Activists from MedAct, Unite the Union, War on Want, and Change to Win are protesting today at the Boots flagship store on Oxford Street. These activists are drawing attention to the way that tax avoidance results in cuts to important services. The groups sponsoring the protest point out that Boots derives a large portion of its revenue from public funds (they say 40%), while avoiding an estimated £1.2 billion in taxes over the past seven years by claiming tax relief on costs that have nothing to do with the UK business.
Interestingly, when these same groups released a report on the company's tax avoidance last autumn, Alliance Boots did not seem to dispute the central allegation: that it had taken on billions of pounds in debt in 2007 as a part of a leveraged buyout and that it has reduced its taxable income by roughly 4 billion via liberal use of the debt interest deduction from 2007 onwards.
The groups are focusing on what that £1.2 billion could have paid for in NHS services. They'll also be tweeting today with the hashtag #payupboots.
This protest comes on the heels of a recent letter from a coalition of stakeholders, me included (I blogged about it here), calling upon HMRC to investigate Alliance Boots' use and possible abuse of LLPs with Cayman-based corporate members. That letter was also the subject of a Bloomberg news story.
This is the press release for today's protest:
Doctors Tell Boots: Tax Avoidance Hurts the NHS
- Doctors' action at flagship Boots store highlights the impacts of tax avoiding on NHS
- Campaigners note more than £1.21 billion in tax avoidance by Boots parent company - enough to cover nearly three years of prescription fees for all of England
- Health professionals and charities call for reforms that close tax avoidance loopholes.
LONDON, 11 June 2014 –Donning scrubs, white lab coats and picket signs, doctors and healthcare professionals rallied with anti-poverty activists today outside of Boots the Chemists' flagship store to publicise how tax avoidance is sickening the NHS and risking the public's health.
Blaming budgetary shortfalls, the Government has made swathing cuts to the NHS. Meanwhile, complex tax avoidance schemes cost HM Treasury an estimated £32 billion to £120 billion each year, a significant portion of which is attributable to avoidance of the corporation tax.[1]
Protestors claimed that the high street chemists' parent company, Alliance Boots, has avoided at least £1.21 billion in payments to the Treasury over the past seven years, and that this missing revenue could have paid for nearly two and a half years of prescription fees for the entire British public or the starting annual salary for 85,000 NHS nurses.
At the protest, activists slapped a giant mock public health notice on the store's exterior, warning customers that unethical, aggressive tax regimes like that at Boots are eroding the tax base and triggering increasingly deeper cuts to critical NHS services. Doctors gave passersby “prescriptions” for a restored NHS - strengthening tax laws that would make companies like Boots pay its fair share.
The rally, sponsored by MedAct, War on Want, Unite and Change to Win, coincided with a launch of a petition from healthcare providers from across the country, calling on the government to investigate Alliance Boots' tax strategy and for greater transparency in public contracts.
“Despite receiving over 40% of its revenue from the NHS - a tax-funded institution - in the form of prescription dispensing and wholesale services, Alliance Boots has avoided paying taxes while the NHS suffers the biggest spending cuts in its existence.” the petition to H. M. Revenue and Customs reads.
For the past year, Alliance Boots' tax avoidance has been in the spotlight. Most recently, a coalition of charities and unions that include Change to Win, MedAct, Tax Justice Network, Tax Research UK, Unite the Union and War on Want have requested that Chancellor of the Exchequer George Osborne and Her Majesty's Revenue & Customs investigate the company's use of limited liability partnerships with corporate members in tax havens.
“Health professionals are seeing the impact of NHS cuts daily on their patients and communities. Meanwhile Boots and many other companies are profiting from NHS contracts paid for by tax payers while not paying their full and fair share of taxes. It's time we treat unjustifiable tax avoidance as a threat to people's health and put an end to it,” said David McCoy, Chair of the Board, at MedAct.
