Tax Avoiding Corporations, Privatisation and the National Health Service

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February 18, 2016 by Protect Our NHS

NHS Clinical Commissioning Groups are preparing to give tax revenues to corporations determined not to pay tax. The Bristol Clinical Commissioning Group [CCG], the local body responsible for determining the contracts for a wide range of health care services, is currently seeking support from the city’s GPs to endorse a change to the CCG constitution that would allow tax-avoiding corporations to bid for NHS contracts. Under the existing constitution, agreed in 2012, they are prohibited from doing so. The CCG describes this as ‘a minor change’, but as we know from the reaction to the Google tax deal and focus on other tax avoiders this is an issue of some considerable public concern. For the future of the health services it is an especially critical matter as it supports the drive toward further privatization of our NHS.

 

The Bristol CCG is not the only one to have such a constitutional clause de-baring tax avoiders nor is it the only one to be now thinking about having this removed. According to The Independent [08/02/16] Hackney CCG in London is also reviewing its stance on this. Bristol CCG says that it is taking this step with the support of NHS England and on the advice of its lawyers following the threat of legal action and its concerns about future legal challenges. However, there is no evidence to support such claims and to date no evidence of a successful challenge against such a clause.

 

Had the Bristol CCG been hoping that this would be a non-controversial issue the timing could not have been worse. The last CCG meeting at which the proposal was discussed coincided with an announcement by the House of Commons, Treasury Select Committee that it was to investigate the current corporation tax structure. It was also the week in which MPs of all parties came out against the tax deal agreed between the global giant Google and the UK’s HMRC.

 

Even the Chancellor, George Osborne, who hailed the Google deal as a ‘major breakthrough’, admitted that all corporations should pay their ‘fair’ share of tax. Since more details of the Google deal have become known, an increasing number of Conservative MPs came out against it and, apart from Osborne, it is now difficult to find anyone who thinks it represented a fair and proper agreement. The European Union has also announced that it too will investigate complaints from both the Labour Party and Scottish Nationalist Party about the Google payment and is now committed to reviewing all European tax arrangements for global corporations. Bristol CCG appears immune to such public concern as it prepares to condone corporate tax avoidance boosting their profits with public money.

 

The non-aligned Bristol ‘Protect our NHS’ [PoNHS] campaign, that for the last four years has been campaigning against the commercialization of the NHS, is urging the Bristol CCG to think again. It is writing to all Bristol GPs asking them not to support the constitutional amendment and in collaboration with 38 Degrees has launched a petition against the proposed change [https://you.38degrees.org.uk/petitions/keep-tax-avoiders-out-of-bristol-nhs-1]. The CCG has given until February 25th for any public comment on the issue [https://www.bristolccg.nhs.uk/get-involved/proposed-change-our-constitution/]. The PoNHS message to CCG members is that that they should not bend to corporate bullying tactics.

 

Indeed, it is unlikely in the current climate that any major tax-avoiding corporation will want the full glare of publicity of a court case exposing its tax avoidance behaviours. Such threats are for now groundless and if they were to occur in the future then the CCG, supported by the city’s GPs, should be prepared to defend the existing constitution that reflects the only ethical stance that should be adopted. Its current stance suggests, however, that it was never committed to this ethical position or that it is prepared to protect the NHS. Bristol CCG says it has a duty to maximise the efficient use of tax revenues devolved to it and therefore should avoid expensive and wasteful litigation. But the real threat to NHS revenues comes from giving private corporations further access to NHS contracts.

 

Why Focus of Tax Avoidance?

 

Corporations engaged in tax avoidance are no different in many respects from other private companies, so why single them out or expect anything different? Do we not all have some sympathy with paying as little tax as possible, provided it is legal and legitimate to do so? Finding loopholes and dodges to get past the revenue has long been seen as ‘fair game’ in our dealings with HMRC. Tax avoidance, as opposed to tax evasion, is not yet illegal. These corporations argue that they are only doing the right thing by the shareholders and that until governments make such practices illegal it is only reasonable that corporations minimize the tax bill.

 

Yet while not illegal, tax avoidance is not the same as the individual tax-payer who claims all their tax allowances, seeks the help of a tax advisor when completing a self-assessment form, or invests in tax incentive schemes such as ISAs, pension contributions or National Saving Bonds, all of which are encouraged by governments and are an integral part of the tax system. Tax avoidance corporations seek to place themselves outside and beyond national tax systems and are not simply accepting a legitimate tax incentive. They invest heavily in creating complex non-transparent ways to avoid paying tax and in doing so show no regard for or appreciation of the public purse. Rather such actions threaten the future viability of all public services, regardless of government policy. Corporation tax is already low [18%], and this Government would like to see it lowered still further, but such generous tax rates do not inhibit tax-avoiding corporations from deliberately seeking to circumvent and place themselves beyond national tax laws.

 

The National Health Service is Tax Dependent

 

The National Health Service is funded almost entirely through tax revenues and thus smaller revenues mean less funding both for the NHS and other public services. The NHS is currently heavily under-resourced, as is universally recognized; both in its capacity to respond to current and future demand and in comparison to other similarly placed countries. France and Germany, for example, currently spend around 25% more of their GDP on health care than we do.

