Boycott Starbucks! Google! Amazon!

[tobyaw]

The chair of the Public Accounts Committee has urged the British public to boycott a handful of large multinational companies that pay little or no corporation tax in Britain, despite being market leaders in their respective areas, and being profitable businesses in their home jurisdictions.

Starbucks has hundreds of coffee shops across the UK. I seldom go into one, and if I do, it is because somebody else has chosen it as a meeting place. I don’t like their tea (I might have mentioned that in a previous post), and find them to be overpriced. It is hard to boycott a business that doesn’t currently have any of my custom.

Google may not have a significant physical presence in the UK, but it has a sizeable chunk of website usage. The great majority of its users aren’t its customers (I might have mentioned that in a previous post); it’s income comes from advertisers. I suppose one could boycott Google by avoiding clicking on the ads it displays, but I never click on ads anyway. Better still, one could use its competitors. Nokia or Apple for maps! Vimeo for video! Bing for search! There are lots of alternatives to Google, and it would be relatively easy to avoid if one chose to do so.

Amazon, on the other hand, I would find harder to avoid. While I’ve pretty much given up buying physical media (books and Blurays), Amazon are still my go-to site for basic purchases. With an Amazon Prime subscription, their free next-day delivery makes them compelling for anything from a replacement battery to De Cecco pasta (two of the recent things I’ve ordered from Amazon). A lot of the other web services I use take advantage of Amazon’s web services — it would be hard to wholly avoid them. And I’m not sure that I’d want to. Amazon’s prices are low because they keep margins low; they can offer a decent service at a competitive price because they minimise all of their costs, and one of those costs is the tax that they pay.

There is no suggestion that any of these companies has broken the law with their tax arrangements, but some of them have certainly creatively used the differences between different countries’ tax regimes to their advantage. MPs have suggested that this is a moral failing. I don’t think that anyone or any company should feel a moral duty to pay any more tax than they are obliged to by law. And to turn that around, I would suggest that it is every taxpayers’s responsibility to take advantage of whatever legal avenues are provided to reduce the tax that they pay. After all, paying less tax keeps more money in the economy.

But if you do choose to boycott any of the above, good luck to you. And I’d like to hear how successfully you manage to avoid their products.

(P.S. Boycott Starbucks! Their tea is overpriced and uninspiring, and I can’t fathom why anyone would choose to go to a chain coffee shop when there are independents on every street corner.)

Comments

[makyo.livejournal.com]

I doubt we'll ever agree on this, but I'll post the following response in the interests of a polite exchange of views, and then probably step back, because these things have the potential to get quite heated if we're not careful.

And to turn that around, I would suggest that it is every taxpayers’s responsibility to take advantage of whatever legal avenues are provided to reduce the tax that they pay.
Part of the problem, I think, is that large corporations and extremely rich people have considerably more opportunities for minimising the amount of tax they pay than the rest of us do, both legal and otherwise.

I, being an ordinary person paying income tax and national insurance at source on my earnings, have essentially no choice in the matter - I have to pay it. There are, of course, some mechanisms for slightly lowering my tax bill: I can invest a limited amount of money in an ISA and avoid tax on the interest I earn, for example. I can also declare my London Mathematical Society (http://www.lms.ac.uk/) membership fees as an allowable deduction - this probably saves me about a tenner a year (and in return it helps me do my job better).

If I were a multinational corporation or a billionaire, however, I'd have so many more opportunities for minimising my tax bill. I'd certainly be able to end up paying a smaller proportion of my income as tax, and probably even a smaller tax bill in total than an ordinary person. Is this fair? I can't register myself as a pigeonhole in Luxembourg to almost wipe out my tax bill, but Vodafone can. And on top of that, they can also have a rather nice lunch with the head of HMRC and come to some sort of cosy and mutually beneficial arrangement.

After all, paying less tax keeps more money in the economy.
I'm unconvinced that this is correct, but could probably be persuaded by a more detailed economic argument.

MPs have suggested that this is a moral failing.
And it is - a shared moral failing on the part of the companies themselves and the people who write the tax legislation. Every pound of tax those companies avoid is a pound that can't be spent on schools, hospitals, scientific research, public services, and a whole host of other things that ordinary people rely upon (directly or indirectly) every day. You can argue that the world of business should be kept in a pure, rarefied environment, divorced and protected from questions of morals, that it's a dispassionate economic machine that should be allowed to function without interference. You can throw your hands up in a gesture of abdication at the difficulty of enforcing local tax rates in a global economy, and I certainly wouldn't blame you if you did, because it's a highly intractable problem.

