Somewhat to my surprise and to the surprise of UK Uncut Marks & Spencer was targeted by tax protests this weekend, apparently as a consequence of the blogs posted here entitled ‚ÄòKnickers to tax’ looking at M&S’s tax affairs.
As the Telegraph reported:
The UK Uncut spokesman admitted the protests against M&S had taken even him by surprise. He said: "Those protests were organised by one of our regional groups. We were not aware they were going to happen.
"We understand they are due to a blog by Richard Murphy, an expert on tax, which claims that M&S is paying too little tax."
A spokesman for M&S dismissed the allegations, adding: "Marks & Spencer is a UK domiciled company and we pay tax in accordance with UK laws and regulations, as well as in each country where we operate internationally.
"We provide full disclosure to the tax authorities and in the last financial year we paid over £600 million of tax to UK HMRC and over £125 million in business rates to the UK government.
"Like many other UK companies, we obtain tax relief for our business expenditure. We also own a number of stores internationally where the profits made are subject to the local tax rates which vary from country to country."
Sorry M & S but that does not stick.
Until 2003 you paid your tax – at rates expected in the UK.
Then three things happened.
a) Stuart Rose
b) New overseas operations – which pay almost no tax at all according to the accounts – which seems highly implausible without serious planning;
c) A big increase in outsourcing and vertical supply chains from outside the UK.
All of this is matched by a stated policy of holding reserves outside the UK to avoid tax – a deliberate manipulation that must in the end prejudice shareholder interest but is flattering for profit.
None of which says M & S is doing anything illegal – but no one ever said they were. It’s the ethics that are being challenged – not the legality.
And as for the claim that business rates somehow counts – are they really that stupid? Try saying next time you owe income tax that you’ve paid your council tax and see what happens.
So M & S come clean. Do this:
1. Publish your accounts on a country-by-country reporting basis – a profit and loss account for every country (without exception) in which you trade and full details of tax paid by country;
2. Reconcile your tax charge in each country with the profit and the current tax bill – not the deferred tax bill, which tells us nothing;
3. Tell us when you expect your deferred tax to be paid, if ever, and where;
4. Reconcile your accounts to show how opening and closing tax liabilities reconcile so we can sure that everything due is being paid.
That way we’d know and your shareholders would know what you’re up to.
But right now we don’t – and press releases of the type issued this weekend don’t explain tax rates as low as 10% when you admit money is being stacked offshore, even if entirely legally.