Tax avoidance and a tax system biased towards big business and the wealthy is undermining faith in capitalism. - Credit: Stefan Rousseau/PA Archive/PA Images
When it comes to tax, there’s one set of rules for big business and the rich, and another for everyone else. Remember the tax deal with Google, made by George Osborne, then Britain’s Chancellor, who hailed it a “major success”? The $800 billion internet giant had generously agreed to pay £130 million to Her Majesty’s Revenue and Customs. Amounting to an effective tax rate of 3%, that sum, agreed in 2016, was to cover tax it owed since 2011.
How many small businesses would get away with that?
A 2016 report by Oxfam America suggested tax avoidance by multinationals was costing the US around $111 billion a year. In an astonishing finding, they reported that between 2008 and 2014, the “50 largest US companies collectively received $27 in federal loans, loan guarantees and bailouts for every $1 they paid in federal taxes”.1
More recently, the Paradise Papers, published late last year, provided the latest in a long list of revelations about morally-compromised corporate behaviour: Apple sent its lawyers out to shop for offshore tax havens; mining multinational Glencore has a staggering 107 offshore companies; and the intellectual property of sporting Goliath Nike is nationless.
It’s not only corporates. The Paradise Papers, like the Panama Papers before them, also exposed the super-rich individuals using offshore accounts. What do cash-rich companies have in common with cash-rich individuals? Expensive accountants – dedicated to finding the loopholes and schemes that allow those with the broadest shoulders to bear the lightest (tax) load. Ordinary families, however, like small businesses, can’t afford to avail themselves of such services.
“But they would if they could”, will be the retort of some, followed by: “Anyway, it’s all perfectly legal.” And I think there’s some truth in that. No one likes paying tax – just look at the tax gap. HM Revenue and Customs, the UK tax authority, estimates it to be £34 billion – which is driven by behaviours ranging from criminality, through “failure to take reasonable care”, to avoidance. And SMEs are bigger culprits than big business, accounting for 46% of the tax gap compared to 28% for larger companies.2
But it is the cosy, back-scratching relationship between money and politics that distinguishes the rich from the rest. Sweetheart deals are for the big boys that governments court… such as Google.
The recent Republican tax reforms prove the point. American corporations are avoiding paying tax by offshoring their profits, so instead of dealing with that, Congress pass a bill that, as Vox so aptly put it, provides “a giant permission slip for shipping profits overseas”.3
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