The Point

Last updated: 27 June 2022.

Corporate Tax Avoidance - Will the real scroungers please stand up?

Ana Dreyfuss-Quillon looks at the companies that don't pay tax...and what could be done about them.

 

Indignity heaped on pain may be the last tax pound straw that breaks the corporate camel’s back.

Widespread revulsion over revelations of the huge levels of tax avoidance in the UK over the last six months have forced Coalition Chancellor Gideon ‘George’ Osborne to rush to the media ramparts, fulminating with manufactured outrage, over the fact that multiple billions of pounds per annum are being lost to the exchequer by companies exploiting legal loopholes to avoid paying tax on their profits.

Osborne has said – and we must presume that he was blissfully unaware of this state of affairs until the story broke in the media (lol) – that it’s terrible his City chums are behaving like such rogues when ‘we are all in it together’, and he’ll jolly well sort it out by seeking ‘international agreement’.

This is a typical Tory tactic of kicking the ball into the long grass.

 

Remember when the banks were going to be sorted out by ‘international agreement’? Whatever happened to that? Even when other countries do come to an agreement on even moderate progressive measures UK plc has an unenviable record of opting out. Just recently France, Germany and others agreed to place a very modest Tobin or ‘Robin Hood’ tax on international banking transactions set at 0.1% - raising £30 billion per year.  The Coalition have opted out of even this very moderate measure, arguing that it would affect ‘our banking competitiveness’. Satire is truly dead.

  

                                                                                  

STARBUCKS is one of many companies engaged in deliberate, systematic and LEGAL tax scams that are robbing the UK of billions every year.  And the rest of us are picking up the bill.

IN THE 14 YEARS SINCE IT STARTED IN THE UK, on sales of OVER £3 BILLION, STARBUCKS PAID JUST £8.6 million in CORPORATION TAX. That’s LESS THAN 1% TAX.

 

Starbuck's has paid nothing for the last 5 years. Now under huge public pressure and a product boycott, it has agreed to ‘voluntarily’ pay some tax over the next two years. Hands up nurses, teachers, firemen, posties and shop workers if you’d like to scrap your PAYE and just give the taxman what you felt you could afford?

But, as one street leaflet I picked up pointed out:

“STARBUCKS is NOT alone… 60% of world trade is conducted through multinationals moving profits around subsidiaries and tax havens!  AMAZON had online sales of more than £7.6 Billion in the UK over the past three years but has not paid ANY corporation tax on the profits. Also, it avoids UK VAT by registering in Luxemburg, yet its main supply and distribution centres are in the UK.    PRIMARK avoided tax of over £9 million last year.    BOOTS pays tax of less than 3% on profits.    Three of Britain’s largest WATER COMPANIES paid little or no tax on profits of close to £1.5billion, despite handing out hundreds of millions of pounds to shareholders and directors.     DIAGEO, the drinks giant, paid less than 2% tax on profits of £2 Billion.    GOOGLE last year paid just £6m tax on UK revenues of £395m.  VODAPHONE avoided £6 billion taxes in a sweetheart deal with HMRC.   APPLE, the most profitable company in the world, paid just £10 million corporation tax on UK sales of £6 billion! [Apple has a growing $40 billion stashed in Bermuda on which it pays NO tax to any country].   

 

 tax avoidance campaigners in Inverness

 

The most common form of these tax avoidance schemes (in one variation or another) is to pay an invoice for services or brand rights to a related front company abroad which will be registered in a tax haven. Astonishingly, and, of course, completely coincidentally, the price paid by the parent company in the UK for this service or brand right will usually be pretty close to the annual profit made by the company. Abracadabra – the profit on the balance sheet vanishes – and the company are not liable for corporation tax.

At a time when the Coalition use the word ‘austerity’ like the daleks use ‘exterminate’, and millions are seeing falling living standards, cuts in public services, attacks on education, the welfare state and the NHS, one doesn’t need to be a revolutionary Marxist to be morally outraged at this perfectly legal tax theft. The Government’s own figures suggest that around £30 billion per year is lost to the public purse through corporate tax avoidance, but many think this is an underestimate. One recent study published by a think tank put the figure at nearer £120 billion. It’s a difficult figure to estimate but only 2 out of the 100 listed FTSE companies are paying their full taxes in the UK. Even if you took a median figure from these estimates it would mean that more than twice the entire annual budget for the Scottish Parliament – for roads, hospitals, schools, everything – is being lost to the public purse year on year.

No wonder there’s a budget deficit – and it isn’t caused by greedy trade unionists, a bloated public sector or disabled people with spare rooms.

Tory ideologues are often quoted as saying that the economy needs to be rebalanced, that the ‘unproductive’ public sector is subsidised by the ‘productive’ private sector, i.e. capitalism, but we are beginning to see the opposite, in fact, is true. Capitalism is receiving a huge subsidy from the public purse. Not just through massive tax avoidance, but in other direct and indirect subsidies. The £6 billion per annum spent on direct subsidy to business is, relatively speaking, a spit in the ocean. Consider that the vast majority of the £220 billion spend in public procurement of goods and services per annum goes to the private sector.  Or that the £29 billion per year spent on tax credits – whilst undoubtedly welcomed by those who receive them – are in effect a public subsidy for low pay.

Corporate tax avoidance is the subject of this article, however, and the astute reader will be saying, yes, we can boycott this or protest that, but what’s the longer term solution?

Clear legislation is required to tackle this problem once and for all, and I would suggest three measures that are needed to deal with it comprehensively. 

Firstly, there should be an annual public report prepared by HMRC, backed by statute, on every company trading in the UK with revenues of £10 million or more, detailing turnover, revenue, profits and tax paid to the Exchequer. This would keep a permanent searchlight trained on the social fiscal responsibility of corporations on a yearly basis.

Secondly, a new and progressive tax should be levied on corporations based on revenue, rather than profit. The justification for such a tax is clear – corporations are legal entities that benefit from our infrastructure; roads, education, health etc and should pay a contribution towards that. We could even call it the Corporate Community Charge.  Corporation tax paid on profits would be offset against this charge, to a maximum level of zero charge, if full corporation tax is paid on profits generated in the UK.  This would ensure that, whether through honestly declaring their profits as taxable, or claiming to make no profits on substantial UK revenues, these corporations would, as legal entities, at last be forced to make a significant contribution to the public weal from which they benefit.  The level of Corporation Community Charges would be set with this aim in mind.

Finally, a wholesale cultural rethink and a corresponding revolution in company and corporate law are needed. Central to any such new legislation should be the principle that the fiduciary duty of Directors and Executives to shareholders only becomes active once the corporation’s socio-economic duties to the wider society in which it is embedded are met. The parameters of such socio-economic duties should be spelled out clearly in legislative form after a wide ranging public consultation.

Now, I know this isn’t ‘one solution revolution’ stuff, but it is radical. How radical? Just imagine these proposals being put forward in a bill either in an independent Scotland or at Westminster, with huge public backing on the streets.

Close your eyes and hear the bastards squeal.

 

with thanks to Frank Ward.