Leaders: Payback time must come for tax-avoiding corporations

Amazon: 'Unfair competition'. Picture: Getty
Amazon: 'Unfair competition'. Picture: Getty
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FEW aspects of business behaviour more rile the public than the impression that taxes are only paid by little people.

That is the unpleasant impression left by evidence that giant companies such as Starbucks, Google and Amazon pay little to no corporation tax on their UK profits. It thus falls on smaller companies with notably less resource by way of overseas operations and teams of specialist tax accountants to bear the burden of corporate taxes in the UK.

Yesterday’s condemnation by Business Secretary Vince Cable of corporate tax avoidance as “completely unacceptable” will resonate with many – not least the smaller businesses competitors who feel strongly that there is not a level playing field where corporation tax is concerned. Even companies as substantial as the John Lewis department store group are now speaking out against what they see as unfair competition from Amazon which is damaging its business.

Appearances by executives from Starbucks, Google and Amazon before the House of Commons Public Accounts Committee last week did little to defuse MPs’ anger when details emerged of the use of favourable European tax jurisdictions. Starbucks, for example, has made a taxable profit only once in its 15 years of operating in the UK. As a consequence, the company is thought to have paid just £8.6 million in corporation tax over the period. Amazon’s Andrew Cecil was condemned by MPs for failing to answer questions, but he acknowledged that smaller companies, many of which face competitive pressures from the major firms, will be angered by the situation.

Mr Cable spoke of “appalling stories of abuse” and said in a television interview that the UK tax authorities have got to get much tougher on things like royalty payments, where a lot of the subterfuge takes place. However, clamping down on this is easier said than done. The UK corporate tax system is fiendishly complex – in large part due to earnest legal attempts to close down other legal loopholes. The companies insist that their tax affairs are legal and within the framework laid down by law: that they are doing nothing wrong. Tax evasion is illegal; tax avoidance is not.

To tackle corporate tax law reform will require commitment and patience on the part of MPs. Unfortunately, on issues such as this, the government’s legislative timetable is dominated by what are judged to be more vote-
earning issues. MPs also have a limited attention span.

Tackling the issue will also require international agreement – and here similar problems arise. For example, Starbucks admitted last week that the Dutch government had granted a special tax deal on its European headquarters, which receives royalty payments from its UK business. Many governments have indulged in the very practices that some now wish to outlaw. Getting governments to foreswear tax sweeteners in order to attract inward investment will be no easy task.

Party return for Watson not a concern

FEW will have forgotten the bizarre chain of events that led to the arrest and imprisonment of the Labour peer Lord Watson. He was jailed in 2005 on two counts of wilful fire-raising at the prestigious Prestonfield Hotel in Edinburgh on the night – ironically – of a Scottish Politician of The Year Award dinner.

News that the disgraced peer has been readmitted to the Labour Party has been seized upon by political opponents. SNP MSP James Dorman has called it an “insult” to those whose lives Watson had endangered by the fire-raising. That is a rather over-dramatic reaction. Watson has served his time in prison for his offence. He has been disgraced. His political career is over and there is very little likelihood that it will be resumed. If he wishes to rejoin the party and it is prepared to admit him, there is little here that is of wider public or concern.

Watson’s political reputation went up in flames with the Prestonfield curtains. That should not deprive him of his basic rights as a citizen now that he has served time. If he wishes to participate in the party’s affairs, and the local party members agree, he should be allowed

back in as a private citizen. Disgraceful though this incident was, the general public would be more forgiving if he had made clear full contrition and apology at the time of his court appearance and sought, through a period of voluntary social work, to seek to atone for this incident.

Doors should never be closed to those who make a genuine

effort along these lines to show a commitment to public service. In such circumstances a second chance is indisputably allowed. Until this is done and seen to be done, a return to any public

office would seem unlikely.