Davos: Come on, corporate giants. Open up to us

If our Government wants to tackle avoidance, it should compel big businesses to publish exactly how much corporation tax they pay. Luckily Labour support the idea

Share

Davos is a rather absurd jamboree – so important to those who attend it and so irrelevant to the rest of the world. But over the past couple of days, amid the coffee and croissants and ceaseless chatter, we have heard the opening shots ricochet around the Alpine slopes of a potentially epic struggle over tax and power.

On the one hand are politicians, struggling to make public finances add up at a time of austerity and riding a tide of righteous anger from activists and taxpayers. On the other are corporate titans determined to keep their profits rolling in as they shift paper assets around the globe to avoid paying fair dues to national exchequers.

In the wake of detonating political dynamite over Europe, David Cameron jetted in to the Swiss resort to reveal he would use Britain’s G8 presidency to enforce tough action on tax avoidance. “Businesses need to wake up and smell the coffee,” he said, in a clear jibe at Starbucks, the highest-profile offender in this country.

Fight for control

The Prime Minister was prodded into action by backbench and media pressure, but this does not diminish his arguments about the immorality of avoiding tax. Yet instantly the public relations machines of the multinationals rolled into action, bleating about red tape and blaming everyone but themselves for their failures to pay. Leading the way was Goldman Sachs, which did not seem the smartest move in a fight for public sympathy.

This battle has been a long time coming. It goes beyond finance: it is really a fight for control of our globalised world. In recent decades, the powers of these profit-chasing behemoths have grown in inverse proportion to any sense of local responsibility. As they flit around the planet buying influence and selling their products, national borders are seen as little more than an irksome irrelevance.

I am not among those seeing multinationals as irredeemably malign influences. Many have been progressive forces through their development of new technologies and services, their readiness to adapt to social change and their role in spreading prosperity. But when it comes to tax, their behaviour is often indefensible.

We have learned the tactics used by Starbucks, Google and Amazon – ironically three brands that sold themselves as ethical capitalists. How hollow that pledge to do no evil now sounds. But they are far from alone: an ActionAid study in 2011 found 98 companies in the FTSE 100 had at least one subsidiary in a tax haven.

Or take Microsoft, whose creator is now hailed a hero for giving so much money to charity. A Harvard law professor revealed it has three units in the low-tax nations of Puerto Rico, Ireland and Singapore that in 2011 booked more than half the company’s total worldwide profits. If it paid more tax around the world, there might be less argument for aid.

Politicians are being forced to act, given pressures on family finances and public purses. In the United States, profit-shifting costs $90bn annually, which would help its fiscal black hole. France is looking at an internet tax. The Dutch parliament has been debating the country’s role as a relay-station in the global tax-avoidance network, which helped Google to cut its tax bill by more than £1bn.

In an ideal world, there would be unified action to shut down tax havens, close loopholes and end aggressive tax avoidance. But this is likely to be compromised by the need for international consensus. Meanwhile, it is hard to have faith in our Inland Revenue, which seems so ready to cut deals with dodgy corporations and wealthy crooks while clamping down fast on small fry.

A simple solution

But there is a simple solution – one in keeping with the Coalition’s drive for transparency and belief in “nudge” theories. Instead of waiting for international agreement, why not just insist every company doing business in Britain publishes precisely how much it pays in corporation tax? This idea is supported by Labour so could be passed in days, is simple to enforce and might prove transformative.

Brands are, after all, the most precious thing companies possess – and they are surprisingly fragile in the social-media age. Starbucks may be opening hundreds of new stores each year and seeing worldwide profits soar, but it was so rattled by public opprobrium over tax that it rapidly offered to hand £10m a year to the Exchequer. It was surely no coincidence that rivals reported soaring sales after the furore.

If such information is public, firms are free to decide whether to keep paying armies of accountants and lawyers to manipulate profits and corporate structures – or to cough up a bit more tax. Equally, the public is free to decide if it wants to keep consuming their products.

Some say this might drive firms to pack up business in Britain. Unlikely – but even if true, would that be such a disaster? If Starbucks had shut its shops rather than responding to public pressure, there would have been plenty of other firms ready to sell us overpriced buckets of milky coffee. It might even be the making of some new national champions.

There is something profoundly wrong with permitting arrogant global companies to flout national tax rules, gaining unfair advantages over smaller and local rivals. It insults their customers, protects their position and entrenches their power. Politicians must flex their muscles to show who really runs the country.

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Front-End UI Application Developer

£30000 - £40000 per annum + Benefits: Ashdown Group: Front-End UI Application ...

Recruitment Genius: Digital Account Executive

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Service Engineers - Doncaster / Hull

£27000 per annum: Recruitment Genius: Domestic Service Only Engineers are requ...

Recruitment Genius: Employability / Recruitment Adviser

£23600 - £27500 per annum: Recruitment Genius: The Employability Service withi...

Day In a Page

Read Next
 

South Africa's race problem is less between black and white than between poor blacks and immigrants from sub-Saharan Africa

John Carlin
Queen Elizabeth II with members of the Order of Merit  

Either the Queen thinks that only one in 24 Britons are women, or her Order of Merit is appallingly backward

Janet Street-Porter
Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...