Taxation Issue Resurfaces in UK as Politicians Make Cheap Political Capital
October 30, 2013 | 7:30 pm
The thorny issue of cross-border taxation of Amazon and similar ebook platforms in the UK has resurfaced – well, not so much resurfaced as been dragged out and paraded by The Bookseller like a suspect in a witch trial. The Bookseller quoted a report in the UK’s Daily Telegraph that in fact led on shortfalls on tax exchange deals with Switzerland, although Labour MP Margaret Hodge, chair of the Public Accounts Committee, took the opportunity in her grilling of representatives of HM Revenue & Customs (HMRC) to hit at tax legally avoided by Google, Amazon, Starbucks, and similar multinationals.
Hodge urged HMRC to “test the law” and “make a few show cases” of MNCs, despite HMRC representatives’ repeated insistence that they were legally collecting all they were legally entitled to collect. Quoted in The Guardian, Hodge also said that the UK’s tax gap: “does not include a lot of what ordinary punters in the street think you should be collecting, particularly in regard to the large corporations.”
For some perspective, we can turn to a report from international Big Four accountant EY (formerly Ernst & Young) entitled “Tax Transparency: Building Confidence”. “Confidence in the tax system is at the heart of an effective tax regime, and the recent furore over the taxation of multinational companies (MNCs) has challenged and, for some, overturned this,” declares the introduction to the report. “We believe there is a need to rebuild confidence in the tax system itself.” Bear in mind also that, as the report states, “the 2013 Lloyd’s Risk Index highlights taxation as the number one threat to global business.” And it adds, “we believe MNCs still need to consider seizing the initiative by increasing UK disclosure that builds confidence.” Note that the emphasis is on disclosure – not on actual payment.
“A key challenge from the perspective of the public is to ensure MNCs’ profits are allocated for tax purposes appropriately amongst the territories in which they operate,” right enough. But what if there is absolutely no legal impediment to a company selling goods in one country but booking those sales through an entity in another? This wouldn’t normally be an issue – except for a country beaten up by austerity policies and seeing its public services, not least libraries, gutted in the name of essential economies. And the political class whose bad policy judgments created this situation in the first place has every incentive to divert attention and shift the blame. And if the ordinary punter in the street has a problem with it, why not go talk to them about surrender of taxation powers to multinational entities like the European Union? If they won’t accept that, then forget any argument about fair shares.
In business and financial circles, capital is a sometimes scarce and treasured resource. But in political circles, you can make political capital at the cost of blowing smoke or a little hot air.