When a news story aligns with your views it can be difficult to critically assess how meaningful it is. An excellent example is today’s story that the Netherlands “will block UK-EU deal without tax avoidance measures.”
In particular, this story shows how the focus on Brexit in political reporting warps the discussion of important matters in potentially dangerous ways.
In certain regards it’s almost the perfect story for the Guardian and Observer, aligning with certain opinions which I will unfairly caricature:
- If Britain leaves the EU everything will undoubtedly be worse;
- The Europeans know much better than we do and we must heed their wisdom;
- “Radical” leftwingers live in a fantasy world and only “sensible” centre-left politicians can lead us out of this crisis.
My point is not to criticise these views even though I may disagree with them in part or in whole. The point is to lay out, with perhaps a few quibbles, the papers’ view of the “Brexit mess.”
This tax-dodging story hits all the right notes: a “sensible” European centre-left leader has vowed to stop the Tories from turning Britain into a tax haven. Great! What’s to disagree with?
Well, the story is meaningless. It means nothing. Its picture of our current situation is false and the threat has no chance of being carried out.
To caricature again, a better summary would be: “Man with no power vows to prevent something that is already the case.” Let’s go through my claims in turn.
To start, it’s unfair to say that Dutch Labour Party (PvdA) leader Lodewijk Asscher has no power. He’s currently the deputy PM! But, like the Guardian’s favourite Liberal Democrats, his party got into bed with the country’s rightwingers (VVD) and, like the Lib Dems, could be annihilated at this year’s election.
Once Britain formally declares its intention to leave the EU a two-year timer starts ticking down. The PvdA are unlikely to be in a position to influence Dutch national policy at that point. So the threat is meaningless.
OK, what about the mischaracterisation of the current tax situation? Asscher writes:
Let’s fight the race to the bottom for profits taxation together which threatens to come into existence if it is up to the Conservative UK government. [Emphasis added]
It’s true, the Tories are bent on slashing (primarily) corporation tax. But the current schedule of cuts was set by George Osborne, who backed a Remain vote in the EU membership referendum. The main rate of corporation tax has already been cut significantly from 28% when the Con-Dem coalition was cobbled together in 2010 to 20% today. The plan is to take it down to at least 17%.
We’re already most of the way to 17%, so it’s wrong to say that “the race to the bottom … threatens to come into existence.”
And further tax cuts are even more irrelevant when you consider that tax-dodgers can legally avoid British rates by using Britain as a tax haven. Britain sits at the centre of a vast web of “secrecy jurisdictions” — starting in the City of London, reaching out to Jersey, Guernsey and the Isle of Man, and then further to the 14 overseas territories (including the notorious Cayman and British Virgin Islands) and to a certain extent the Commonwealth countries.
Overall, the City of London and these offshore satellites constitute by far the most important part of the global offshore world of secrecy jurisdictions. Had we lumped them together, the British network would be at the top of our index, above Switzerland.
Government policy over decades to support the City of London as a financial centre has enabled the growth of this tax haven network. (For more on all this, I highly recommend Nick Shaxson’s book Treasure Islands.)
And then there’s the other, unmentioned, side of this accusation: the Netherlands as a tax haven (PDF). While it accounts for “less than 1% of the global market for offshore financial services,” an ocean of money flows through it:
The Netherlands hosts around 12,000 ‘special financial institutions’ used by foreign parent companies to route €4,000 billion through the Netherlands every year — roughly 10 times the Netherlands’ gross national product.
Further tax giveaways have led to “91 of the 100 largest” transnational corporations setting up financing firms in the Netherlands.
The point of this is absolutely not to say that Dutch politicians should get their own house in order before they start lecturing Britain, it’s to put Asscher’s remarks in context.
He made a fuss of Britain becoming a tax haven when it leaves the EU and a pro-EU paper here has given his views prominence — but the briefest examination shows that everything he says might happen has already happened.
My worry is that the obsession with the decision to leave the EU in almost all areas of policy is causing people (deliberately or not) to focus on it to the exclusion of other factors.
And since the Brexit negotiations are such a nebulous mess the danger is that people ascribe their fears or hopes to them when they should be taking action in more concrete ways that might actually make a difference.
(Just in case you think I’m being anti-Remain with the tax example, here’s one from the other side. Both left- and right-wing pro-Leave groups have criticised the EU common fisheries policy for harming small fishers. The EU does set quotas for each country, but national governments divvy up the quota between companies and Westminster gives most of Britain’s quota to giant firms.)