Sunday, 18 November 2012

Tax dodgers are poverty creators

Let me make clear from the start that by 'tax dodgers' I mean tax avoiders and well as tax evaders. The former is not unlawful and the latter is. But the former ought to be, and this post is about why it ought to be. Recently, companies such as Amazon, Starbucks and Google have been taken to task for tax avoidance. All three companies were hauled up before the Public Accounts Committee, and their responses to questions about tax avoidance were woefully inadequate - see this excellent account of the proceedings by Richard Murphy in which he said:
"For Amazon things were much worse. Its rep could not justify how an order made in the UK for a product in a UK warehouse, shipped by UK staff through the UK post and with a bill enclosed printed in this country could somehow have anything to do with Luxembourg. Despite this he had the gall to claim tax must be paid where the economic substance of the deal was – even though Amazon does nothing of the sort."
Tax avoidance means that this country loses money which we badly need to pay for infrastructure, education, health - and, as you know, the list goes on. But by dodging tax, these companies are not only shrinking the UK tax base, and therefore dumping more of the tax burden onto individual taxpayers, they are also killing off British retailers which are based here and pay their full  taxes. This isn't creating jobs, its costing jobs and the profits made in the UK are siphoned off abroad. Corporate tax avoidance is nothing more than a race to the bottom where corporations swan around the globe looking for the cheapest tax rates and playing one country off against another in the process. Its not much more than a form of robbery and we are the ones who are being robbed.

Stupidly, politicians in different countries are playing the corporations' game as they compete with each other to get these tax dodgers based in their country. What they should be doing is deals with other countries to set a standard corporate tax rate so that the corporations cannot gain advantage. It looks at that that British industry is beginning to wake up to this scam and beginning to fight back. Polly Toynbee reported in the Guardian:
"John Lewis's managing director is calling on the Treasury to demand tax is paid in the country where profits are made: Amazon made £3.3bn in sales but paid zero UK corporation tax on any of the profits of that income. "They will out-invest and ultimately out-trade us," tax-paying John Lewis protests, unable to compete fairly with tax-shirkers."
Th reality of 21st century capitalism is that it is no longer productive. It doesn't create as much real wealth any more. Profits from companies like Amazon aren't re-invested in useful economic activity. They are spent by investors on, yachts, financial schemes and property booms. So huge has non-productive financial capitalism become globally that it completely dwarfs the productive economy. Far from being wealth creators, these companies will increase poverty in the countries they are shafting, like the UK, and we will be the losers. Our spineless politicians need to get a grip, and fast. It ought not the be beyond the wit of the EU countries to agree a corporate tax rate of £25% and to clear out the tax havens which are causing so much damage to our economy. Do it, and do it soon! Meantime, if you want to get involved join the UK Uncut demo on 8th December!

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