Wednesday, 9 February 2011

We're all in this together? Don't be silly

In Yesterdays Guardian Newspaper had an excellent article by George Monbiot where he outlined changes to tax for large corporations.

At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies": it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime". The main beneficiaries, in other words, will be the banks.

But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate "of any major western economy". By the time this government is done, we'll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph, David Cameron said: "What I want is tax revenue from the banks into the exchequer, so we can help rebuild this economy." He's doing just the opposite.

Today we learned that the Conservative Party are increasingly reliant on bankers, hedge fund managers and private equity moguls for their income for their political party now over 50% of their income. David Cameron has raised £42 million for his Party from the city of London in the last 5 years.

The Conservative Party are close to the City of London and has failed to tackle the bonus culture of our financial institutions, today's agreement between banks and the government on lending and bank bonuses seems meaningless because of the statement “3.5 nothing in this statement derogates from the obligation of the banks, and their boards and remuneration committees, to manage pay policy in a way which protects and enhances the interests of their shareholders.” in the agreement.

Lord Oakeshott a Lib Dem called said of the banking agreement "If this is robust action on bank bonuses, my name's Bob Diamond." He called the Treasury negotiating team "They've got an awful combination of arrogance and incompetence, most of them couldn't negotiate themselves out of a paper bag." His displeasure is made clear "I'm afraid the banks have taken the Treasury for a ride and I've decided I'm more comfortable saying that from the backbenches."

So it's becoming increasingly clear, this Conservative led government are acting on behalf of their funders and unwilling to tackle their friends excesses, at the same time this government are cutting frontline services, cutting schemes such as the financial inclusion fund to fund 500 centres for specialists in debt relief at a cost of just £45million.

We're all in this together? Don't be silly

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