How much of the national debt has been faked by tax dodgers?

Diddled into debt: A corporate tax avoidance scam is conning workers out of decent pay and the government out of tax and NI money, after causing the financial crisis.
Diddled into debt: A corporate tax avoidance scam is conning workers out of decent pay and the government out of tax and NI money, after causing the financial crisis.

“A bank in the UK could lend, say, $1bn to a US bank… generating tax-free income in the UK but a tax deduction in the US – and then simply borrow it back. For the second leg a different instrument could be used that generated tax-free income in the US and a tax deduction in the UK. The banks had simply swapped $1bn, to no economic effect beyond two tax breaks, while quite possibly keeping any mention of the debts off either’s balance sheet. Such tricks – the creation of debt more for tax advantages than any real business need – undoubtedly contributed to huge levels of inter-bank indebtedness that triggered the financial crisis.” – Richard Brooks, The Great Tax Robbery, p86.

If you are not deeply disturbed by the implications of the above quotation, read it again until you are. Richard Brooks is saying that the major banks of the UK, the USA, and who knows how many other countries colluded to hide massive amounts of money from the tax man by claiming – falsely – that it was debt.

The financial crisis happened because the banks could not service the debt they had created – they could not even pay back the interest on it, let alone the debt itself – and so the government was forced to step in and bail them out. So now the government had not only lost the tax it was due from the bank profits that had been hidden by the dodge Mr Brooks mentions, but it had now taken on the fake debt that had been created. The taxpayer was doubly the loser.

Who pays back the debt? Not the banks. Not the large corporations that are also avoiding tax. Not the rich businessmen and women who dreamed up the tax dodges. Thanks to changes in the law and already-existing legal loopholes that have not been closed by the Coalition government, they have been able to park their ill-gotten gains in offshore tax havens, depriving the nation of the wherewithal it needs to fix the problem they created.

Now it seems the government is also being deprived of badly-needed tax money because of the way large firms are structuring their pay packets – to the disadvantage of low-paid workers. The details were in Channel 4’s Dispatches documentary, Secrets of Your Pay Packet, broadcast on October 21.

With more people in work than ever before, the UK should be getting massive amounts more in tax and National Insurance, allowing it to provide the services we expect and pay down the national deficit. But the deficit hasn’t budged. Why?

Because the new jobs are part-time, self-employed or temporary.

Self-employed contracting means you can end up working for less than the minimum wage (you’re paid a fixed daily rate for the job, not the hours it takes to do it, so if it takes a long time to get it done, your pay-per-hour diminishes proportionately – and, as you are self-employed, you’re not entitled to the minimum wage).

Conversely, if you are employed part-time, you can end up working too few hours to qualify for tax or National Insurance (so you don’t get enough credits to pay for your pension later in life and the Treasury doesn’t get the tax money it needs to pay for services and clear debts) and on a personal level you don’t work enough hours to qualify for decent holidays. The company doesn’t pay for employees going on annual leave, potentially saving tens of millions of pounds.

If you work overtime, this doesn’t count towards annual leave, of course. So you can be employed on a part-time contract for, say, three days a week, be asked to work two more days overtime (a full five-day week) and lose out on all the benefits a full-time worker would expect.

The threshold is 20 hours per week. If you work less than that, employers do not have to pay NI contributions which would cost them nearly 14 per cent of pay. So people may work all their lives but never qualify for the state pension.

This is why more people are now in work than before the recession – it’s a cheat by bosses. They’re the ones who pay your tax and NI contributions. If you’re on pay that’s below the new tax threshold, you don’t pay tax. We have the Liberal Democrats to thank for that. It seems like a good deal but in fact it isn’t.

Meanwhile the companies say that cutting down working hours has saved jobs in a hard business environment, while the number of full-time jobs is down and wages have now fallen by 12 per cent in real terms (up from nine per cent, only a few months ago).

It is cheaper for companies to employ more people on shorter hours because they pay less to the government in tax and NI. And they say the “flexible” labour market has been a boost for the country, that having a job is better than having no job, and that it will help people progress.

That is not what we see.

We see a workforce ground down by the pressure of making ends meet on part-time or zero-hours jobs, making no NI contributions, getting very few holidays, and afraid to challenge the situation because their employers can simply let them go and hire someone else from the huge 2.5-million-strong pool of the unemployed (who are desperate for jobs because the DWP fills their entire lives will bullying and threats about losing their benefits).

We see the government completely unable to cover its costs because its own tax system – written by the ‘Big 4’ accountancy firms that have been responsible for more tax avoidance schemes than any other organisations in the country – actively promotes corporate tax avoidance; and Conservative ministers are totally indifferent to the huge losses they are piling up, because it means they can cut public services, or sell them off to (again) big corporations who will then avoid paying tax on them.

And we see the rich corporates laughing all the way to the (offshore) bank yet again.

The Coalition government has tried to tell us that it must squeeze benefits for the extremely poor, and low-paid working people must work much harder, in order to pay off the debt that – no matter what ministers tell us – neither they, nor the last Labour government, created.

In fact, this has been a story of tax avoidance by the very rich. A huge scam, running for decades, and hidden from the British people.

Are you angry yet?

Related posts

18 Thoughts to “How much of the national debt has been faked by tax dodgers?”

  1. Florence

    They just get greedier & greedier. Riches beyond our dreams. This government has turned these scams into our nightmares for the poorest. Perhaps they have over-stretched the relentless punishment of the poor, ill, disabled & under / un /employed. Their greed has now made us wake up & take note. I hope we can collectively put an end to the culture and practice of “something for nothing” in the Banks & their rich masters. How much it hurts them will be determined by how far the ConDems want to hurt us.

    Do they want recapitalisation or renationalisation?

    Will they choose corporate responsibility and taxation, or global financial collapse?

    Do they want reform or riots?

    On Taxation, we’re not asking nicely anymore, we must make the politicians demand an end to this destruction of our society by unbridled capitalism. When (Lord??) Saachi went on TV last night, most of what he said was incomprehensible garbage, but the drift seemed to be that the Tories should back away from these excesses of capitalism, because they are killing the golden goose. Saachi represents the richest, who actually have the most to loose, and they only speak out of self interest.. When Saachi speaks in praise of Marxism (which he thought he did) the Bullingdon thugs should take note. They are now on a course set for internal war if they carry on.

  2. Ahh brings back memories of the old platinum sponge tax avoidance scheme … some things never change:-

    http://www.hmrc.gov.uk/manuals/nimmanual/nim04010.htm

  3. I would be angry but Ive been too kicked in…

  4. Ian Cropper

    If you want to see someone getting angry about it all, then watch this link.
    http://www.youtube.com/watch?v=glcqb9hHQ3E

  5. […] "A bank in the UK could lend, say, $1bn to a US bank… generating tax-free income in the UK but a tax deduction in the US – and then simply borrow it back. For the second leg a different instrumen…  […]

  6. […] How much of the national debt has been faked by tax dodgers … […]

  7. […] How much of the national debt has been faked by tax dodgers … […]

  8. […] How much of the national debt has been faked by tax dodgers … […]

  9. […] profits away from the tax man as possible. It is a commitment to turn Britain into a tax haven and the VP post earlier this week shows that the government has been successful in this aim. What a shame that it also means the […]

  10. […] How much of the national debt has been faked by tax dodgers … […]

  11. […] How much of the national debt has been faked by tax dodgers … […]

  12. […] How much of the national debt has been faked by tax dodgers … […]

Comments are closed.

%d bloggers like this:

By continuing to use the site, you agree to the use of cookies. This includes scrolling or continued navigation. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close