Editorial: The game's up for tax avoiders

Consumer power can drive a more ethical capitalism. Disapproval reduces sales
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The Independent Online

How many times are George Osborne and Danny Alexander going to announce a "new government clampdown on tax dodgers"? Last week, they announced "action" that includes £77m of new funding for HM Revenue & Customs (HMRC) over the next two years to expand its "anti-avoidance and evasion activity". The Treasury press office said: "This is expected to bring in an additional £2bn per year in tax that would have otherwise gone unpaid."

This is the most remarkable rate of return in human history: for a one-off outlay of £77m, a yield of 26 times as much every year, instantly. With this alchemy of public finances it would make unbreakable sense to borrow as much as the Government can while the AAA rating lasts and bet it all on "anti-avoidance and evasion activity".

The Osborne-Alexander press release is only the latest and most ridiculous overblown claim for the tax authorities' permanent struggle against the efforts of clever and well-paid tax accountants and lawyers. This is a war that can never be won; the front line may push forward and back, but all the heavy artillery is on the side of the multinational corporations.

The HMRC "High Risk Corporates" programme employs, for example, seven permanent lawyers. Last week's announcement promised to bring in "more people and additional legal support to speed up HMRC's work to identify and challenge multinationals' transfer pricing arrangements". In other words, running to stand still.

We need not only tougher enforcement but tougher tax law. As we report today, JP Morgan, the US bank, is close to a settlement with HMRC to pay £500m in back taxes. One detail of this story speaks volumes: employees who were US citizens were ineligible for the offshore tax-avoidance scheme, because US tax law is more stringent.

Indeed, the way that HMRC reaches deals with big companies, and hides the details on grounds of "taxpayer confidentiality", fails the test of an open and fair tax system. The rest of us, who are told how much tax to pay and pay it, are really not "all in this together".

That sense of unfairness is one thing that has changed recently. Unease about receiving Amazon parcels from Jersey has turned into anger about the low tax bills the company pays in the UK. The weaselly evidence given to the Public Accounts Committee by representatives of Amazon, Google and Starbucks added to the outrage. We praise Margaret Hodge, the committee chair, for her tenacity, just as we salute the UK Uncut protesters for highlighting poor corporate citizenship.

This verdict in the court of public opinion is as effective as any ruling by a judge. Anyone seeking an explanation for Starbucks's decision to pay about £20m more tax than it need do over the next two years should look at the opinion polling on how positively the company is regarded. The line on YouGov's graph dropped sharply in mid-October. This is a good example of how the market in corporate reputation can work, and how consumer power can drive a more ethical capitalism. Disapproval of tax dodging leads to lower sales.

Let this be a lesson to the big companies with small tax bills, including the Premier League football clubs on which we reported last week. Fewer resources devoted to avoiding taxes, please, and more to facing up to your social responsibilities.