The defenders of Google, Amazon and most especially Starbucks have been queuing up to defend the companies on various articles on this blog.
The argument, at least in the case of Starbucks, is that the total tax lost may well be less than £10 million - and that I conceded could be true.
But what these defenders of abuse seem not to notice this is a systemic attack on the UK tax system. Or do they notice and not care? Many seem to think the answer is a levelling down of tax rates - and that's a sure sign of those who want to undermine the role of government whilst shifting the burden of tax from rich to poor and from big companies to small.
No wonder this issue has become so important: this is the frontline of political debate as a result. Who pays, and what do we want from government is at the heart of this issue. It's clear the corporations want to free-ride the system; happy to see anyone but them pay whilst demanding all the benefits of the state. That is rational if utterly amoral. And it also reveals an indifference to the states that host activity since no one, Starbucks included, denies they're paying tax in Europe. The suggestion made by the likes of me is that for their own convenience they are paying it to the wrong ones. This is significant since it also suggests that those who analysis this issue by totals of tax paid by the companies are wrong: they replicate that indifference to states as well as to the state which those on the PAC and in the public do not share.
But it's not just the companies who are to blame; it is a culture and a politics of abuse that is to blame. It's the same culture and politics that is indifferent to democracy and treats it with contempt, seeking for example to reduce the number of MPs and their role whilst offering faux democracy for police commissioners.
Their defenders either don't get this, or support that attack on democracy: there's no line in between.
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It’s always interesting to speak with people and hear them say “it’s not illegal so it’s OK”. While I regretfully assent that it may not be illegal by the letter of the law it’s certainly against the spirit of the tax code. Hopefully the UK (and now France it seems) clamp down on the some of the abusive European structures the likes of Amazon et al are using.
I think this phrase works well regarding taxes – the only way to win a race to the bottom is to not play at all. Without the taxes to pay for the infrastructure and law & order the individuals / companies would never be able to receive / maintain such levels of wealth
Agreed
and if it really is only £10 million, why don’t they just pay it?
For the PR disaster they are facing you would think it worth it, wouldn’t you?
… and to be doubly clear – for Starbucks – it’s zero whether we are talking about the letter or the spirit of the law.
And to be absolutely clear – you have no idea that’s true
Because we have no idea what else is in their accounts
Richard as you probably know, Will Hutton has entered the debate:-
http://www.guardian.co.uk/commentisfree/2012/nov/18/back-british-business-tax-avoidance
I’m rapidly coming to the conclusion that you fight fire with fire. HMRC should be provided with the resources to attack the purveyors of amoral predatory capitalism. Every trick in the book should be used to trip them up. Now who’s for targeted retroactive legislation?
This is a cautionary tale about the consequences of running down public sector investment due to political dogma.
http://economix.blogs.nytimes.com/2012/11/16/americas-mid-20th-century-infrastructure/?ref=economy
This is what the far right want to bring to the UK, because they are only concerned about the interests of a tiny minority and of course they don’t need public services such as healthcare and education.
I am not convinced that Starbucks tax arrangements are legal under current UK transfer pricing legislation. The law requires the UK subsidiary to pay an arms length price to the European parent for royalties and coffee etc and the European parent to pay similarly arms length price to the UK subsidiary for the services provided in the UK. Since arms length price is the price an unconnected third party will pay for similar services etc the mere fact that the transfer prices charged under Starbucks’ arrangements have resulted in zero profits for the UK sub for 12 years means they’re not arms length since no unconnected third party will run a company for no profit for 12 years!!!
I have been stopping defenders in their trackes recently when discussing this issue and the likes of K2 etc. for individuals. The defenders will claim “it’s not illegal, wouldn;t you like to pay less tax” and I of course agree with them.
I then ask them to answer this simple question “What if every individual in Jersey avoided paying any income tax or social security by using K2 type schemes with the aid of an offshore location such as Guernsey?” “We would have no hospital, no schools, no roads, no street lights, no police force etc etc. who do you think should pay for them if we all have the option to avoid tax?”
Seriously, I have had this debate several times in recent weeks and each time I am met with a perplexed look and stunned silence.
Spot on as usual. I’m looking forward to hearing you say something about the water companies whose tax abuse has been overshadowed by Google and Starbucks. I think this important as they operate a monopoly in the areas which they operate providing an essential service.
I have spoken on air about water company tax – but – as far as I can see – tis low payment is due to investment and excessive capital allowances
I could criticise the law on allowances
I can criticise the fact that the benefit does not seem to have been reinvested and has been taken instead
But offshore does not seem to be an element – bar for funding
What loophole are they using to claim these excessive capital allowances? Is this also against the spirit of the law?
No, it’s not
That’s why I have not made a big issue of it
I think the current approach of trying to close tax loopholes is doomed to failure – as you close one loophole someone finds another one so that is why I suggested lowering corporate taxes. But I hear you, making no one pay is not the answer, but we do need to level the playing field.
How about a different approach. Instead of closing loopholes, just identify the companies that are not paying their share and enact rules to punish them in retrospect.
example: Google seems to be paying less that its share. Call them in for a meeting, explain why you think they are not paying their share and they have two options.
They invest in the UK economy to ‘x’ level to pay back what they avoided in the past, and start paying their fair share in the future.
If they don’t accept that deal we will tie them up in lawsuits challenging their past dealings and introduce legislation to make it hard to do business in the UK and Europe like an internet advertising tax, like a fee to link to news articles, start competition inquiries, fine them for linking to copyrighted material.
That is what Texas did to Amazon.
That is what France seems to be doing to Google
It seems to work, and word will soon get out. If you avoid taxes in the UK it will cost you more in the long run. You either behave ethically or you don’t make money in the UK market. It seems to be the only thing that is working.