“The UK Government is putting its public's health at risk by failing to tackle Alliance Boots and other corporate tax avoiders; its proposals are a sticking plaster when major surgery is needed to tackle these parasites,” said Owen Espley, Senior Economic Justice Campaigner, at War on Want.
Nell Geiser, Associate Director of Change to Win Retail Initiatives, said “It appears Alliance Boots' tax avoidance is spreading to America. US pharmacy chain Walgreens are reported to have been looking at how to use its takeover of Boots to move to Switzerland for tax purposes. Corporate tax avoidance is a global problem and these two global giants need to be held accountable for their part in gaming the system.”
Len McCluskey, General Secretary of Unite the Union, said: "Boots has abused the trust of the British public and needs to come clean on its tax affairs, and act more responsibly towards this country. If it doesn't, the government must make it, by closing the tax avoidance loopholes and not granting public service contracts to companies that avoid their tax liabilities. These practices must not be rewarded through the public purse."
Today's action comes just days before UK Uncut target telecommunications giant Vodafone for its use of similar avoidance schemes.
[1] http://www.taxresearch.org.uk/Blog/2014/05/21/why-40-billion-of-tax-evasion-in-the-shadow-economy-matters/
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Shouldn’t they be protesting outside the treasury about changing the tax treatment of interest expense? Would seem to be the real target of this, boots have reduced tax by claiming a tax deduction for interest hardly sophisticated tax planning
Nobody would notice at the Treasury
Examples have to be made
Spoken like a true Trot.
Posted solely because it is so absurd
“Alliance Boots did not seem to dispute the central allegation: that it had taken on billions of pounds in debt in 2007 as a part of a leveraged buyout and that it has reduced its taxable income”
That’s hardly an allegation though is it, which is why AB probably did not feel the need to comment on it. From AB’s point of view it is probably not wise to provide a running commentary on dubious reports written by groups who do not have any particular tax expertise – why bother wasting the time?
“claiming tax relief on costs that have nothing to do with the UK business.”
Well if that’s true (and it’s a very serious allegation to make), then HMRC should use the unallowable purpose rule at section 442 CTA 2009 to deny a deduction. If it hasn’t invoked that rule then I assume the interest does relate to the UK business.
There are also transfer pricing rules and worldwide debt cap rules (the latter being particuarly draconian). If HMRC aren’t challenging deductions under these rules then I can’t see what AB are doing wrong.
I am quite sure you can see nothing wrong
I really do believe you
Boots is doing nothing wrong, it is taking deductions in accordance with the law and doing precisely what Parliament intended.
It’s called democracy. I’m rather a fan of it.
And I have a right to ask for changes in the law
That’s also a very big part of democracy
Indeed you do have that right. What you don’t have a right to do is label individuals or companies “wrong” when they are clearly complying with the law.
Oh yes I do
Just as once upon a time people said slave traders were wrong when slave trading was legal
It’s called ethical judgement and it is my undeniable and absolute human right to use it
Or are you saying it isn’t? Nothing would surprise me this morning
Wow, comparing the slave trade to a company claiming a tax deduction for interest payable in accordance with tax rules.
I think that says it all, really.
I compared it to the right to demand change
Are you really unable to read anything contextually or apply any intelligence without it being explained to you?
If that is a real issue then please let me know – privately
Otherwise I will assume you are being awkward
As pointed out by others and accepted by you, what AB is doing is quite straight-forward and within the current law.
I very much doubt they needed to take Counsel’s opinion on any of it in which case I guess you’ll agree that they are not avoiding tax.
But you have said all such deals get opinion
This is why
I have said no such thing. I have in fact said quite the opposite, that much tax planning is so basic it needs no Counsel’s opinion and by your own definition is therefore not ‘tax avoidance’.
Please do not put words in my mouth.
But your claim is wrong
That’s my point
The point it seems to me is that Boots have claimed deduction for interest on funds used for a leveraged buyout. As others have said claiming that interest is deductible is in principle in line with UK tax law.
