At 3.15pm Andrew Cecil, Amazon’s Director of Public Policy; Troy Alstead, Starbucks Global CFO; and Matt Brittin, Google UK CEO, will all appear before the Public Accounts Committee in Westminster to answer questions on their tax status. One has to wonder why other companies such as eBay won’t also be present, but to be honest the answers from all the companies will probably be similar.
The problem is that companies have a responsibility to shareholders to be profitable. Voluntarily paying higher taxes doesn’t tend to align with maximising shareholder returns.
As companies are free to legally base themselves wherever they like it makes sense for them to base themselves in countries where their corporation taxes will be lowest. That doesn’t tend to be the UK. It’s worth remembering that this is nothing new, but in recession governments tend to shout a little louder when they need the coffers filling. It’s pointless the government haranguing HMRC to collect more tax when companies are paying what’s legally due.
It’s also worth bearing in mind that whilst companies have been hitting the headlines due to their low corporation tax payments, many of the same companies will be paying VAT and Income Tax and National Insurance for their employees.
The current story is that the public are outraged that some companies have huge turnovers in the UK, but pay little corporation tax. The truth is that the public enjoy being consumers of these companies and successive governments, both Conservative and Labour, have allowed a tax regime to exist which benefits the companies. There’s no question that all of the companies have paid every penny of tax due in the UK, the only question is should they be allowed to operate in the UK and pay taxes in another territory.
I have to say the one thing that really irks me about this isn’t that some large companies are arranging to pay tax outside the UK to minimise their bills. It’s the unfairness that it wouldn’t be financially viable for myself and countless other small businesses to do the same.
We may get some answers after Monday’s Public Accounts Committee meeting, but the truth is we’ve had the answers for years. If we want companies to pay more tax in the UK two things need to happen – We need to be a country which is attractive to do business in and taxation rules need to be changed so that large companies trading in the UK are required to pay tax in the UK.