The Telegraph has reported today that:
Foreign companies like Starbucks and Amazon which have avoided paying large corporation tax bills in Britain lack "moral scruples", David Cameron has said.
The Prime Minister said he was going to make “damn sure” that foreign companies like Starbucks and Amazon which have been found to avoid legally paying a large corporation tax in the UK paid their fair share.
This is risible. Firstly, the government is taking no steps to challenge these companies. The General Anti-Tax Avoidance Principle Bill that Michael Meacher MP put before the House of Commons and which I drafted would let them do that, but the government has opposed it.
The government's own general anti-abuse rule specifically does not challenge normal commercial arrangements and tax planning - which no doubt these are. So we can say with certainty that nothing will happen to recover this tax based on current proposals.
What we can also say is that far from making this sort of abuse easier the government is encouraging it. The territorial basis for UK taxation that it has adopted - which means the UK now turns a blind eye to and does not tax the earnings of multinational corporations arising outside the UK - means that every encouragement is now being given to every UK based company to shift their earnings out of the UK just as Starbucks, Amazon and Google are doing. They can then ship them back in from whichever tax haven the relocate the profit to tax free. Tax abuse does not get simpler than that and it is all happening with the encouragement of this government So far from tackling this abuse, Cameron's government is doing its utmost to encourage and spread it.
Third - the UK is asking the OECD at ways to tackle this issue. It has given it just £120,000 to do so. I think we can safely tell from that how serious he is.
The man is a complete hypocrite. If any lacks moral scruples on this issue it is David Cameron. And we're all paying more tax as a result, and it's his fault.
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Hasn’t this government stated on many occasions that growth will come from the entrepreneur, and small business owner? It says this seemingly while it helps to create a system which is favourable to multi-nationals and not to small businesses. The only comfort I find in this is, at least it’s not just New Labour who betrays the people it claims to represent.
£120k to crack a £120 billion problem says it all.
The tax payments we are complaining about today were made under rules established by Brown-Balls when they were in office, so whether Cameron or Brown-Balls is the bigger hypocrite remains to be seen.
The rules are actually largely those of the OECD, not Brown at all
If you want to thwart these corporate evil tax avoidance schemes, simply buy shares in the company of interest and give 40% of the dividends to HMRC. It is really that simple – you are taxing the returns on investment. And what do you think happens to investment if you reduce returns?
Corporation tax is the reddest of red herrings. Employment based taxes (and VAT) are the prize which generates the bulk of tax take, and skimming a bit off profits either at the expense of consumers (in higher prices), workers (in reduced benefits) or pension funds (in reduced returns) is self defeating whichever way you look at it. This doesn’t come out of the pockets of corporate fat cats.
Right now UK businesses are sitting on £754 billion in cash according to Ernst & Young
Tax policy is not impeding investment
And as for corporation tax – the incidence claims you make are not supported by fact. The evidence will be in a forthcoming book I’m writing – out 10 February
Tim L
Have you ever seen a set of accounts?
You have turnover, reduced by cost of sales, then various costs, which include wages, to give profit before tax. Then there is corporation tax. Then, the balance is the surplus available for the shareholders.
So, suggesting that increasing corporation tax take would, somehow, affect turnover (increasing sales prices) or wages seems, to me, quite bizarre.
It obviously would reduce the surplus available for the shareholders.
It does indeed impact on shareholders most
As the US Congress has found unambiguously
And all short term studies find
And then we come to the FTRSE funded Oxford Centre for Business Taxation. Mysteriously they find otherwise
How about taxing sales rather than profits Richard – would this work better?
No – definitely not
Sales taxes are grossly unfair – charging the poorest most and always being passed on by companies so never being paid by shareholders / capital
Sales taxes are less unfair than tax avoidance of £32 bn per year in the UK.
The big advantage of a sales tax is that multinationals cannot avoid it or manipulate it by creative accountancy or using tax havens. It offers one of the most secure methods of levying tax.
Why is a sales tax more likely to be passed on than a profits tax?
Google and Amazon do not record their sales in the UK
How are you going to get round that?
Sales taxes are a dire and deeply regressive substitute for proper corporation tax reform
Why suggest it?
