Something’s wrong with Britain's taxes

Comment on this story
GeorgeOsborne George Osborne, UK Chancellor of the Exchequer, centre, with the HM Treasury team outside 11 Downing Street. Photo: Bloomberg.

Amazon, Starbucks and Google are three of the corporate giants that define our age. In the space of just a few years, their logos have become familiar symbols plastered all over the planet as they conquered the world from their base in the US.

Whether rising to global prominence by selling millions of books, shifting over-priced cups of milky coffee or shaping our ability to harness the internet, all three had one thing in common: they preached the language of ethical capitalism.

They presented themselves as the vanguard of a new generation of benevolent corporate conquistadors.

Their message was clear: they were a force for good, unlike all those greedy bankers and malicious multinationals focused only on the bottom line.

Starbucks dedicates big chunks of its website to a section called “Responsibility”, bragging about its support for the environment, its ethical behaviour and how its stores are supposedly at the heart of their communities.

Google puts it more simply: the company motto is: “Don’t be evil.”

This only serves to make their grubby tax avoidance all the more grotesque. For these three companies have been exposed as money-grabbing pirates, exploiting millions of hard-pressed British customers by not paying their fair dues to the taxman. Such behaviour is unacceptable at any time. Amid austerity, it is unforgivable.

All that sophisticated branding, that soft-focus selling and sweet talk of doing good appears to have been no more than hypocritical hogwash to dupe customers.

As squirming executives from the three companies were grilled by exasperated MPs on Monday, it became evident they are exploiting globalisation to slash payments to the British exchequer. We buy their products, but they do not pay our taxes.

Now politicians from all parties are urging Britons to boycott these behemoths over such “immoral” behaviour. They are right to sound the alarm.

Starbucks, for example, says its British businesses are “profitable”.

This is not surprising: since opening the first of 760 coffee shops in the UK in 1998, it has clocked up sales of more than £3 billion (R42.5bn), which played a big part in its rise to become the world’s second-biggest restaurant chain.

Yet, over the same period it has paid just £8.6 million in corporation tax in the UK. This is a staggeringly small amount for a firm of its size, and hardly the behaviour of the “good neighbour” proclaimed by the Seattle-based company.

Like so many other huge companies, including, as we learned this weekend, three of Britain’s major water companies, they employ armies of well-paid lawyers and accountants to (legally) exploit loopholes in national laws and devise clever accounting tactics.

As a result, British outlets pay royalties to the Dutch branch, which cut a highly favourable tax deal with the government there, plus a 20 percent mark-up on coffee beans supposedly bought by a handful of traders in Switzerland, where tax is just 12 percent. Such are the tricks of the tax trade.

 

Dubious

For its part, Amazon is on course to become the world’s most successful retailer.

It employs 15 000 people in Britain, whose hard work helped make the country responsible for about one-eighth of the company’s net sales. Yet the firm reportedly pays no taxes on these £3.3bn sales.

The reason is simple. If you buy something on its British website, the purchase is booked to its Luxembourg business, where coincidentally, of course, taxes are significantly lower.

The business there employs just 500 people, yet its turnover last year was £7.3bn.

However dubious it may be, such practices are not illegal. They demonstrate, however, the way in which a seedy amorality over paying tax has spread throughout the upper echelons of our society.

Consider this.

We have a state broadcaster, reliant on a unique tax called the licence fee, that encouraged thousands of its highest-earning executives and stars to use tax-reducing “off-payroll” firms.

Or take the head of the watchdog monitoring MPs’ expenses, who earns the equivalent of up to £169 000 a year.

She uses a similar deal, allowing her to save thousands of pounds each year in national insurance and income tax.

It is bad enough when such a bad example is set by the BBC and Westminster.

Yet it gets worse: this month, we have seen evidence of how the taxman actually colludes with the rich when they break the law to help them evade prison.

So, while millionaires are allowed to do secret deals and keep their names out of the public eye, tax-evading odd-job builders and benefit cheats are routinely jailed for ripping off the revenue.

For example, look at what happened with the so-called Lagarde List, containing the names of 6 000 Britons with secret HSBC bank accounts stashed away in Switzerland.

This list was stolen by a software engineer, seized by the French authorities and handed to the tax authorities by the country’s former finance minister, Christine Lagarde, nearly three years ago.

It led to 500 people suspected of evading tax being investigated for serious fraud, and another 600 owning up to illegal non-disclosure of assets. The list probably included people prominent in public life.

Yet tax officials secretly decided to offer them immunity in exchange for payment of a penalty and their tax bills.

Only one man has been convicted and another 12 are being prosecuted, so we will never know the identities of the majority of these people who sought to swindle the government.

How hollow the words of Chancellor George Osborne now sound, who insisted last year: “We will be as tough on the richest who evade tax as those who cheat on benefits.”

These wealthy crooks should be named, shamed and prosecuted to deter others. They are, after all, just common thieves.

 

Sickening

Instead, the tax authorities, so ready to crack down on small business owners or the self-employed, indulge the wealthy with sweetheart deals that amount to little more than a slap on the wrist.

Truly, it is one law for the rich, another for everyone else.

The country can ill-afford such sickening double standards at any time, let alone when public services are under such pressure and so many families are struggling to survive as the cost of living soars.

The truth is that this is the legacy of a culture that developed under New Labour, which was scared of being seen as antagonistic to the wealthy.

Also, we have a tax office renowned for bungling, even once losing the personal details of 25 million people.

MPs have slammed it for inefficiency, poor service, lack of accountability and favouritism towards the biggest taxpayers, while a recent report estimated it lost £5.9bn a year.

Last year, a damning inquiry by the Public Accounts Committee concluded “senior officials fail to give us any confidence in the way large settlements are reached”. It complained that they treated large companies more favourably than other taxpayers, while pointing out the same officials negotiated and signed off settlements.

Alarmingly, the committee chairwoman also commented that the senior staff were “not prepared to co-operate with our inquiry in a spirit of openness”.

Tax evasion and avoidance has been estimated to cost the Treasury up to £70bn each year, only slightly less than the total amount being cut from public spending by the coalition government.

Ultimately, there is something profoundly wrong about wealthy individuals or firms existing in a society and using its services when they do everything possible to avoid paying their fair share of tax.

Additionally, we simply cannot afford to live in a nation in which, in the words of an infamous billionaire tax avoider, “only the little people pay taxes”. – Ian Birrell from the Daily Mail



sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.