic factors that are far more important than whether this or that politician is taking part in a legal (though morally dubious) practice.

As well as dealing with the issue of tax havens, we also need to recognise the influence that the revolving door, corporate lobbying, and political financing has on policy. These are of significantly greater importance than the tax affairs of our senior politicians. That we are not talking about these at all should be far more worrying to those who value political and economic transparency than anything you will find in a politician’s tax return.

Some of the coverage you find on Cultured Vultures contains affiliate links, which provide us with small commissions based on purchases made from visiting our site. We cover gaming news, movie reviews, wrestling and much more.