January 3, 2013, 12:49am
As the public becomes increasingly aware of how much tax companies are paying, chief executives should be asking: “What impact will our tax affairs have on our brand?” Sir Martin Sorrell is right to acknowledge that Starbucks’s decision to pay £20m extra in corporation tax was motivated by the idea that “doing good is good business”. But this highlights a broader issue: the UK has a tax gap of over £32bn a year – the equivalent of seven government departments’ annual budgets. Taxation must be simplified in response to increasing international and online business, and HMRC must be properly resourced to tackle avoidance. Britain must be fair to all businesses, including small firms. The current position distorts competition and ultimately leaves individual taxpayers to make up the shortfall.
Steve Barclay is a Conservative MP for North East Cambridgeshire and a member of the Public Accounts Committee.
I disagree with Sir Martin Sorrell’s claim, which is based on the perception that capital can locate where it wishes and can move at will. Three things perpetuate this myth. The first is that tax havens (and low-tax jurisdictions), whose opacity allows much of the supposed mobility of capital, obscure the reality that often nothing moves bar the ink on a contract. The second is a financial sector that promotes and services this myth. The third is that tax authorities are unwilling – as the Public Accounts Committee has suggested – to tackle tax avoidance. Multinational companies cannot make money without engaging customers, staff, and by employing assets. Paying tax in the right place at the right time is not a moral obligation. The right place is where the customers, staff and assets are. The right time is when the law of the land dictates. It is not “a matter of judgment”; it is a legal obligation.
Richard Murphy is director of Tax Research UK.