if I understood half the stuff in the papers about what exactly precipitated the global financial crisis I’d be ten times cleverer than I actually am. But still, I’ve been reading some fascinating and depressing stuff about tax and wealth recently. So thanks to my city-based friend T for kindly totting up the bonuses all the major banks in the UK have paid out so far this year. His figure – which he freely admits is unlikely to be fully accurate – comes to just over £30bn. Incredible.
A more careful analysis of corporate tax avoidance and the impossible complexity of today’s tax system comes in the form of this briliant piece in the New York Review of Books, by Guardian editor Alan Rusbridger. The main focus of the story is on the libel case that Tesco took to the Guardian after they published an inaccurate story. But along the way Rusbridger also highlights some eye-watering facts about corporate tax avoidance, such as HMRC’s estimate that today’s ‘tax gap’ (the amount avoided by individuals and corporations) is up to £13.5bn a year. According to the TUC, it would take average income tax contributions from £2.4m households to make up this shortfall. Or, again from HMRC’s analysis, the fact that 25% of the 700 biggest firms in the UK paid absolutely no corporate tax in 2005-6.
How can we have any kind of legitimate debate about tax and redistribution if the richest businesses and individuals of the UK can effectively exempt themselves? And surely the money spent by government on reclaiming benefits overpayments (which, at £1.9bn, is dwarfed by these kinds of figures incidentally) would be better spent on closing these loopholes and ensuring that our largest corporations pay their way?
For Rusbridger, one of the major reasons these have not become issues worthy of public outrage is the sheer complexity of the system. Papers can’t afford to hire in the expertise necessary to make sense of (and expose) the tangle of ‘innovative financial products’ firms are using today. And even if they could, it’s just too complicated to explain in a way that any of us lot with busy lives and overly full heads can make sense of.
The Guardian must be brave, because despite having all that law flung at them by Tesco, and despite the nerves they must have about whether they can make this stuff accessible enough, today they launched a major new investigation into these issues, which they will be reporting on over the coming weeks. Worth keeping an eye on.