Apple Chief Executive, Tim Cook’s claim that ‘No one did anything wrong here’ as a reason why it wasn’t immoral and wrong for Apple to pay a low as 0.05% tax on its £billions in profits is strikingly similar to Gary Glitter’s claim that he wasn’t breaking any laws when he only had sex with 13 years old girls in countries where the age of consent is 13. Shopping around the world for laws you want to obey to avoid those that everyone else has to abide by isn’t moral but the real question is why isn’t our government doing more to stop this sort behaviour? The UK government changed the law to cope with Gary Glitter and his cronies – if the wanted to they could do the same with multinational tax dodgers. In its ham-fisted way (the ruling was made under ‘state-aid’ rules which was exactly the sort of rule stretching that we are leaving the EU to avoid) the EU has finally got something right.
Our high streets are filling up with firms that avoid tax and push out the local small businesses who have to pay real tax rates and can’t compete. Cafe Nero, for example, has avoided paying any tax in the UK since 2008. The Austrian chancellor recently pointed out that Amazon and Starbucks pay less tax than a local Austrian sausage stall. Our banks now pay so little tax that they have invented a new term ‘total tax contribution’ to hide this by including their employees personal tax in their figures (https://www.pwc.co.uk/assets/pdf/total-tax-contribution-of-the-uk-banking-sector-1909.pdf ) According to the Observer 5 of the top British banks made £3.2 billion in profit in 2014 but paid between them only £21 million on tax. A tax rate of 0.66%
Multinational tax avoidance is absolutely endemic.
This is a fundamental free market issue. All companies (and individuals) need to pay the same rates of tax on their profits whatever their size. Our government needs to wake up and address this issue not weakly mutter about being ‘business friendly’ and suggest that we lower our taxes so these multinationals will grace us by choosing to obey our laws instead and pay their taxes here thereby depriving other countries of the tax due them. The way these arrangements work is that the multinational artificially funnels it profits from a whole geographical area, covering many countries, into one county where it has negotiated a favourable deal. In this way the recipient country can cut a very low tax deal because it it getting the tax from tens of other countries – not just its own. The other countries of course get nothing. This scramble to do a deal to get at least get some money is simply a race to the bottom depending on how low a country is prepared to go.
Some of the arrangements are comically artificial. Take the Cafe Nero example above. The reason they don’t pay tax is that their clever accountants have set up an arrangement where Cafe Nero owes huge amounts of money to another company, conveniently hidden in tax havens where no one can inspect its books, so that all the profits it makes is taken up with ‘interest payments’ to the owning company. This has been going on since 2008. Who would like to bet that they never manage to pay enough money back to have any profit in the UK to pay tax on? Again, why doesn’t the UK ban this sort of practice? The chancellor found it easy enough to stop second home owners off setting mortgage interest against profit when he wanted to.
Any party that took this issue on is going to be onto a huge vote-winner. As an issue it cuts across the political spectrum from left to right. Not only is it depriving our schools, roads and hospitals etc. of funds but it is an unfair distortion of the free market. As Andy Street, the boss of John Lewis, said ‘If you think two companies making the same profit, one of them pays corporation tax at the UK rate, one does not because it claims to be headquartered somewhere else. That is not fair. ‘