Sunday, June 16, 2013

Tax Avoidance at the G8

Have not had time to blog for ages. So much to do and see on summer evenings. For last three weeks, whenever I'm home with time to spare, I am gripped by the Azaleas. They are just incredible. More photos tomorrow. But I want to blog tonight - not to share some great insight, but to order my thoughts on the tax arrangements of global businesses - usually focusing on Google, Starbucks and Amazon. There are lots of oothers. Being invited to discuss this issue with Vaughan Roderick on Radio Wales' Sunday Supplement this morning started me off thinking about it. Some of my Parliamentary colleagues have been doing little else for weeks. The following is factual, as I understand it, without much opinion. Corrections and contrary opinions are welcome.

The current position is that very many UK citizens are resentful that global companies are able to arrange their taxation affairs to avoid paying Corporation Tax in the UK. Not suggesting this is illegal, but it cannot be moral that Google pays just £10million tax on £11.5billion revenues. I know we do not pay Corporation Tax on revenues, but this is ridiculous. Lots of billions of potential tax is being lost to the Treasury- which must irritate the Chancellor no end. The only effective way of injecting fairness into the system is through greater transparency and international agreements. The Prime Minister, who is chairing the G8, meeting in N Ireland this week, wants some action. But the UK is seen as the main 'offender' when it comes to transparency. So David Cameron has met with British Overseas Territories and Crown Dependencies to raise his status and credibility on the issue as going into the talks.

Yesterday's meeting at No 10 included Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Aguilar, Montserrat, Turks and Caicos, Jersey, Guernsey and Isle of Man. They all agreed a "clampdown on tax avoidance" - though I'm not certain precisely what this entails. A 'Multinational Convention on Mutual Assistance in Tax Matters' has been agreed - led by the Organisation for Economic Cooperation and Development. Also agreed is a plan to publish what each will do to register beneficial ownership, detailing who exactly owns these so-called 'shell companies'. Initially this register will be made known only to HMRG, but there will be consultation about whether it should be made public. Personally, I reckon the jury is out about whether any of this will make any real difference. If Merkyl and Obama were willing to sign up, maybe the G8 would be able to move things along.

When I think of this issue, the company that comes to mind is Starbucks. I like their cappuccino and flapjack and will enjoy same tomorrow when I stop at a service station en route to London. Starbucks pays no Corporation Tax, which rankles. Reckons none is due. No profits. B*****cks. Mrs D used to be involved in running restaurants, which focused on morning coffees. She had to pat tax. Where's the fairness in that. But I can see its not so simple to sort out, unless there is international agreement. So lets hope the G8 deliver on this.


Anonymous said...

Glyn: Why won’t you and your compadres consider THE EASY SOLUTION: sliding scale flat tax on gross turnover – all those accounting tricks to avoid paying taxes are RENDERED MOOT.
Christopher Wood BSc (Wales)

David Logan said...

I tend to agree with the above comment, Glyn.

What I find particularly frustrating on this issue is that the govt has not had - a) The political competence to hang this all on Brown and Balls; and - b) the fiscal competence to start actually doing something about it.

We could be leading on this not bleating at the sidelines. We have had a history of using one-off windfall taxes on banks, energy and oil companies, that would be a short term start. Longer term, the tax simplifying route has to be the one to go down.

Will Amazon, Starbucks, Google and Vodaphone abandon the 5th largest economy in the world - i think not! It may cost us a few new coffe shops or warehouses ( which may well be staffed by immigrant labour anyway) to get some millions into the treasury. A government that can deliver this could be in danger of looking popular and competent - heaven forbid!

Anonymous said...

I agree with David Logan

Yes, in the past the UK government hit banks with extra taxes on their windfalls due to government/BoE imposed interest hikes.

The government can do the same with respect to Google et al.

But Cameron seems spell bound - unable to react in a way that will fix this awful issue that perplexes and angers ordinary folks who are getting hammered.

Make it so that companies like Google and Starbucks see no point in running up tax avoidance tricks - perfectly legal, but instantly useless if the UK government moves with special taxes and/or tax on gross income.