How the ultra-rich enslave themselves
By George Monbiot, published in the Guardian 22nd February 2010
It’s a bitter blow. When the government proposed a windfall tax on bonuses and a 50p top rate of income tax, thousands of bankers and corporate executives promised to leave the country and move to Switzerland(1,2). Now we discover that the policy has failed: the number of financiers applying for a Swiss work permit fell by 7% last year(3). The government must try harder to rid this country of its antisocial elements.
Executive flight is the corporate world’s only effective form of self-regulation: those who are too selfish to pay what they owe to society send themselves into voluntary exile. It’s an act of self-sacrifice for which we should all be grateful. It’s hard on the Swiss, but there’s a kind of mortal justice here too: if you sustain a crooked system of banking secrecy and tax avoidance, you end up with a country full of crooks and tax avoiders.
Sadly, most promises of self-imposed exile are empty. They seem to be intended, like Boris Johnson’s warning last year that the City of London would be reduced to a ghost town by the new taxes(4), to dissuade the government from taking action. The universal public response, as Tracey Emin found when she announced that she couldn’t possibly survive here on her scanty millions(5), is “Go on then, jump.”
But self-awareness is yet to become the bankers’ dominant trait. Last week the president of Barclays insisted that Britain should be “immensely proud” of the bank’s enormous profits(6), while the Royal Bank of Scotland announced that it would give its staff bonuses of £1.3bn – 84% of which belongs to taxpayers – despite making another massive loss(7). The new taxes are being imposed because of the crisis caused by bankers’ greed. Yet the bankers seem to believe that we’ll agree that they are the last people who should have to pay them.
There’s something else that the threats tell us: some people appear willing to do almost anything for money. In court papers made public at the beginning of this month, Guy Hands, the owner of the private equity company Terra Firma and the record label EMI, sought to explain why the case he is fighting against Citigroup should not be heard in London. He moved to Guernsey last April to avoid UK taxes. Since then, he says, he has “never visited” his wife and children, who still live in his former home in Kent, for fear of compromising his tax status. For the same reason, “I do not visit my parents in the United Kingdom and would not do so except in an emergency.”(8)
Hands, according to the Sunday Times rich list, is worth £100m(9). Were he to allow the Exchequer to reclaim a few of his unnecessary millions, he would face neither ruin nor starvation. He’s reported to work 18 hours a day(10), which means he is unlikely to find much time to enjoy his wealth. It’s hard to see how the fraction he has saved through becoming an economic refugee could bring him any discernible benefit, let alone happiness that could compensate for the life he has lost.
Extreme wealth invariably leads to captivity. Its victims live in an open prison. In Mexico and Colombia, they and their families face the constant threat of kidnap: they must scurry around, screened and shrouded, as if they were coppers’ narks. In Russia they can never be free from the fear of assassination. Everywhere on earth they live behind walls and razor wire, guarded by cameras, dogs, watch towers and sensors. The walls that shut the world out also shut them in.
They must, if they wish to maintain their place on the rich lists, also live in fear of their rivals. Despite their lobbying power, they cannot permanently shake off the authorities, not least because of the irregular tax and accounting methods which helped many of them to become so rich: the remark attributed to Balzac (“behind every great fortune lies a great crime”) is at least half right. Who in his right mind would volunteer for this life?
The Conservative Party’s most persistent embarrassment is the hazy tax status of its deputy chairman, Lord Ashcroft. Ashcroft received his peerage in 2000 after promising that he would become a UK taxpayer. Since then a succession of senior Tories has been quizzed by the media about whether he has redeemed this promise or is still registered in Belize, and they have writhed like hooked eels(11,12,13). Though this issue could explode as the election approaches, neither Ashcroft nor the party have yet produced an answer. This gives us a pretty good idea of what it must be, and of where the party’s priorities lie.
For some of the ultra-wealthy, tax avoidance seems to be a matter of principle: they’ll be damned if they give a penny to the people, whether they would miss it or not. On the few occasions on which I’ve met members of this class, I’ve been struck by their dissidence: they appear to see themselves as lonely rebels engaged in a perpetual fight against authority, even as they strive to get so rich that their own authority becomes impregnable. In fighting the taxman, they draw on a heroic tradition of resistance. In the New Testament, or to the Sons of Liberty seeking American independence, taxation was an instrument of colonial oppression. The context has changed: today the tax avoiders are the oppressors. But they still regard themselves as insurrectionaries.
Now, at last, the net is starting to close. Far too late, the British government has begun to abandon its mystifying tolerance of the loss of its funds. Last year HM Revenue and Customs retrieved three times as much unpaid tax from the very rich as it did five years before(14). In December the government announced that it would impose 200% penalties on people who fail to declare their bank accounts in uncooperative tax havens(15). Last week the appeal court ruled that the British multimillionaire Robert Gaines-Cooper must pay £30 million in back tax, as he retains too many interests in this country to qualify as a resident of the Seychelles(16). The government is considering a new law on British residency, which it will introduce next year, in the unlikely event that it wins the election(17). Why has it left this so long?
These efforts scarcely scratch the problem. International attempts to close down tax havens remain half-hearted. But if by some miracle these measures were to succeed, one haven – let’s say St Helena – should be kept open. It should be furnished only with rudimentary homes. All who chose to could live there in peace. Every penny they possessed would remain safe from the taxman, as long as they never set foot in another land. They could sit in their cells and count their money for the rest of their lives. Parties of schoolchildren would be brought to the island to goggle at these hermits, and learn some lessons about the follies of wealth.