The latest scandal to erupt within the world of high finance is beyond dispiriting. Yes, HSBC may no longer offer its wealthiest and stealthiest clients so much help in the field of tax dodging, but the disclosures of the past few days have done nothing to dent a widely held perception that the maintenance of economic inequality is the raison d’être of the banking sector.
HSBC argues that all this is historical; that regulations are now tighter; and that it places greater emphasis on corporate and customer compliance with those regulations. That is reassuring – up to a point. It certainly seems that the institution is not about to be deserted by its customers on the high street.
Nevertheless, if it was at the outset a problem for HSBC and a select client group, others are now equally dirtied by the mess. After all, the information about the bank’s tax-dodging clients was leaked as long ago as 2007. The British tax authorities have known the identities of those involved since the turn of the decade. And it is becoming abundantly clear that the response of Her Majesty’s Revenue & Customs has been woefully inadequate.
There are some grounds for believing that HMRC was right in the first instance to offer an amnesty of sorts, offering to go easy on the individuals concerned in the hope of recouping a good deal of the tax which had previously been kept from its clutches. But to have thus far recovered only £135m from 1,000 super-wealthy individuals is a poor return, suggestive of a belief among tax dodgers that they are unlikely to face prosecution and are probably, therefore, better off sitting tight. If that is so, it says little for HMRC’s robustness in the face of determined – and well-resourced – opposition. More prosecutions are needed to, at the very least, dispel a worrying impression of complacency.
Bringing a prosecution is neither easy nor particularly cheap. But as Margaret Hodge, the straight-talking chair of the Public Accounts Committee, put it: there rarely seems to be such reluctance when it comes to bringing low-level benefits cheats before the courts.
With an election looming, the main political parties are inevitably doing all they can to implicate one another in the scandal. The Tories, note their opponents, appointed HSBC’s former group executive chairman, Stephen Green, to a ministerial post. Labour, on the other hand, stands accused of having encouraged a light-touch regulatory regime which allowed banks to operate without due oversight leading up to the 2008 financial crisis.
If there is a bright spot on the horizon it is the planned implementation in January 2016 of the Common Reporting Standards (CRS), released last year by the Organisation for Economic Co-operation and Development. While the CRS has its critics, it ought to improve vastly the international exchange of information about individuals’ financial affairs and thus boost global tax compliance. It mirrors legislation already in place in the United States.
Indeed, these advances suggest that the anti-tax avoidance furrow being ploughed by Ed Miliband is not as lonely or as hopeless as some on the right would like to suggest. And while it remains to be seen whether Labour’s plans to crack down on UK tax havens stand up to electoral and perhaps parliamentary scrutiny, there seems little doubt that questions of financial inequality and injustice provide fertile ground for politicians of Mr Miliband’s hue.
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