Remainers often appear to consider themselves the elite – better educated, morally superior – whose views ought to trump everyone else’s but in reality they are supremely ill informed. Most young Corbyn supporters, for example, do not realise that all those economic promises about nationalisation and state subsidies simply cannot be implemented under EU legislation (never mind whether they are actually affordable!)  Remarkably, a Corbyn supporting socialist at the recent Leave Means Leave rally in Bournemouth said that 50% of Corbyn’s economic policy was prohibited by the EU. How difficult is it for the Labour leadership to point this out? Why do Corbyn and McDonnell not point it out? Are they scared that their young dreamers and EU ideologues will chuck them out? Do they even grasp it themselves?

I do not know the answer to the questions but I do remember Nigel on television once, talking about the steel industry, probably Tata at Port Talbot,  and the interviewer kept asking Nigel, should we save the steel industry and Nigel said, ‘We can’t.’ And she did not take it for an answer – she pressed again – Should we save the steel industry?  – and Nigel got somewhat irritated, and said, ‘Look here, you cannot under EU rules, you can’t even if you want to.’

And it gets even more ridiculous with tax rules.  Britain has the largest tax code in the world. Few people know that.  Eight enormous volumes with more being added all the time. Add to that all the separate tax rules in each EU country and what you might think is a nightmare is in fact a tax planners paradise.

Much of what we hate about multinationals not paying their fair share of tax (and the Corbynistas would hate if they really knew) derives from the European Union and its four freedoms. As a friend who is an international tax planner said, ‘The EU is pretty handy if you don’t want to pay tax.’

And this is the point: whilst you are in the European Union, so many issues relating to the economy have nothing to do with economics or national politics but to do with tax planning.

Let’s take Booking.com. Booking.com is the trading name of a company called Priceline in the USA. It’s share price has gone up 30,000% – that’s right, 30,000% from it’s low point.  You can find a chart in the above link. Just from 2006, it’s share price has gone up from $20 to $2000. That’s how you become a billionaire.

And the EU has had no small part in helping Booking.com be successful. There was a company called ‘LateRooms’.  Anyone ever booked a room on it? Probably not but most of you will have booked through booking.com. ‘LateRooms’ is based in the UK. It charged exactly the same commission to hotels as booking.com – 15% – a flat rate to all hotels with no negotiation. But there was one crucial difference. Booking.com handily based itself in the Netherlands.  

So ‘LateRooms’ had to charge hotels 15%+ vat at 20% = 18%  whilst booking.com charged 15%+0% vat = 15%. In other words, a hotel with £100,000 turnover was paying £3000 extra to be with LateRooms rather than booking.com

The result is obvious.  Booking.com obliterated the competition and is the dominant player in the market.

They did this under a rule called ‘The reverse charge’ system on VAT.

And not only that, it then gets worse.  Now I am not a tax expert and there are whole legions of tax advisors who spent all their time working through those large eight volumes, and then on to some of the 55,000 EU laws that have been enacted, to help these companies pay almost no tax.

The Netherlands is a particularly egregious case. Because of The Netherlands Antilles, many companies then find a way, after not having charged VAT, to push their profits through to a tax haven and pay little tax in the whole continent. That might have helped their share price go up 30,000%.

And there are loads and loads of ways of doing this. Setting a company up in Cyprus is another common method. Corporation tax is 12.5% in Cyprus. It literally costs a couple of thousand Euros to buy a company off the shelf in Cyprus and you can even backdate it now to Jan 1 2018. There is a whole industry of advisors and company formation companies there ready to help you do it.

Licencing, interest offsets, moving debt around, loss leading to create monopoly positions so your profits end up in shares in the USA, collecting profits as dividends and so on, are all helped by all these EU countries having different rules and totally different rates of tax – and by the EU allowing all these freedoms of capital movement, across jurisdictions.

Just going back to VAT, you can either end up paying a low of 0% (if you do a booking.com wangle) or 25% if you are in Sweden. And even the difference in the rates of VAT between countries is more than the WTO rules for total tariff.  Sweden has VAT of 25% whilst Luxembourg is 17% (see here).

The results are awful. It’s not just booking.com that has obliterated local competition.

Starbucks paid £5m tax on it’s entire UK income. John Lewis (whose profits fell by 99% recently), paid £10m in business rates just on its Oxford Street store. Yes I know they are not the same tax, this is just to put the amounts into context. Facebook with a global revenue of $40 billion paid £15m tax in the UK last year.

Many of these tax avoidance schemes could be stopped if we got out of the EU. The savings alone would allow for a massive cuts in corporation tax and Britain would have companies flooding into the UK  to invest and employ people.

Unfortunately under the EU, corporation tax has become a bit like inheritance tax which is generally not paid by the rich – only small  and domestic companies pay it. There is no level playing field and the more complexity that is added to the tax rules, the better big companies are at finding loopholes.

As my friend said, ‘The EU is pretty handy if you don’t want to pay tax.’

[Ed: Catherine Blaiklock is the Former Economics Spokesman. She was dismissed one day after writing this article “Leave means Leave – where are we?“]

 

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