In defence of multinationals: Danny Alexander may boycott Starbucks - but it's our barmy tax system that's to blame

We shouldn't beat up businesses for trying to grow rather than recognising profit

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The Independent Online

So Lib Dem Secretary to the Treasury Danny Alexander is no longer buying his coffee at Starbucks. Fine - he's sure to see a popularity bump as a result. But I for one am getting sick and tired of the populist, corporate bashing rubbish being bandied around about corporations not paying their fair share of tax.

No one pays anymore tax than they have to - on your tax return each year, there's no box asking you “would you like to give us any more than you absolutely have to?” If you're a business, you try and minimise cost wherever possible, and you won't pay suppliers or staff anymore than you have to, so why would you turn to the taxman and say, “I don't have to pay this, but I will because I'm a good corporate citizen.”

We're starting from the wrong point with this whole debate. We're assuming that our tax system is right and proper. In truth, it's a barmy system that has grown organically over the years with no strategic control, heaping cost and complexity on business. You just have to look at the size of the tax advisory practices at the big accountants to know that their are countless complexities and loopholes in the system.

We're also focusing on corporation tax, which is payable based on profits. This is a ridiculous place to start. Take Starbucks as a popular example. Think of how much VAT income they produce, never mind contributions to National Insurance and what the employment of their staff will raise in PAYE. Corporation tax pales into insignificance by comparison.

They're also not recognising a profit in the UK, so aren't paying any significant corporation tax. Why is that?

I would guess its for two reasons. Firstly, they're a high growth business, investing in the opening new stores and creating new jobs. They will try and reach some sort of saturation point before focusing on driving profits from the business. Secondly, it is more efficient for them to recognise their profits in a country with a more competitive tax system, which as a global business, is down to them.

Beating Belgium

We certainly shouldn't beat up a business for trying to grow rather than recognising a profit. But the real question here is how many billions of pounds are we losing each year because the likes of Amazon find it far easier to base their businesses in Belgium? What would be the return to the exchequer if we persuaded them to base their business here and what would it take?

The big win here would be a campaign where government considers simplifying and improving the tax system and agrees with the likes of Amazon etc that their business should be based, and pay tax here - win for the politician, win for the business.

However, what we're getting instead is politicians assuming that they're right and that the tax system is great and good, and they're riding the wave of public inquiries that the press have become so fascinated with to score political points and improve their career prospects by indulging in a bit a “bully the poor corporate bastard". Easy points, better profile than eating slugs in the jungle, but missing the point badly.

We know that our economic recovery is not coming from public spending - there's nothing left in the coffers. We're going to rely on business to drive our recovery, so let's make it as easy as we can for them to grow, and incentivise them to pay tax in the UK, not Belgium.