The Tories said when coming into office that they would create a UK tax system that said we are "open for business".
They forgot to mention that meant we were really open to be fleeced. Which is just what the likes of Amazon, Starbucks and Google are doing. Beghind their crocodile tears on the impossibility of making money in the UK they're laughing all the way to their tax haven bank.
And now, quite rightly, Andy Street of UK retailer John Lewis has hit back, saying that the government has to tackle multinational companies that pay little or no tax in the UK before they damage the economy. His warning is simple: he's saying that multinationals involved in overseas tax havens will "outinvest and ultimately out-trade" businesses paying full taxes in the UK, risking driving them out of business.
And he's right. It's taken a while for British business to realise this. Way back in the Tax Justice Network's first ever major publication in 2005 (which I co-wrote with John Christensen) we said:
The ability of transnational corporations to structure their trade and investment flows through paper subsidiaries in tax havens provides them with a significant tax advantage over their nationally based competitors. In practice this biased tax treatment favours the large business over the small one, the international business over the national one, and the long-established business over the start-up. It follows, simply because most businesses in the developing world are smaller and newer than those in the developed world and typically more domestically focussed, that this inbuilt bias in the tax system generally favours multinational businesses from the North over their domestic competitors in developing countries.
It has taken seven yearsa for people to realise we were right, but now the message is loud and clear: the tax compeititon that the Tories and their friends promote harms UK business. As a result it is bad for out economy. And worse, it now only destroys our business, it shifts the tax burden onto ordinary people who are unable to pay, increases ineqaulity and destroys hope all at the same time.
That's why we need to change our tax system, now.
It's the most pro-business policy anyone can promote.
And what is more, opposing tax havens is also a totally pro-business policy too.
It's time UK business and politicians woke up and realised that fact. Because fact it is.
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Richard, so pleased that you have highlighted the comments from John Lewis about the unfair advantage given to multinational companies operating in the UK. Actually I have asked David Smith (most of his tweets consist of references to the growth or otherwise in John Lewis monthly sales) from the Sunday Times whether he supports the John Lewis CEO. It will be interesting to see if he considers the issue to be worthy of comment.
Even better, Mr Street has precedent on his side. After all, Osborne has already caved on bringing LVCR to an end on the grounds that it was harming UK businesses.
Richard,
Genuine question, can you explain how this complaint (companies dodging taxes thereby gaining an advantage) can be reconciled with your position that companies paying tax is not a cost?
It’s not a cost
It’s a distribution to society
John Lewis is a semi mutual company set up in a paternalistic way, however it has some economic democracy factored into its enterprise and administrative culture. Consequently as such it is more liable as a corporate body and the individuals in it to becoming responsible citizens.
An economic culture in which economic democracy, in finance, asset commonwealths, in the workplace, housing is one which will be more conducive to the emergence of what you call the the courageous state. This, if possible needs transparency, accountability, and democracy. Reforms strengthening this might also require the revival of local democratic government.
As it is the counter forces to corporate capitalism and the City are dangerously weak; so there are few checks and balances. The Trade Unions are under pressure and are at the moment in decline, with them being undermined. Little attention is being given to this; it is a problem because they are important social assets. They may need to diversify their work. Their further decline is very unhealthy to democracy.
One area that the trade unions might consider is what the United Steel Workers Union has begun to do is to study the possibility of being agents of promoting worker owned and controlled enterprises, The USW with the help of the Mondragon coops have brought out the Union Cooperative Model. It is too early to know if this will succeed.
A courageous state will probably need a corresponding social and economic culture to support it.
Noel,
Genuine question. If corporations are allowed to wriggle out of their responsibility to pay tax but flag up how much payroll tax they pay, does it not suggest to you that something’s wrong? Corporations don’t own people. They offer their labour in return for remuneration. If everyone but the ordinary worker is now trying to dodge tax, don’t you think this will build up such resentment that society will either implode or you will see the rise of really quite horrible populist parties?
One more thing… there is the cost of a product’s manufacture and a gap between its production and its sale. The sale comes from wages/salary. If the profit on production actually comes from a sale, who is actually paying the tax due eventually? It would seem to be the company but let’s see how this tax evasion shenanigans plays out and you will see that without the sale (perhaps due to a consumer boycott), there will be no profits, no tax due, and eventually no company. In the wider economy, we are all in this together.
If you are worried about costs to business..why not look at the salaries of the well-off? Those beacons of light and joy who are trashing our economy.
In the end to be honest I don’t care so much. Cecil Parkinson (yes really!) actually said on the Daily Politics a while back “why are the capitalists trying to destroy capitalism”?
Genuine question Noel….why?