Can pay, must pay: Vast tax avoidance by multinationals that rely on the stability of our country to make their profits has to end

 

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Between now and January, hundreds of thousands of Britons who are self-employed or whose income is not taxed through PAYE will have to undergo the annual grind of filling out tax forms, a tedious task for which their only reward is to be told, when the job is done, how much of their money they must surrender to their Treasury. Nobody likes paying tax, but people will accept that it is something they have to do, if they feel that the system is fair, and everyone who can contribute to the Exchequer is doing so.

However, since the crash of 2008, there has been rising resentment over big companies who appear to use their wealth not to pay their share but to hire accountants to devise elaborate schemes to avoid paying. The plumber or the small shop keeper cannot locate their head offices in a distant tax haven: small UK businesses have no option but to pay UK tax rates. But if the company is big enough, it can move its headquarters to some other place where tax rates are low.

The Independent has this week highlighted the case of Vitol, an oil-trading firm doing lucrative business in London, which keeps its tax bill below UK rates by having its head office in Geneva. This is not the most extreme case of its kind. In an average year, by our calculation, Vitol pays 10.5 per cent of its profits in tax – whereas Amazon, for example, which funnels its business through Luxemburg, pays about one 10th of 1 per cent of the profit it generates in the UK as UK tax.

However, there is an aspect to this story which does not apply in the case of Amazon, in that Vitol’s chief executive, Ian Taylor, is a major donor to the Conservative Party who has given the party in the region of £1m. There is no suggestion that his company has broken the law, or that there is anything improper in Mr Taylor using his personal wealth to support the Conservatives, but that party incessantly warns us that the extent to which the Labour Party is subsidised by trade unions such as Unite can potentially influence how a Labour minister would think and act when in office. How, then, can the average taxpayer be confident that a Conservative government will be motivated to take a cold, hard look at the tax structure of a company such as Vitol when it is run by an individual to whom the party is so very indebted?

Leading Conservatives are well aware of the political sensitivity of how much tax is paid by those who can most afford to pay it. The Chancellor, George Osborne, has repeatedly promised to bear down on “aggressive” tax avoidance, and HM Revenue and Customs has shown some determination in dealing with tax schemes used by wealthy individuals. The acute embarrassment this has caused to the likes of  Gary Barlow is more than compensated for by the reassuring message it sends to the average taxpayer. But the amount of money even a mega-rich showbiz figure can store in a tax scheme is tiny compared with the multinational firms.

The people who run multinationals will say that their first duty is not to any government or to taxpayers but to their investors and shareholders, and so it is part of their job to make sure that the company pays only such taxes as the law requires. But companies owe their profitability to the fact that they are able to trade in orderly stable communities, which would very soon descend into anarchy if nobody paid their taxes. Big companies should pay their share, and should be seen to be doing so.

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