Wednesday, May 22, 2013

Trying to sound less hypocritical on tax

Tweeting from my iPad that multinational companies should pay their taxes in full seemed a little hypocritical, so I thought I'd blog about it (using my PC, powered by Microsoft software produced by a company that has had its fair share of run-ins over anti-trust laws). Hey ho, what a murky world we live in!

At its most simple, it is obvious that all companies, as well as people, should pay all the tax they owe on their earnings. Furthermore, companies, like individuals, should not engage in aggressive ways of avoiding their full tax liability. So, I'm quite happy to say that it's outrageous that Apple, Google, Amazon, Starbucks, Vodafone, M&S and many other companies uses transfer pricing to locate business that obviously occurs in one territory in another one that has a lower prevailing tax rate.

If I buy a book on Amazon's UK website that is dispatched to me from Amazon's UK warehouse, handled by Amazon's UK-based employees, I expect Amazon to pay any tax on the profits from that sale to the UK tax authorities. Simple. In exactly the same way, I imagine that Waterstones will pay UK corporation tax on profits from the sale of a book bought in its Bromley store.

Of course, Amazon will still still be able to charge lower prices because of the way it does business. So this is not a complaint about business styles; it's simply a complaint about paying tax.

The issue is complicated by inept governments competing with one another over relative tax rates and reliefs. And it is complicated by rules about how companies should be governed.

The competition between governments could be resolved through international agreements at G8 and G20 level overseen by the IMF or OECD. At the very least, it seems to me, the case for a single EU-wide rate of corporation tax is pretty strong. It is a nonsense that Ireland has an effective corporation tax rate half that of the EU average - especially when it is the recipient of an EU-led bail out of its economy (partly caused by idiot banking but not helped by a chronically low tax take).

Companies are obliged to maximise shareholder return. This means that they will try to minimise tax in every legitimate way possible. So, again, action through the OECD/G20/G8 to change company law to put other priorities on public companies - such as maximising social return through paying appropriate taxes, investing in the social capital of communities in which they are based (so-called CSR).

Let's not pretend that either of these courses of action will be easy. So, supporting the Tax Justice Network in its work of campaigning and lobbying seems essential;the wealth of research material it produces is invaluable in informed debate. So, protesting against those companies who appear not to be paying their full wack is also essential. I haven't been to Starbucks since it became clear that it treated tax as a matter of voluntary donation; I have cut the amount I buy from Amazon. But I listen to music on iTumes, have an iPhone and iPad for communication...

Pressure could well pay dividends in the long-term as it shames companies into greater transparency and forces governments to act in the interests of all their citizens and not the elite 1% who call the shots - we do, after all, allegedly live in a democracy. But it will take time. As with everything else, good things only come to those who wait.

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