The killing of George Floyd by US police in Minnesota, on 25 May 2020, has sparked a public response both more powerful and more international than almost any of the previous cases in a very long line – including Breonna Taylor in Kentucky, 13 March 2020. The demands for justice extend far beyond the specifics of the individuals involved, and instead reach deep into the structurally racist inequalities embedded in countries all around the world.
Reparations for slave… owners?
In the UK, welcome attention is being paid to the typically whitewashed history of the British Empire. As statues of (white, male) slave traders tumbled, Naomi Fowler (the Tax Justice Network’s creative strategist and presenter of the monthly Taxcast) reported on a long-running investigative project. This focuses on the financial institutions and others who benefited from the unrivalled generosity of the British government, which in 1835 recompensed the slave owners who were to be ‘dispossessed’ by the abolition of the legal right to hold title to other human beings. Such was the scale of the repayment, at around 40% of annual revenues, that UK taxpayers continued to service the resulting debt until 2015.
The UK Treasury’s bizarre, tone-deaf decision to celebrate the final payment being made prompted a wave of revulsion at the idea that taxes paid by UK tax residents in this century could have been used, in effect, to make good an imagined debt to those who profited from human misery in one of the most shameful elements of an imperial history not lacking in competition. That response included a petition, now reopened, calling for the government to return to taxpayers these illegitimately raised revenues.
The notion that we as tax payers in Britain, including those whose ancestors were subjected to the horrors of enslavement, have by your own admission, financially contributed to such payments, is totally unjust and abhorrent to us… We at no time consented to the misuse of our tax monies to reward such abominable crimes. We therefore demand refund in full so that such funds can be put to better use in repairing the harms done and paid for not in our names.“– Cleo Lake, petition to HM Revenue and Customs.
‘You broke the social contract’
As both the petition and Naomi Fowler’s piece note, the sums extracted globally by the British empire were much bigger than the compensation paid to slavers – running easily into the trillions of dollars, rather than the few tens of billions associated with this debt. What sort of reparations could conceivably address this scale of damage?
And the human costs of the structurally embedded racism, in both former imperial powers and in settler/colonial states, run far higher. The racial wealth gap is extraordinary, is not closing and will not do so under the types of policies typically considered. White power didn’t just push Black people and others behind, as if stealing some money in a game of Monopoly – as Kimberly Latrice Jones lays out here, ‘you fixed the game… you broke the social contract.’
Two recent papers from Dr Trevon Logan, the Hazel C. Youngberg Distinguished Professor of Economics at the University of Ohio, show one role of tax in how white people broke the social contract. First, in ‘Do Black Politicians Matter? Evidence from Reconstruction’ (March 2020, Journal of Economic History), Logan shows that after the American Civil War,
“an additional black official increased per capita county tax revenue by $0.20, more than an hour’s wage at the time. The effect was not persistent, however, disappearing entirely once black politicians were removed from office at Reconstruction’s end. Consistent with the stated policy objectives of black officials, I find positive effects of black politicians on land tenancy and black literacy. These results suggest that black political leaders had large effects on public finance and individual outcomes over and above electoral preferences.”
Effective taxation supports the 4 Rs: revenue, redistribution, re-pricing (of public bads) and political representation. Attempts to include freed slaves in public services for the first time required new revenues, to complete a broader social contract, and Black politicians were more likely to pursue this aim. But resistance was often violent – aiming, almost literally, to break that social contract before it could be embedded.
Second, in ‘Whitelashing: Black Politicians, Taxes, and Violence’ (June 2019, NBER), Dr Logan finds that successful revenue-raising was also associated with a higher likelihood of (white) political violence against Black people:
A dollar increase in per capita county taxes increases the likelihood of a violent attack by more than 25%. The result is robust to numerous economic, social, historical, and political factors. I also find that counties where black officeholders were attacked had the largest negative tax revenue changes between 1870 and 1880 and that violence against black politicians is unrelated to other forms of post-Reconstruction racial violence. This provides the first quantitative evidence that political violence at Reconstruction’s end was related to black political efficacy.”
