There were reports in the papers yesterday that provided a useful contrast. The first showed that our Corporation Tax intake was down and the second showed why. It showed how companies like Starbucks, Google and Amazon were avoiding paying Corporation Tax in this country although obviously making good profits here.
I’d like to be able to take them to court but regrettably what they are doing is absolutely legal although obviously completely immoral. They achieve this by passing internal charges around the company which takes potential profit out of areas of high corporation tax and places it in countries with low corporation tax. I suspect that much of it washes through the system so many times that ultimately little gets paid at all.
Why don’t governments do something about this? Well the argument goes that these international companies are mobile. They can choose to invest their money here and if we were too punitive they would invest somewhere else. There may be an element of truth in this. A car manufacturer for example helps the economy of a country by locating within it. It prevents imports because people buy more locally sourced cars and components and aids exports. Such providers of goods and services are truly mobile because they can locate anywhere.
But not Google, Starbucks and Amazon. Anywhere that the final interaction is with consumers then the action and the tax must be local to that country. What would happen, for example if Starbucks disinvested from the UK and took their capital elsewhere? Absolutely nothing! There would still be zillions of places to get a plastic beaker of overpriced coffee. What if Amazon closed? The net result would be no change. People would continue to buy books, CDs and all the other things that Amazon sends from places like WH Smith and the other online UK based, UK taxed retailers.
So what should the Government do about it? Well it’s quite simple really. They should pass a law that strips out ‘special charges’ and then levels corporation tax on the difference between earnings and outgoings at the rate reported as the final corporation tax rate in the country which received the final audited accounts of that company. If this were applied equally by all countries across a company’s service continuum then each would get a fair share of the tax generated on local sales.
They could massively tighten up on off shore destinations for corporate as well as personal finance as well as those very local tax havens in Jersey, Guernsey and the Isle of Man in addition to places under the British Flag such as Turks & Caicos Islands.
But that would take time even if there was a political will which I suspect there isn’t within the Tory wing of the coalition. But you can take action tomorrow. I will never buy a Starbucks coffee again. I will never buy a product from Amazon again. I will never use a Google service but will choose other IT engines.
If you did the same then we can make an impact on the profits of these greedy, grasping companies. We could force them to realise that their loyalty is not only to their shareholders but also to the long-term interests of their customers and the communities within which they work.
Are you up for personal, decisive action? Then start now.