Editorial: Multinationals must pay their share of UK taxes

Share
Related Topics

Tax arrangements that, while legal, allowed comedian Jimmy Carr to slash his contributions to the Exchequer were judged by the Prime Minister to be "morally wrong". The contortions of multinational companies – the service subsidiaries, the intra-group debt financing, the "double Irish" – are no less so.

Take Starbucks, for example. The Seattle-based coffee chain has paid just £8.6m in British corporation tax over 14 years, and none at all for the past three, despite turnover estimated at £3bn. The company says that an over-aggressive expansion strategy absorbed all sales revenues, pushing it into the red and out of range of HM Revenue & Customs. But the confusion of executives having talked to investors of UK profits – now explained with reference to "royalties" arrangements with the European arm in the Netherlands – has left the group under a cloud.

The good news is that the furore – justified or not – has prompted the House of Commons' influential Public Accounts Committee to investigate. Not a moment too soon. By some recent estimates, as much as £11bn may be missing from the public coffers thanks to foreign companies' avoidance strategies, typically using complex business structures to divert revenues to lower-tax jurisdictions elsewhere. Starbucks joins an illustrious list. Amazon UK acts as an order fulfilment arm for its parent in Luxembourg; Google UK is an "agent" of the US giant's subsidiary in Ireland; Facebook UK also sends its revenues to Ireland. All pay negligible British tax as a result. Similar allegations also dog eBay and Apple.

A central question for the PAC inquiry is how far HMRC itself is at fault, hence yesterday's appearance from chief executive Lin Homer. But to concentrate on the failings of the taxman is to miss the broader point. As with Mr Carr, there is no suggestion of law-breaking here, and the time and cost involved in HMRC pursuing complex but legal arrangements is both disproportionately high and unlikely to prove successful.

While the manoeuvres of Amazon et al may be within the letter of the law, they are most certainly against its spirit. The divergence used not to matter much. Looking for ways to minimise tax liabilities – either personal or corporate – was, until recently, normal practice and widely accepted as such. In the aftermath of the financial crisis, however, with austerity, debt and recession weighing heavy on the public purse, the moral climate is changing.

The power of public censure should, therefore, not be underestimated, particularly when so many of those being named and shamed present themselves as models of ethical, modern business (Google's company motto, after all, is "don't be evil"). But reputational pressure alone cannot solve the problem. And as ever more businesses use the internet as their shop front, and rely on intellectual property rather than physical assets, the question of geographical location will become thornier still.

The only solution is to change the rules. It is welcome, then, that the Chancellor and his German counterpart used last weekend's G20 meeting to call for international co-operation on the issue. Similar efforts already under way in Europe also warrant Britain's full support. But reform is needed at home, too. David Cameron has not lambasted corporations as roundly as he did Mr Carr; he has said only that he is "not happy" and called on HMRC to "look carefully" at individual cases. In fact, it is for George Osborne to look carefully at the system as a whole, to find a fairer way to assess profits that are generated in Britain – and to tax them accordingly.

React Now

Latest stories from i100
SPONSORED FEATURES
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Environmental Adviser - Maternity Cover

£37040 - £43600 per annum: Recruitment Genius: The UK's export credit agency a...

Recruitment Genius: CBM & Lubrication Technician

£25000 - £27500 per annum: Recruitment Genius: This company provides a compreh...

Recruitment Genius: Care Worker - Residential Emergency Service

£16800 - £19500 per annum: Recruitment Genius: Would you like to join an organ...

Recruitment Genius: Senior Landscaper

£25000 - £28000 per annum: Recruitment Genius: In the last five years this com...

Day In a Page

Read Next
Labour's Jeremy Corbyn arrives to take part in a Labour party leadership final debate, at the Sage in Gateshead, England, Thursday, Sept. 3  

Jeremy Corbyn is here to stay and the Labour Party is never going to look the same again

Andrew Grice
Serena Williams  

As Stella Creasy and Serena Williams know, a woman's achievements are still judged on appearance

Holly Baxter
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones