Imagine if the government’s war on the poor were replicated with a similar ferocity on the rich – it’d be immediately denounced as the ‘politics of envy’. The Public Accounts Committee estimates corporate tax avoidance costs the exchequer £8.5bn a year, and the National Audit Office found that 30% of Britain’s 700 biggest companies paid no corporation tax at all (source). This is all prompted by the Guardian’s current investigation, which is looking at tax avoidance by big business over the next two weeks. It’s strange that cracking down on such obviously unjust corporate malfeasance is taboo for New Labour, while kicking the most vulnerable in society further into the gutter is acceptable. But then maybe I’m being too harsh. According to Derek Draper of LabourList, it’s not Labour’s fault – after all, they’ve been in power for less than twelve years – no, it’s all because of the TaxPayer’s Alliance (via the excellent Chicken Yoghurt).
Now it’s pretty rare that I find myself on the side of the TaxPayer’s Alliance, but this bit of their response is just such an occasion: Mark Wallace points out that there’s no way you can physically force companies to register in one jurisdiction rather than another – which is of course true. It would be nice if companies abided by the spirit of the law, but that’s pretty unrealistic. Companies, like individuals, often take advantage when doors are left open. Unlike Wallace, I don’t think the answer is to lower corporate tax rates, and I don’t think this would help anyway as there would always be a jurisdiction with a lower tax rate. Incidentally, this is separate from an argument about whether lowering corporate tax rates would result in higher receipts – the point is, the rate has been decided on and companies are using not exactly kosher means to circumvent this decision.
So how do you get companies to pay their fair share? Would it require an international agreement with almost every country or is there a way countries can act unilaterally (or, multilaterally but still without unanimous or even majority agreement)?
Update: this has been edited a bit
February 4th, 2009 at 19:31
I think you’ve hit on the problem at the end – many of the companies had their registration in Switzeland, Tax-haven islands, its very difficult to get round this without wider agreements, and a number of countries (Switzerland for sure) but also some developing countries, have a vested interest in creating tax havens for some it’s vital to job creation.