Corporation tax didn’t use to be this gripping. Five years ago it hardly caused a stir in public life. Nobody seemed awake enough to notice the warren of loopholes that accountants for Amazon and Google and Starbucks were apparently advising their clients to exploit. Not anymore. Today – with Britain yet to pull itself out of recession –corporation tax is politics, but sexy. The UK needs money back. Dastardly multinationals aren’t paying. It’s cops and robbers – with more cash at stake than Ronnie Biggs and all his gang could rip off in a lifetime.
Proof of this new-found visibility came at last week’s televised appearance of executives from Amazon and co before the Public Accounts Committee, a group of MPs charged with figuring out the tax affairs of alleged avoiders. There followed a roasting of unexpected intensity – one to rival Leveson for entertainment value, according to seasoned inquiry-watchers.
Andrew Cecil, the bumbling head of public policy for Amazon, was lucky to leave with his head. Starbucks’ Chief Financial Officer found himself openly laughed at and accused of being “on the fiddle”. Google’s Matt Brittin avoided a spanking only through his open and revealing admission (“We pay all the tax you require us to pay.”)
What made this such a delight to watch? Some credit must go to the MPs for showing temper as the evasions escalated (“I don’t know what you take us for”, “What’s your job?!”). But more persuasive, and ultimately more important, was the fact that – at last – multinational organisations teetered upon vulnerability.
The likes of Google, Starbucks and Amazon tend to scandal-proof themselves through hive-like anyonymity (at one point Amazon’s Cecil even bizarrely claimed he had no idea who owned the company at all). They can also rely on omnipresence to act as a shock-absorber. These days it’s about as easy for the public to muster protest at Google or Amazon as it is to take a stand against roads, or money. Yet for three hours in House of Commons’ Boothryod Room, both organisations had a face. And that face was blushing.
As well it might. The French government recently served Amazon a back-claim (which the company intends to fight) for £158 million in unpaid taxes. Their affairs have been shown equally weasel-like over here. UK revenues were estimated at £3.3 to £4.5 billion for 2011, though the online retailer paid less than £1 million of that to the exchequer. When one remembers that the rate for corporation tax in this country is 25 per cent of profits, that’s quite a remarkable limbo.
And add together the sums avoided by some of the most recognisable brands operating in the UK and the impressive PAC chairman Margaret Hodges MP puts the amount owed at £900 million.
This is money that could pay for, among other things: the return of the invaluable school sports partnerships for the next five years, or the Education Maintenance Allowance for two, or the recent batch of social care cuts. Or it could go to sustain our hospitals and schools.
Business lobbyists respond to arguments like this with all kinds of chicanery, but a typical defence rests on two principles: first, they say, tax-efficiency is not illegal. Second, a business is responsible only to its shareholders, and therefore must put its own profitability above all else.
The first of these is true for the moment, but may soon be less so if Cameron does review HMRC policy, as he has been advised.
The second has heavyweight support – notably from the Nobel winning economist Milton Friedman. However, with regards to Starbucks and Google it can be thrown straight out the window. Both organisations have taken pains to promote themselves as caring corporate citizens, willing to factor an emphasis on “people” and “places” into their quest for profit.
Both make an awful lot of noise about the good they do through what's known as Corporate Social Responsibility (or CSR - time being money). Google – who quietly dropped their “Don’t Be Evil” motto in January – give 1 per cent of profits to charity. Starbucks was singled out by David Cameron for special praise as recently as February of this year for their example of how business can contribute to wider society.
How cynical, you might think. While these billion dollar brands trumpet morally responsible behaviour – and reap the publicity that results – they simultaneously do everything possible to minimise taxes, taxes which would otherwise amount to far more than they invest in social programmes but which – as they’re considered duty rather than gift– come without the smiling PR tag of do-goodery.
Scandals like this one hammer what little credibility CSR has earned. Philosopher Slavoj Zizek and journalist Glenn Greenwald are open in their scorn. The Economist looks on sceptically. But simply, when it comes to funding sources for social programmes, in the short term at least, we don’t have much choice. The support of private companies is vital, and will only get more so as cuts to public services continue and individual donations decline.
Can CSR work?
CSR can, with the right leadership, be more than window-dressing. Computing giant Cisco systems set up an $11 million charitable project in 2008 to develop Palestine’s computing sector; in three years, the proportion of Palestine's GDP accounted for by ICT went from 0 to 11 per cent. Now Cisco outsources its Research and Development to Palestine for business purposes rather than charitable ones (it’s cheaper there). And I’m not the only person to have written about it, without being paid to do so, which might be worth something too.
So the proper response here is not to condemn all CSR as a sham, but to make sure any consideration of a company’s social contributions includes the amount of tax they pay. At the moment, details of whether a business hands over enough are difficult to dig out: the most successful attempts to highlight offenders have come from radical groups like The Intruders, who don tuxedos to infiltrate corporate dos and shame avoiders. Stunts like theirs have one goal. To publicise tax avoidance. Now government must do their part. This means making it a requirement of businesses to show up front how much they pay. Put it on the website homepage, make a “we do our part” stamp-of-approval, plaster it across their office front doors - anything. Capitalism will only have a conscience once the chore of paying tax is just as important as shiny corporate social responsibility. Want an example of how to do it? Go take a look at John Lewis.