But none of that changes the fact that real people rely, for their education, prosperity and health, on the things that are being underfunded or cut partly because of the clever tax-minimisation schemes of the likes of Vodafone, Amazon, Google, Starbucks and the rest.

I don't entirely blame these companies for taking advantage of these loopholes - they have a duty to their shareholders to maximise their profits, after all. I am, however, exasperated at the continuing failure of our politicians (and their opposite numbers in other countries) to even attempt to do anything about it.

[tobyaw]

I think the failure of the politicians to do anything is entirely understandable, as I suspect that there isn’t anything that they can do. Rules for businesses trading throughout Europe will be governed by the EU and by international treaties.

Unless there is a will across Europe to harmonise tax (and to harmonise tax breaks), then smaller countries like Eire or Luxembourg will always see an advantage in targeting their tax policy at enticing multinationals to base their European businesses in their jurisdictions.

[makyo.livejournal.com]

Yes, indeed. But surely there must be something that can be done at the national level? I'm not suggesting for a moment that there's an easy solution out there. And I don't really mind companies optimising their tax situation to some degree. But when we get to the point where Starbucks manages to pay no tax at all in the UK because somehow they've managed to lose money despite being clearly very successful, then things aren't working how they should, and I'd like our elected officials to at least make a bit of an effort to do something about it.

[tobyaw]

It is a bit cheap to say that they pay no tax, when they obviously have significant VAT and PAYE bills, as well as all the rates and other taxes that hit businesses. And worth noting that VAT and PAYE both bring in significantly more money to the treasury than corporation tax.

Plenty of organisations are “clearly very successful” yet make a loss, so are not liable for corporation tax — from the latest Internet startup to the Guardian newspaper, businesses lose money year on year but keep trading, keep employing people, and keep paying VAT and PAYE.

[tobyaw]

It looks like there is a little bit of movement at European level, in that they are working to create a Europe-wide standard for calculating a company’s profits. Member states will still be able to set different tax rates.

http://ec.europa.eu/taxation_customs/taxation/company_tax/common_tax_base/index_en.htm

[tobyaw]

Worth noting that individuals can choose to minimise their taxes through having a personal service company. It is not just big business or the rich who can choose to organise their tax affairs to their advantage. Cheap and easy to set up, working through a limited company can suit many forms of work, particularly if you’re working on short-term contracts. Very educational in understanding how business works!

[makyo.livejournal.com]

Yes, I could set up a private limited company and work through that, paying myself in dividends rather than salary. I know people who do this - mostly in IT, but people like builders and plumbers do this as well. Unfortunately, I don't think it's an option for me - I doubt the University would be willing to go along with this.

But even taking this sort of scheme into account (and assuming one manages to avoid being clobbered by IR35 and the like) it's still true that big corporations and very rich people have far more such opportunities than the rest of us.

[houstonjames.livejournal.com]

"I can't register myself as a pigeonhole in Luxembourg to almost wipe out my tax bill, but Vodafone can."

In fact, Vodafone pay a great deal of tax: they turn over one-sixth of their sales revenue to HMRC in VAT, another 20+% of their staff salaries in income tax, a further 14% in National Insurance, billions of pounds more in spectrum licensing fees, a Climate Change Levy on all their energy usage, commercial rates on all their premises (retail stores and all their network sites)... Yes, they did pay the UK government little or no tax on the transfer of assets between Vodafone Germany and Vodafone Luxemburg (though quite why such a transaction would be subject to any UK tax in the first place is debatable!) For all the complaints from the likes of UKUncut, Vodafone already contribute a great deal more to the state's coffers than any of the Uncut people are ever likely to have paid in their lives.

Personally, I feel that it is wrong for our "education, prosperity and health" to rely on the government hiding part of the cost in our mobile phone bills, another part in the bill every time we fuel up a car ... the failure of that cost-hiding mechanism may be inconvenient, but better to find a more honest and direct way to fund them than to attempt to resurrect the cost-hiding.

[tobyaw]

If we want to avoid the government hiding its costs, perhaps we ought to get rid of PAYE and have everyone pay their own money to the tax man each month. And maybe list all prices ex-VAT, and make people pay the tax separately.

[houstonjames.livejournal.com]

Almost exactly how it works in the US: shop price tags are the price you actually pay the shop, excluding the amount you pay the government for being allowed to shop there, and you have to do an annual tax return, calculating - and showing you - how much tax you're actually paying. (Some does get deducted each month, to spread the load - but unlike PAYE, *you* control the amount deducted, then pay or receive the difference at the end of the tax year.)

Slightly less convenient, of course, but it does make tax much more transparent to those paying it - in the long run, a win for democracy I think.