Give to the rich to help the poor? An idea worthy of Bono

Satire? No - a genius really has concocted a tax proposal to put our aid budget in the hands of the super-rich

Marina Hyde
The Guardian, Saturday 28 February 2009

On Tuesday night, 100 billionaires will gather at London's sumptuous Dorchester hotel, to watch Mr Ted Turner in conversation with Ms Carol Vorderman. Ms Joss Stone will sing, and some model or other will be in attendance. Can you guess the aim of this evening, which I trust you would cross continents to avoid in the infinitely unlikely event that you had been invited? No? Then allow me to assist. The aim is to make the government give tax breaks to the super-rich, in order to tempt them to give the same percentage of income to charity as the poorest 20% of people in this country already do.

Feel free to be taken unwell.

Initially I assumed the Fortune Forum, for so it is named, was an elaborate living satire, designed to highlight practically everything that is wrong with contemporary life. Alas, The Fortune Forum is all too real. It was dreamt up by an heiress called Renu Mehta, as a kind of vaguely benevolent mini-Davos. It is now in its third year, and has made several donations to the world's neediest people, including paying one Bill Clinton a rumoured $450,000 to address it.

But it is the Fortune Forum's latest scheme that really impresses. As the Guardian reported yesterday, Mehta enlisted the Nobel prize winning economist Sir James Mirrlees to come up with a plan to address the shaming statistic that Britain's richest 20% donate 0.8% of their income to charity, while the poorest 20% give 3%. He duly concocted a tax proposal. To wit: 50% of money donated towards the UN's millennium development goals through this scheme would be deducted from an individual or corporation's tax liability (which is of course only 40% or 28% respectively), with the government making up the other 50% from its aid budget. Naturally, the super-rich donors would get to decide on what projects their money was spent.

Let's see that in action, shall we? The UK's total overseas aid budget was £4.9bn in 2007-2008. Mehta suggests her scheme could persuade the super-rich to part with an extra £5bn a year, but of course the government is required to backmatch that notional sum, meaning that the entire aid budget would be swallowed up. What this means, effectively, is that control over the UK's aid budget would pass from the Department for International Development to a bunch of private individuals.

As the tax campaigner Richard Murphy points out, this is fundamentally undemocratic. Depressingly, Mirrlees and Mehta have already been granted two meetings with the Treasury, at which they insisted the scheme should be extended to those whose tax affairs are offshore, in effect allowing the use of UK taxpayers' money to be directed by tax exiles - and giving them tax relief for the privilege.

Did you ever hear anything so defeatist? Rather than make a concerted attempt to close down these offshore havens, the Treasury is now considering further enabling them with a cashback scheme because they are too tight to give the same percentage of their wealth to charity as someone in the lowest income bracket. Allowing this would be a monumental scandal.

One suspects Mirrlees is a Nobel economics laureate much in the same way that Henry Kissinger is a Nobel peace laureate. Another of his brainwaves is replacing corporation tax with a higher rate of VAT, a move which would shift the tax burden from the rich to the poor. Yet he will inevitably be lauded for this latest plan by those puffed-up fauxlanthropists who monopolise the aid debate.

And so to our old friend Bono, who this week announced he is displeased at being called a hypocrite for moving his tax affairs to the Netherlands, all the while lobbying the Irish government to increase its aid budget. As you may recall, the Tax Justice Network estimates that if tax was paid on the money the world's rich have protected in tax havens, it would raise enough to finance those millennium development goals five times over.

"I can understand how people outside the country wouldn't understand how Ireland got to its prosperity," Bono bleated to the Irish Times in the course of promoting his new album, "but everybody in Ireland knows that there are some very clever people in the government and in the revenue who created a financial architecture that prospered the entire nation - it was a way of attracting people to this country who wouldn't normally do business here. And the financial services brought billions of dollars every year directly to the exchequer. What's actually hypocritical is the idea that then you couldn't use a financial services centre in Holland."

Now that Ireland's economy has gone belly up, you mean? He's not the brightest, is he? At least he's only parlayed himself into the role of Africa's messiah.

For Mehta's part, she keeps waffling that "we have to achieve philanthropic parity". As I wrote here last week, philanthropy begins with paying tax, and given the super-rich's notorious capacity for weaselling out of it, the very last thing we should be slinging their way are further tax breaks, let alone control of aid budgets.
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 http://www.guardian.co.uk/commentisfree/2009/feb/28/tax-avoidance-aid