Whilst we have rules to restrict interest paid within groups – worldwide debt cap – these don’t kick in in a simple leveraged buyout case.
I am not sure I understand what the Cayman LLP point is about – presumably they have routed the loan issue via a Cayman entity and if that is all then I am not surprised as bond issues are frequently routed via non UK incorporated companies but often they are UK resident and so taxed in the UK so not normally a corporate tax avoidance motive for using – It’s normally around stamp duty and/or withholding tax from memory that a non UK incorporated company is used!
So in short it seems to me that Boots Alliance are not doing anything that is not intended by parliament — they are simply claiming deduction for interest paid to fund the buyout.
The real complaint here, it seems to me, is whether parliament should allow interest in the case of a highly leveraged buyout. It’s pretty easy to legislate against — See Germany, Italy and Norway who only allow a percentage of EBIT to be deducted.
I suspect your feeling is that ‘parliament’ allows it because it fits in with their neoliberalist view of the world and in that world leveraged buyouts are to be commended.
Plus I agree it’s your right to challenge government on their policy in this and any area 🙂
WHat the hell has this got to do with slave traders. I shall tell you, nothing!
Everything, actually
If a definition of slavery is working without pay, then I know of at least one long standing Boots employee at my local branch who is working several hours a week without pay catching up on paperwork. Boots say they cannot afford to provide an extra pharmacist; she is disgusted by her employer’s tax dodging. Meanwhile morale in the store is plummeting with customer service suffering. Actions like today’s have raised the issue of tax avoidance to unprecedented levels in the minds of the people; this doesn’t mean you have to agree with their action, but people have risked their liberty, facing arrest and prosecution for enacting their right to peaceful protest. Public action on tax dodging has everything to do with the public’s reaction against the slave trade; if we feel that our lives, livelihoods and those of others are being compromised by the actions of a few, we take action and force those few to follow the will of the people.
Thanks David
Having previously had family owning a chemist I take my own personal complaints to a more enjoyable level. I dong shop there. Its simple really, don’t like them, then go elsewhere. My local family owned chemist is so much better.
I am long since retired as a GP but I would support anything that takes aim on those who take from our National Health Service. Boots has always been a poor medical “service” and the fact that they now take even more from it by dodging all this tax just makes it even more upsetting.
Of course there’s a massive contradiction when you attack the Law Society in another post as being anti-democratic for wanting to set up an independent body, but claim that you yourself are being wonderfully democratic in wanting to change the law. If it’s good enough for you to air your views, why not the Law Society?
And what do you want AB to do? Unwind the deal of seven years ago? Not claim a deduction for interest expense legitmately due, and thereby submit an incorrect return? What is your remedy here? If it’s to change the law then go and protest outside the Treasury. Why should a company be made an example of for complying with the law? It is you who is being anti-democratic.
A veto is not the same as a right to express an opinion
Shall we get real here?
This sort of behaviour is paramount to bullying. :Like other companies they are abiding by the law. This law has been around for some time.
I appreciate some people don’t like it, which is understandable. However targeting one company isn’t right. Its not fair on their employees, its not fair on the customers.
I am disappointed, but not surprised, that you are saying its acceptable. This is behaviour of harassment.
Oh come on
A few people outside a store is bullying when big corporates spend millions lobbying?
Shall we be a little more realistic here?
And respect the right to free speech?
Harassment -of a giant corporation with immense financial clout-come off it. I’ll tell you what real harassment is:
1) when people are deprived of basic benefits for turning up to a job centre interview five minutes late and then have recourse to a food bank.
2) When people are forced into low paid jobs or spurious ‘self-employment’ to reduce unemployment figures.
3) When young people start their lives under the diabolical stress of immense debt.
4) When people cannot afford housing because of thirty years of artificially induced housing bubbles.
5)When, after a financial crisis due to imprudent banking and mortgage lending some of the poorest in our society face cuts to housing benefit.
Boots being harassed-that doesn’t pass the ‘split your sides with laughter’ test.
