Tuesday, 25 June 2013

The Corporate Welfare State


The BBC reports that Starbucks has voluntarily agreed to pay £10 million in tax this year, and again next, in a change of heart on recent behaviour from the multi-national, multi-million pounds making business in the UK. Clearly, media exposure leading to a fear of putting off customers has played the major part in the company’s decision here, but there is a much wider perspective to this story.
The tax authorities make ‘sweet heart’ deals with the large corporations, grateful for any crumbs of tax revenue that they can get from these companies, whilst allowing others to pay nothing at all, through clever accountancy schemes which offshore the profits made in the UK market place. But who can blame the civil servants when the politicians from the establishment parties uniformly react to this type of behaviour in these two ways?

First is to say it’s all perfectly legal (although these tax schemes are so complicated I don’t think they really know whether some are legal or are not). Second, is to pronounce pompously that it’s just globalisation, you can’t do anything about it, we have got to attract private investment at all costs, be competitive, jobs and so on, blah, blah, blah.  

This reasoning rarely gets challenged in the mainstream media even though the unfairness of corporations getting all the benefits to run their businesses that tax payers provide; the courts, police, educated employees etc etc, without contributing to the costs of providing them is the real issue here. And is it so impossible to do anything about it?

Let’s take the legal excuse first. As Google’s executive chairman, Eric Schmidt said recently, his company obeys the tax laws, if the government wants to change these laws they should get on with it. Which is a fair point generally, but it doesn’t stop Google finding ways around these laws, and given its global presence, it is a particularly hard company to tie down to any one particular country, which they of course exploit like hell.

But it does also beg the question, why doesn’t the government change the law? This is when we get into the second excuse, of it being a pointless and undesirable course of action, so powerless that national governments have become that they must ‘attract’ business by allowing them a free tax ride. Admittedly, companies like Google and Amazon (to a lesser extent), can be hard to pin down, but surely it is not beyond the wit of any government to design a system which captures at least some of the tax due on UK transactions? After all, we know the government has been monitoring everyone’s internet habits, don’t we?

Starbucks is an altogether easier proposition when they have a physical presence on almost every high street in the country. All profits on selling coffee and cakes etc in the UK should be taxed and they should be forced by law to declare them this way. If they don’t like it, then they can close down, and it won’t bring the UK economy to standstill. Indeed, independent cafes will fill the void if there is a market for this type of business, and let’s not forget that Starbucks have an unfair competitive advantage over these cafes at the moment, who do pay UK tax.

It seems as though paying tax is only for the little people, and this extends to personal taxation too, where if you are rich you pay next to nothing, but if you are just an ordinary person, you get clobbered.
What mugs we all are!

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