Photographer: Chris Ratcliffe/Bloomberg

Tax Dodgers Targeted by Both Sides in U.K. Referendum Campaign

  • Former Mayor Johnson dismisses Osborne’s diverted-profits tax
  • McDonnell says EU best way to coordinate action on avoidance

Both sides in the campaign for the U.K.’s referendum on membership of the European Union turned their fire on tax dodging on Tuesday, while disagreeing on the best way to tackle it.

The Vote Leave campaign said EU rules have hampered U.K. government attempts to crack down on corporate-tax avoidance, but the “Remain” side said companies are more likely to pay their fair share if Britain stays in the 28-nation bloc. Chancellor of the Exchequer George Osborne’s diverted-profits tax, intended to stop “contrived arrangements” involving foreign subsidiaries to avoid U.K. tax, is not working, former London Mayor Boris Johnson said.

“Because of the way the EU works, we’re not able to crack down on tax avoidance in the way that we want,” Johnson, the most prominent member of the ‘Leave’ campaign, told reporters during a campaign stop in Nottingham on Monday. “We can’t stop them sluicing money off to Luxembourg.”

QuickTake Brexit

A European Court ruling in 2006 that limits the ability of the U.K. to tax subsidiaries of multinational companies in lower tax jurisdictions is costing Britain 840 million pounds ($1.2 billion) a year in lost tax revenue, Vote Leave said in an e-mailed briefing. By contrast, John McDonnell, the finance spokesman for the main opposition Labour Party, will say Tuesday that the EU enables coordinated action against tax avoidance.

‘Project Fear’

“I want to rescue the debate from the negativity and ‘Project Fear’ coming from all sides of the Tory party,” McDonnell will say in a speech to the Trades Union Congress, according to extracts released by his office. “It’s time to turn this debate around, drive out the politics of despair and offer a vision for Britain and Europe, one where we protect workers’ rights, tackle tax avoidance, get to grips with climate change and protect our industries like steel.”

Osborne used a speech on Monday to warn that a vote for a so-called Brexit would be “a one-way ticket to a poorer Britain” as he pressed his case that inward investment and economic growth would slow if the U.K. leaves the bloc.

Cheap vacations will be a thing of the past if Britons vote to leave, he warned as he welcomed plans by Dublin-based budget carrier Ryanair Holdings Plc to invest $1.4 billion and create 450 jobs in the U.K. this year.

“There’s no question that we are up against the most colossal glutinous tide of nonsense coming from ‘Remain;’ they are determined to drown out the arguments in a wall of noise,” Johnson said. “The EU is a zone of low growth and the one group of people that are benefiting are chief executives of big companies who are taking more and more out of their companies, whilst those on the shop floor are getting, in real terms, less and less.”

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