I have already mentioned the new Action Aid report on SAB Miller and it's tax affairs . The Tax Justice Network has also covered this issue. As they report:
The Guardian notes:
"SABMiller said its companies "pay a significant level of tax", adding that in the year ended 31 March 2010, the group reported $2.93bn (£1.88bn) in pre-tax profit . "During the same period our total tax contribution remitted to governments — including corporate tax, excise tax, VAT and employee taxes — was just under $7bn, seven times that paid to shareholders," the company said. "This amount is split between developed countries (23%) and developing countries (77%)."
This looks impressive, but it needs serious unpacking. This appears to be from a concept apparently designed by PriceWaterhouseCoopers called the "total tax contribution" whereby a firm rakes in every single tax it can conceivably claim to be associated with its business, and claims it for itself.
So it will claim, for example, Value Added Tax paid on its businesses, and employee taxes. But of course much of the VAT is paid by consumers, not by PWC. Similarly, the employee taxes are paid by the employees. They are not taxes borne by the company. It is a very clever idea, and we will be seeing a lot more of this Total Tax Contribution, now that people are beginning to wake up to the issue of tax avoidance.#
Bob McIntyre of Citizens for Tax Justice does an excellent job of looking at this Total Tax Contribution framework in The American Prospect. As he summarises it:
"PwC is trying to get corporations to pretend their tax bills are bigger than they really are, by counting not just their actual taxes, but also taxes they don't pay, such as those paid by their customers, workers, suppliers, and so forth."
He looks at how ExxonMobil used this formula to claim to have paid $99 billion in taxes on just $36 billion in profits. He also cites TJN's Richard Murphy, who notes:
"This is bilge -- to put it nicely."
Murphy has more to say on the Total Tax Contribution framework here, here and here. This is one of the problems with tax, more generally. International tax is so complicated that when investigators publish excellent research on corporate tax avoidance schemes, it is relatively easy (as with the recent Vodafone story) for corporations and their supporters to publish their own re-interpretation of the same information, sowing confusion in the public mind. While it always makes sense to look at the other side of any argument, we should remember that corporations have an awful lot of leeway in presenting the facts in ways that present themselves in the best possible light.
I’d add three things.
First, that probably wasn’t my most subtle moment — and the quote got altered in translation to the US — but in short form it does summarise my feelings about the PWC Total Tax Contribution.
Second, John Whiting, who created this idea, is now head of the UK Office for Tax Simplification.
Third, this disingenuous charade is touted, often, as an alternative to country-by-country reporting. It is nothing of the sort and any reasonable person can tell that is the case. But that does not stop PWC.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I honestly don’t see what your problem is. Tax arises on more than just the profits of the company. If a company sells £100 million of goods and services to the public, it is not of any interest to the buyer that some of that £100 million goes straight to the government in VAT and duty, some more goes in emploment related taxes and even more through taxes on profits, but the common factr is that all of that revenue to the government has only been possible because the company has made and sold products to pay the various taxes as well as its own costs.
@Alex
I’m sure you see no problem at all
I wonder if you never see problems with what your clients do either?
The profession is good at looking the wrong way
Actually, Alex, it is very interesting to the PWC customer. That part of what it pays to PWC which represents VAT may, in the cases of miost businesses be reclaimed against its own VAT liabilities.
And, when it comes to PAYE, it is payable because of the worker’s own labour.
You might just as well say that the common fact is that (almost all of) the partners and staff of PWC in the UK were delivered in NHS hospitals by NHS midwives, so the tax payments should be attributed to the NHS!
Your argument is risible as all taxes could be attributed to loads of sources. Double counting is something that is best avoided if you want meaningful data. You wouldn’t get far as an accountant!
In fact, let’s keep it simple and attribute all tax liabilities to the initial act of divine creation!
@James from Durham
Great argument!
Richard, I think your views on the Total Tax Contribution are fully justified, nay restrained!
The first time I became aware of the specious utter garbage that was the total capital contribution, my view then was that the relevant professional bodies should have taken action against PwC and/or the responsible PwC individuals for bringing that profession into disrepute. It is about as intellectually sound in principle as saying that HMRC generated tax revenue of the total tax collected in the UK merely because it is the department that collects UK taxes.
But there is a further aspect to Total Tax Contribution. This is that any organisation that dreamt it up belongs in the twilight world of selling snake oil, or of advertising where half-truths, products validated by customer surveys unsupported by statistics and outright lies are common; not in (what I would hope continue to be) the sober and objective worlds of auditing, tax compliance and business and government consulting.
But the world of Humpty Dumpty, where a word means exactly what they want it to mean is, increasingly, where the Big 4 are going.
The general public needs to know the extent of the tax avoidance that goes on in the UK. To my mind, the attitude of many corporates, fueled and pandered to by the likes of PWC (and the rest of the big 4)is immoral and grossly anti-social. The idea of the ‘total tax contribution’ is not just a load of rubbish, its offensive and misleading. Paying VAT, Excise duties and PAYE does not erode the distributable profits in any way. What the big companies don’t advertise is the lengths they’ll go to to avoid corporation tax! If they’ve nothing to hide, then I say ‘publish your tax comps’ – then we’ll see the full picture! No hiding behind VAT and PAYE there!