Tuesday, 4 December 2012

The Starbucks Tax Scandal

Poor Starbucks. They seem to have been informally voted the leading corporate tax dodger in the UK by that independent, impartial and totally just tribunal: the press. Admittedly other US based corporations such as Amazon, Google and Apple have been held up to opprobrium too for contriving to shift taxable profits out of the UK, but Starbucks seems to have been awarded the crown.

Now there is a good point of public interest in this story. Clearly it is a sound argument that, if UK companies are unable to shift their taxable profits from the UK whilst foreign competitors can, then they will be at an economic disadvantage. Clearly, also, it would be madness for UK public policy to allow this to continue. But where does responsibility lie? When I started writing I intended to observe that there is an old maxim that nobody is obliged to arrange their affairs in a way that renders them liable to tax. I intended to qualify that by observing that people may not, however, arrange their fairs to flout the law. But that principle has  been taken further and legislation was introduced years ago in the UK to make arrangements whose sole purpose is to avoid tax unlawful. In more recent times a new constraint has been developed, that of public opinion. As ideas of corporate (and personal) social responsibility have developed, so pressures have grown on those who seek to avoid paying tax.

 I do wonder whether this is not, at least a bit, unfair. Is this not a scandal relating to the ineptitude of the tax authorities as much as anything else? Why do they allow companies to charge UK businesses fees from corporations they own abroad that drain away all their taxable profits? It is, after all, pretty clear that the businesses that stand stark naked (of profit) before them are, in fact, successful businesses that are playing the system. If they are allowed to get away with it then they will obviously all pile in. Whilst it is useful that journalists have revealed this scandal, the most appropriate outcome would be if it embarrassed the tax authorities into taking actions they should have taken years ago to limit these fees from connected companies that are allowable deductions against tax bills!

I don't say that the corporations or the individuals who have been a previous target of investigative journalism are simply freed of responsibility and can place all blame on governments that let them get away with it. It may be stretching a simile, but that is rather like a thief blaming his misdeeds on the householder who leaves a window open. There is a responsibility to be a good citizen and the public may take revenge if you are not.

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