The price we pay for rewarding greed
Your correspondent Martin Togneri appears to concede that Starbucks, Amazon et al are cooking the books in order to make it appear that they are not profitable (Letters, 4 December), but he draws a smokescreen over the main issue.
The executives of these companies are bound by their duty to the shareholders, he tells us, not to pay more tax than they have to.
Indeed every pound paid to the tax man is a pound not available to increase the wages of the warehouse staff. How touching. Mr Togneri does not need to spring to the defence of this pathological sector of society. What is actually meant by “maximising returns while obeying the laws” is in practice “making sure the books are cooked so comprehensively that it confounds public scrutiny”.
Cheating the tax man is not a public duty; it is cheating the community: you, me, our children. Large multinationals allocate huge sums to finding ever more sophisticated methods of tax avoidance using accounting specialists with far greater resources than the tax authorities in any one country and the Chancellor has only now woken up to the need to increase HMRC’s firepower.
I find it quite shocking how passive we have become that we neglect the really able members of society: our scientists, engineers and craftsmen. We devalue the people who keep health and education and social services going and yet we are supposed to quail at the prospect of some greedy tax consultant threatening to go and live elsewhere if we lift the lid on what he is really doing.
A recent report by the High Pay Centre points out that the pay of the chief executives of UK FTSE 100 companies, now 185 times the average wage, has more than quadrupled from an average of £1 million in 1998 to £4.8m in 2011.
How lucky we are that they still live among us for they pay tax on every penny, are not thinking of emigrating or offshoring and are kind to dogs.
Understandably, there is deep public outrage and concern at recent revelations that multinational companies doing successful business in the UK are using tax avoidance measures to pay virtually no corporation tax year after year.
This is an immoral position at any time, let alone at a time when swingeing cuts to public services are under way.
However, a few points need to be clearly understood if we are to make headway on this problem.
Firstly, while Google, Starbucks and Amazon have been “named and shamed”, this is not a matter of “a few bad apples”. Last year a study of the FTSE 100 companies revealed that only two out of a hundred paid full taxes in the UK.
Secondly, these companies and their mouthpieces will use the defence of international tax treaties that say profits cannot be taxed twice to continue to justify their behaviour.
Thirdly, fake moral outrage and a few more tax inspectors provided by George Osborne and Danny Alexander can, as intended, only have a minimal effect on this corporate national disgrace.
Clear legislation is required to tackle this problem once and for all, and I would suggest three measures that are needed to deal with it comprehensively.
Firstly, there should be an annual public report prepared by HMRC, backed by statute, on every company trading in the UK with revenues of £10 million or more, detailing turnover, revenue, profits and tax paid to the Exchequer.
This would keep a permanent searchlight trained on the social fiscal responsibility of corporations on a yearly basis.
Secondly, a new and progressive tax should be levied on corporations based on revenue. The justification for such a tax is clear – corporations are legal entities that benefit from our infrastructure; roads, education, health etc and should pay a contribution towards that. We could even call it the corporate community charge.
Corporation tax paid on profits would be offset against this charge, to a maximum level of zero charge.
This would ensure that, either through honestly declaring their profits as taxable, or claiming to make no profits on substantial UK revenues, these corporations would, as legal entities, make a significant contribution to the public weal from which they benefit.
Corporation community charges would be set with this aim in mind.
Finally, a wholesale cultural rethink and a corresponding revolution in company and corporate law are needed.
Central to any such new legislation should be the principle that the fiduciary duty of directors and executives to shareholders only becomes active once the corporation’s socio-economic duties to the wider society in which it is embedded are met.
The parameters of such socio-economic duties should be spelled out clearly in legislative form after a wide ranging public consultation.
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