Yeh…tax sales… fine… but double wages first. Or to avoid unnecessary bloodshed coming to a city near you this summer…make the rich pay for gaming the UK system!
In response to Tim L
“Employment based taxes (and VAT) are the prize which generates the bulk of tax take,”
In other words labour should suffer the greatest burden of taxation and if not then the burden of taxation should be regressive and not progressive. Why?
“skimming a bit off profits either at the expense of consumers (in higher prices), workers (in reduced benefits) or pension funds (in reduced returns) is self defeating”
Which means capital should have a free ride. Why?
Richard as I think you pointed out in a previous blog labour’s share of wealth creation has shrunk compared to capital’s since the 1970s. Like most things in life., I believe that a balance should be struck and at the moment this has swung too far in capital’s favour.
Why is it that when economists talk of the share of wealth creation and the effects of direct taxation on this share, they never talk about the third factor of production: land? Who is analysing the share going to landowners? A great deal is actually the imputed rent of owner occupiers of residential property, but this is not obvious or accepted. The banks are actually taking a large part of the rent via mortgage interest on vastly inflated property prices. Private landlords are, of course, taking a rising share now as home ownership recedes from the grasp of the young, and not so young, from landless families.
Residential property represents the majority of the value of UK plc still and it is the land value which is the most part of that. So, why not consider the taxation of land value – the stuff you can’t hide in a tax haven?
Being a migrant to Australia from the Uk, it’s unbelieveable how similar the two governments operate. We down under have problems with multi national companies using the Irish/Dutch loopholes. What I do not understand, is how can the USA, can tax foreign companies on their “world wide” income (thats the impression I get from our press), why is we cannot?
Surly, it’s not the companies fault if they find these loopholes. They’ll always look for them, surly it’s the governments problem.
What needs to be carried out in both countries is the banning of lobbyists. The only persons that should be able to lobby a member of parliment is his/her constituants.
Both countries operate under the westminster system, and both countries neglet their constituants fundemental rights, for the good of corporations.
True
With regard to tory policies on tax avoidencea former supervisor had a turn of phrase which summed it up nicely: ‘Have you ever heard of a jellyfish with a backbone.’
Just a thought, some of our leading politicians have access to family fortunes. But where are they?
Richard,
This is more about PR than any real concern. Cameron knows tax avoidance is a big issue at the moment and that most people want it addressed. Far easier for him to talk tough now knowing that he needn’t have to do anyhting right now. He hopes the story will go quietly away and this is usually the case once the media have run out of new angles to present the story.
Of course the truth is the UK could close their tax havens tomorrow without the need for ‘global agreement’. So what if some companies move their accounts and brass plate to another country’s haven – they weren’t paying us tax anyway. What is clear from the Starbucks case is that the UK market is extremely important to them and any threats to leave are unfounded and would be self-defeating. In any case, if a multi-national were to leave the UK market simple economics dictates another player will move in to fill the void, an undoubtedly good thing.
Let’s not forget that most of the print media is owned by families who avoid tax. They’re not exactly going to be chasing “new angles to present the story”.
Carol’s point is spot on. Oh dear. How then does one generate unstoppable pressure on this, so that the elites are forced to act? For example the GAAP is a big part of any solution, as is adequate resources for HMRC. How can any pressure be applied? And how can we create the angles which the media just have to take up. Like Starbucks . . . .
I have just been reading Dial M for Murdoch. It is a tale of investigation after investigation mysteriously running into the sand, of the BSkyB takeover inching ever closer to becoming fact – an appalling prospect but quite OK for the Tory set. Only the Milly Dowler story, coming ON TOP OF all the drip drip of the preceding months – finally tipped public opinion into an unstoppable rage.
One idea: build up popular awareness in say a dozen marginal seats. Start now. Canvassing, newsletters, whatever it takes. Make alliances with parties there who are GENUINELY on board. Select marginals for example with known serious tax justice campaigners sitting or potebntial. Marginals automatically get coverage when election time comes.
The famous French European referendum victory was won against all predictions by a strategy of street by street campaigning. Hard work? Yes, rather. But UK Uncut and other similar groups could target such seats from now on.
I personally think it more use to persuade mainstream parties we are right