Why the Conservative Party Should Crack down on Tax Evasion | Josephine Freund
For far too long, the rule of law has been evaded by means of loopholes that favour the rich and powerful.
The UK has marketed itself as a haven for foreign investment and collaboration, which is essential to its economic growth. However, it must be more regulated. Existing rule of law must be enforced equally, irrespective of class – to demonstrate value for the law, as well as to ensure that the Conservative Party consolidates newfound traditional working-class support in provincial and post-industrial towns.
The “Pandora Papers” leak, which reveals the confidential financial dealings of some 300 officials, was released to the public on October 3. Most notable about these files is the exposure of the immense wealth of world leaders such as Ukraine’s President Volodymyr Zelensky, Jordan’s King Abdullah II bin Al-Hussein, and Kenya’s President Uhuru Kenyatta to name a few.
However, it also exposed a considerable amount of real estate dealings in the UK conducted through the functions of the network known as the UK “Spider’s Web.” The Spider’s Web refers to the UK, its territories, and Crown dependencies that are often used to shift profits and wealth often to avoid higher taxation in the UK. This facet of the exposé is a particularly glaring oversight since the UK government has promised to begin registering these accounts in 2018, yet never began the process. More than anything, this leak reminded Brits of how unequally the rule of law has been enforced – especially when it comes to socio-economic status.
The exposé raises several polemic issues regarding accessibility and honesty when it comes to UK real estate. For one, the use of offshore accounts has aided foreign investors and UK nationals alike to shirk from their tax-paying responsibilities. In 2020, the State of Tax Justice reported that the networks of money laundering and offshore accounts have led to the UK being responsible for 49 percent of the $182 billion worth of taxes the world loses out on per year from the UK Spider’s Web.
Aside from the foreign aspect of tax evasion and loopholes, there is a class-based gap delineating who pays their fair share of taxes. For the year of 2014-2015, the poorest 10% of households paid around 46.8% on average of their income tax, while the richest 10% paid only 34.4% on average of their income tax. This ability to evade taxation based on socioeconomic status has been especially problematic amongst politicians. Conservative MP Geoffrey Cox has also been accused of abusing his post while simultaneously working from the British Virgin Islands – a notorious tax haven.
Fortunately, there has been an increased international effort to tackle tax evasion loopholes. At the Summit in Rome at the end of October, G20 leaders agreed to implementing an international-level tax crackdown. This would supposedly lead to set a global minimum corporate tax of at least 15% to block the phenomenon of “shopping around” for the lowest tax rate possible. Considering the Conservative Party’s traditional views on retaining the integrity of the UK’s capitalist system, it should be leading the way in the fight against financial rule-breaking. The Conservative Party prides itself in protecting the upholding of the rule-of-law and that it is maintained irrespective of class and wealth.
Considering all these factors, it is worth considering what the Conservative Party’s stance should be regarding this issue. Since the Tories tend to garner considerable support from working and middle class voters, it would be important for them to tackle this issue head-on (The David Rowntree Foundation revealed that the December 2019 elections saw the Conservative Party winning 45.4% of low-income voters).
As the papers have revealed that rule of law is not enforced in a fair manner, it shows that the UK is not as fair in enforcing its rule of law as it portrays itself to be. This is especially true when it comes to social class. However, the Tories should not underestimate the resentment this may sow amongst working-class voters who recently voted Conservative for the very first time. Surely, center right parties can bolster working class support if they introduce tax fairness at the heart of their economic agendas.
Should the Tories wish to retain traditional working-class support, it would behoove them to show that the UK government and law enforcement does not give special treatment to the elite. This would entail first verbally expressing condemnation at abuses of tax fraud. Then, it would mean cracking down on the use of offshore accounts and ensuring that with the enrichment that foreign investment brings, low-income citizens will not be left behind. Finally, it should not tolerate special treatment of tax-abusers, even if they are prominent members of the party. This would show that the UK government is dedicated to upholding the integrity of democratic values which are meant to protect the equal treatment of all – irrespective of social class.
Josephine Freund is an MA graduate from the International Relations Programme at King’s College London. Previously, she received her BA from the George Washington University where she majored in in History and minored in Russian Language and Literature.