Good grief Richard-this blog has brought out the one-dimensional minds of the neo-libs with a vengeance.
Congratulations to MedAct, Unite the Union, War on Want, and Change to Win: you’re being booed by the right people 🙂
Too many of you are saying it’s within the law. The whole point is that it shouldn’t be. The law needs changing. If we cannot criticise those who bend the law, what’s the point? Can’t you see how immoral it is, what Boots are doing?
Precisely
But some choose to ignore that
Jen
AB aren’t bending the law. They aren’t even leaning up against it.
An analogy I’ve used before, travelling at 29 mph down a road where the speed limit is 30 mph but where you think it should be 20 mph is not “speeding fine avoidance”. Campaign to change the law, don’t vilify the driver.
Why don’t you realise the aim is to change the law but without example of reasons to do so there is no chance of that happening?
Your argument against examples being used is equivalent to suppressing freedom of speech
No I cannot – they are tax compliant according to you
If compliant how would you like Boots to tax themselves. What basis of taxation should they adopt and why should they?
Justin
You really don’t get it
Boots are tax avoiding: the structure is the evidence of that
And those opposing that are not saying they’re acting illegally – although we are saying they are acting unethically – what we are saying is that we want the law changed and that their behavious is the evidenced need for that change
And don’t pretend we have no case – if we did not the OECD would not be looking at this very issue as a major theme in international tax abuse
They think this is tax avoidance
So do we
And candidly, only semanticists do not
Your headline is Pay up Boots.
The structure is a choice that Alliance Boots makes – if it is designed solely to avoid tax, with no commercial justification, then HMRC should have a cake walk getting it undone in the courts.
Maybe it is a tax avoidance – acceptable tax avoidance (if you wish to call it avoidance). However, there isn’t a thing you can do about it because it is totally within the law and HMRC oesn’t see much of chance in resisting it.
Therefore….tax compliance.
If you wish to have ethical taxation, lets have ethical spend of tax revenues. So no war in Iraq, no freebies to civil servants at sailing events, no faux retrenchments in the NHS with immediate re-employment in the next county.
If you want ethical taxation, then allow the taxpayer to decide whether his money is ethically spent and let him reserve the right to pay what he deems appropriate.
No tax law, just pay what we feel is ethically just, a totally subjective method of payment.
Lets see how that works.
That is an absurd suggestion – linking unrelated issues based on the premise that one gets out of tax what one pays in – which is not the premise of a modern tax system, at all
Of course I support better accountability for tax spending but to suggest that tax abuse is justified because you do not like the outcome of the democratic process is simply an attack on democracy itself
I note you also agree by implication that Boots is not acting ethically
At least we can agree on that
Presumably the commenters who don’t see any issue with AB’s tax structure wouldn’t have a problem with the government withdrawing Boots’ ability to fulfil NHS prescriptions, assuming there is a legal process to achieve this.
After all if it’s legal it’s ok huh?
I don’t think anyone is saying that AB has a God-given right to supply the NHS.
If the government want to find a new supplier, why shouldn’t they?
If however they want to tear up the contract half way through it then obviously compensation will be due (presumably all outlined in the contract).
I thought there was a rule introduced into the government procurement rules recently that allowed them to take tax avoidance into account during the procurement process. Or did I dream that?
It’s so narrow it’s worthless
Well I’ve heard nothing about this protest in the MSM so presumably it’s been a failure. By the way, what do these protesters do for a living? Why do they all have so much spare time?
Most are doctors
And probably work a lot harder than you have ever known how
I am married to one
Highly unlikely that most are doctors, if that were true it would have been the MSM.
And if doctors want to draw attention to tax avoidance within medicine, perhaps they would do well to look in the mirror and the extremely generous arrangements which allow GPs to be classified as self-employed when in reality they are employees of the NHS. But the BMA would never allow their members to be stripped of that status – there’s just too much self interest.
Your cynicism is just too wearing to be bothered with
Please don’t bother again