How would one go about establishing an appropriate level and means of reparation for the scale of damage done – not only the outright theft of lives, but the burning down and looting of possibilities for political, social, economic, human development? There are many great resources out there to help think about what this could mean, and this white British male blogger is in no way qualified to opine on right ways and wrong. What does seem clear, however, is that while a monetary aspect is likely necessary, it could never be sufficient. That which must be repaired is also social and political, not purely economic.
Reparations—by which I mean the full acceptance of our collective biography and its consequences—is the price we must pay to see ourselves squarely… What I’m talking about is more than recompense for past injustices—more than a handout, a payoff, hush money, or a reluctant bribe. What I’m talking about is a national reckoning that would lead to spiritual renewal.“– Ta-Nehisi Coates, ‘The Case for Reparations‘, The Atlantic June 2014.
On the other side of one of empire’s many coins, we find the UK’s network of small islands operating as financial centres. Nick Shaxson’s book Treasure Islands and Michael Oswald’s film, The Spider’s Web, document how the UK turned away from its responsibilities to its remaining territories. Instead of making the financial commitment to support their development as the sun set on the British Empire, successive governments chose instead to encourage them down the road of tax havenry – attracting dirty money from all over the world, and channelling it into the City of London.
The intention was to engineer a ‘win-win’: providing a development path for the territories that would ‘save’ the UK from providing aid funds on an ongoing basis, while at the same time ensuring the continuing pre-eminence of the UK as a global financial centre.
The actual effect, arguably, was lose-lose. Many of the UK’s dependent territories saw a sharp and sustained rise in inequality, as foreign financial services professionals entered and captured the greater share of any subsequent benefits in economic growth. At the same time, a predictable Dutch disease played out, from Jersey to Cayman, with agriculture, tourism and other alternatives largely squeezed out by the new industry, making both the economies and the politics of these islands increasingly dependent on the whims of accounting and international law firms – rather than democratic preferences. This capture, part of what we have labelled the Finance Curse, further deepens the inequality and corruption facing islanders.
Meanwhile, at an international level, the emergence of the UK’s network of secrecy jurisdictions has been a central driver in the process of global extraction that has followed the period of formal Empire. The UK and its network, if taken as a single entity, would consistently be at the top of both the Financial Secrecy Index and the Corporate Tax Haven Index – in other words, the network is the greatest threat facing the world in all aspects of illicit financial flows, from tax abuse to grand corruption.
As we show in a new book with Petr Janský (now free to download in open access, from Oxford University Press), these illicit flows undermine the 4 Rs of tax in countries all around the world. In simple monetary terms, corporate tax avoidance is estimated to cost some $500bn a year in lost revenues, and offshore tax evasion a further $200bn – but as with the pattern of racist political violence that Prof Logan documents in the US, the governance damage is likely to be far greater than the simple loss of immediate revenues for public services.
It is difficult to imagine the means and level of reparations by which the UK might begin to make amends for the global extraction it has driven during decades, and continues to drive today. A very first starting point would be to bring the UK and the network into line with the ABC of tax transparency – committing fully for all of the jurisdictions to participate in Automatic, multilateral exchange of financial account information; to deliver public registers of verified Beneficial ownership information for all companies, trusts and foundations; and to require public Country by country reporting from all multinationals.
In terms of the UK’s territories and the islanders themselves, the position is perhaps more straightforward. The UK has, in effect, saved money year on year by promoting their tax havenry rather than supporting broad-based, sustainable human development strategies. The City of London too has benefited, by receiving a greater stream of (partially laundered) dirty money; although of course this has also contributed to the UK’s own finance curse, driving the governance and inequality problems it now faces.
These funds, in effect taken from the territories by the UK’s failure to meet its responsibilities, should now be provided as the basis to support that permanent transition – away from tax havenry, with both the global and local costs that it imposes, and towards alternative strategies: the ‘Plan B’ that islands should have been supported to develop since the 1950s, instead of pursuing financial secrecy. This is a topic about which the Tax Justice Network has been involved in discussions with partners in many of the jurisdictions over a number of years, and we are cautiously optimistic now about policy ideas beginning to come forward. We’re always interested to hear from others on this, and to support where we can, so do get in touch if that’s you.