 

The most recent OECD figures [2013] show the UK spending a diminishing proportion of its GDP on public and private health care, which now stands at 8.5% down from 8.8% in 2009. This leaves the UK languishing 13th out of the original fifteen EU members, with only Ireland and Luxembourg investing less. The average spend for the OECD as a whole, but excluding the USA, is 9.1% and the average across the whole of the 34 OECD countries is 8.7%. At these rates the Kings Fund, a respected Think Tank, has calculated that by 2020 the UK will spend 43 billion pounds less per year than the average spend of its European neighbours.

 

Many NHS Trusts are now running substantial and unsustainable deficits, mainly as a consequence of PFI funding. It is estimated, for example, that Barts NHS Trust will have a deficit of 134.9 million pounds for this financial year [2015-16], a 69% bigger increase on its overspend in the previous year. Eighteen of the 37 London NHS Trusts are expected to return a collective deficit of 582.3m with the total deficit for the whole of the UK NHS Trusts soaring to 1.8 billion. In response, the NHS regulators have ordered staff cuts across all Trusts to reduce such deficits. Yet if the plans for a seven-day week full service are to become a reality thousands more health care staff will be required.

 

Corporate Tax Avoiders Want the Benefits Without Making a Contribution

 

Corporate tax avoiders not only want to pay no tax and see no reason for doing so, but by demanding access to public funds aim to further enhance corporate profits by exploiting those same tax revenues that they do their upmost to avoid paying into. In other words, taxpayer money is being used to increase the profitability of the very corporations that shun the idea of paying taxes but seek to exit the tax regime whenever possible. Legally, they can get away with such practices but that is no reason for the taxpayer and those, such as the CCGs, responsible for ensuring that taxes are well spent, or in other words wisely and properly, to condone such morally bankrupt and bankrupting behaviours.

 

These corporations seek to exploit our tax-based revenues designed to provide essential public services while making no contribution to those revenues. They seek to pay no taxes but want to profit from the taxes paid by others. They insist they are entitled to access such markets and the profits that would flow from them but refuse to make a fair contribution to the revenues that create the services they now seek to deliver.

 

Corporations will spend a small fortune avoiding taxes, employing an army of ‘experts’ whose sole job it is to reduce the tax bill to as close to zero as possible. They then demand that hard-working taxpayers, whose work by contrast does make a real contribution to the economy, hand over tax revenues to them, so that these corporate parasites and shareholders can profit from the revenues generated by the work of others. The view that not paying a fair contribution denies you the right to benefits is a well-established principle and one vigorously pursued by the current government in relation to welfare recipients or non-British nationals. It should be no different when it comes to tax avoiding corporations.

 

Tax Avoidance is a Privatisation Device

 

For those corporations in the market for public sector business, corporate tax avoidance is not simply a means of maximising shareholder profits. It can moreover be a deliberate strategy to secure those contracts from a service weakened as a direct consequence of such tax-avoiding measures. After all tax avoidance is not a new device and corporations make long-term plans as to how best to access and secure new markets. By depriving the Exchequer of substantial tax revenues these corporations undermine the capacity of our public services to deliver the efficient and high quality services needed, thereby making it more likely that governments will turn to the private sector. Corporations are only too aware that in the long-term it pays to invest in tax avoidance as smaller tax revenues makes public services vulnerable, crisis driven and prone to failure, opening the door to further commercialization. Corporate tax avoidance disrupts, de-stabilises and ultimately destroys the public sector market. Corporate tax avoidance is nothing less than a privatisation device.

 

Corporate tax avoidance, whilst legal, is unscrupulous and destructive: it kills the public service and then allows the same corporations to claim that they are its saviours. They might initially accept the insufficient resources on offer but will then employ a range of cost-cutting measures, including salary and wage reductions, the diminution of working standards, lowering patient care standards, off-loading essential but high intensity non-profitable activities, before ultimately demanding a different fee-based, means tested or insurance based system of paying for the services and thus the disappearance of a National Health Service. Privatisation is gathering pace and since 2013 private companies have won over a third of the total value of all contracts put out to tender, worth 5.5 billion and this year is likely to see a further percentage increase. To condone tax avoidance will only further accelerate this process, which is exactly what tax-avoiding corporations seek.

 

A level-playing field in the contract market place is created not by removing all barriers to the process making it possible for anyone to participate. It is, in fact, quite the opposite. Removing those that seek an unfair advantage by engaging in either illegal or unscrupulous and destructive behaviours creates a level playing field. All tax-avoiding corporations undermine public services by reducing the level of public finance available. Those who, in addition, seek to exploit an already weakened public service by competing for public sector contracts market to further enhance their profits should be denied access.

 

 

 

 

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3 thoughts on “Tax Avoiding Corporations, Privatisation and the National Health Service

  1. nivekd says:

    And not questioning the tax affairs of contractors is the declared policy of Wirral CCG. Well done for highlighting this.

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