December 2012: Tax Avoidance

While out doing some Christmas shopping in Milngavie over the weekend, I was intrigued by the following sign:

It got me wondering about how many people were changing their buying behaviour as a result of the current controversy over tax avoidance by some large multinational companies.

The figures have been well quoted: Starbucks, for example, made around £400 million in sales in the past year but, because of various legal strategies to make payments to other Starbucks subsidiaries in other parts of the world, the company declared losses of £33 million and so was liable for no corporation tax. It’s main rival in the UK, Costa, last year paid around £15 million in tax – 31% of its profits.

Amazon employs around 15,000 people in the UK and had sales of around £3.5 billion in 2011. However, because it reports its sales through a base in Luxembourg, the company pays only around 12% on profits. This is less than half of the average corporate income tax rates in the markets it operates in in Europe.

So, I’m keen to know:

Are you withholding your custom from companies who have been reported as pursuing aggressive tax avoidance strategies this festive season?

As ever, I’ve collated a few articles to bring, I hope, some balance. Here are some articles putting the case forward for a boycott:

http://www.dailymail.co.uk/debate/article-2242008/32-billion-reasons-nail-tax-dodgers-Google-Amazon-Starbucks.html
http://www.guardian.co.uk/commentisfree/2012/dec/03/firms-fair-share-tax-war?INTCMP=SRCH
http://www.guardian.co.uk/commentisfree/2012/oct/23/starbucks-tax-avoidance-no-instant-gratification

The following articles argue that such companies are doing nothing wrong:

http://bit.ly/UUDyXn  Guardian
http://bit.ly/Y7B2dR  Telegraph
http://ind.pn/Y7B05U Independent

If you will be avoiding such companies, send an email to yes@joswinson.org.uk If not, send it to no@joswinson.org.uk (N.B: Please do not use any other e-mail address to reply to this question)

I will be fascinated to know what residents of East Dunbartonshire will be doing, and will let you know the results.

I’d also like to take this opportunity to wish you a Merry Christmas and a Happy New Year!

Results

Tax avoidance – your thoughts!

Firstly, thank you to everyone who took the time to respond to my most recent e-consultation – I know that it was a particularly busy time for everyone!

I was keen to know whether, in light of increased coverage of the issue, residents would be withholding their custom from companies who have been reported as pursuing aggressive tax avoidance strategies over the festive season.

How you voted

323 of you voted, and the results were as follows:

67%  of you planned to boycott companies who did not pay full tax

33%  did not plan to.

It was apparent, in both the yes and the no votes, that most people felt extremely strongly that the use of tax avoidance schemes was morally wrong. However, what else I picked up was that, even amongst those who felt most strongly about it, many of these companies are so ingrained into our everyday lives that it is difficult to not use them. Although there are plenty of rival coffee chains – not to mention some excellent independent coffee stores – people felt that Google and Amazon are difficult to avoid.

One respondent noted that, “Although I would like to say YES, I will continue to use Amazon as their prices are low”, and a number of other people explained that no bookshops they had been to have the range of books that Amazon do – particularly the case for those with specialist interests.

Government action on tax avoidance

Of course, a number of you – quite rightly – pointed out that the Government should be addressing this problem, and I do very much agree. It is simply not fair that at a time when most firms are making a contribution to balancing the nation’s books, that a small minority of companies are escaping their responsibility.

The Coalition Government is investing more than £1 billion to help HMRC tackle tax avoidance and evasion, which will bring in £9 billion more a year than Labour managed in Government. The 2012 Autumn Statement announced a new £150 million investment in HMRC which will help speed up work to detect and challenge transfer pricing arrangements, similar to those used by Starbucks.

The Lib Dems have championed a General Anti-Abuse Rule (GAAR) and, as a result,  the Coalition Government will introduce one in 2013 which will block artificial and abusive arrangements contrived to avoid corporation tax. It was announced in the recent Budget that tax disclosure deals made with Jersey, Guernsey and the Isle of Man had brought in £1 billion.

Many of you, in your replies, noted a cynicism at the frequently used argument that companies would simply ‘do their business elsewhere’ if the Government cracked down on this.  To resolve this, tackling international tax avoidance requires international cooperation. The Government are leading negotiations and offering funding to help the G20 and the OECD deal with the problems associated with transfer pricing. We will make it a top priority when we chair the G8 in 2013.

Following this e-consultation, I will to write to George Osborne to highlight to him how strongly my constituents feel on this matter – we cannot grow complacent on it.

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