Editorial: What can be done on corporate tax?

Corporate taxation – avoidance, evasion, the use of tax havens – has rightly climbed up the political agenda, but blaming corporations alone is a dangerous oversimplification

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Both the Prime Minister and the leader of the Opposition were in action yesterday, fulminating against companies that choose to be economical with their tax payments. En route to Brussels for an EU summit, David Cameron called on European leaders to  support global remedies against tax avoidance that were causing “staggering” losses to individual countries. Ed Miliband took the argument to Google, attacking its UK tax arrangements at the corporation’s own Big Tent event.

Their comments followed revelations about how little tax the computer giant, Apple, pays in the US and the grilling suffered by a succession of corporate leaders recently at the hands of the Commons Public Accounts Committee. Together, they illustrate how far corporate taxation – avoidance, evasion, the use of tax havens – has climbed up the political agenda, at home and abroad. It will be a high priority when Mr Cameron hosts the G8 summit in Northern Ireland next month.

And that is right, because when capital, companies and intellectual property can cross borders so easily, international coordination is essential. To demonise corporations alone, however, is as much of an oversimplification as it has been to blame the banks alone for their excesses. Yes, there was wrongdoing, but with the banks there were also regulators and shareholders. On the tax front, there are laws, and if those laws do not work, governments have the power, and a responsibility, to change them.

Not so long ago, ministers everywhere competed to court big international corporations for the investment and jobs they would bring. If the tax treatment of business is now out of kilter with the public mood – as it clearly is – then governments must act to make avoidance more difficult and rethink their approach to tax havens. Mr Cameron has to get the UK’s house in order before he tells others what to do.

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