Nothing is certain but death and taxes, so have said a number of famous authors including Benjamin Franklin and Daniel Defoe.
If you are fortunate enough to be working then it is very likely that you are a tax payer. Whilst it is easy to grumble about it, we do all benefit collectively from the services and infrastructure taxes fund.
Average wages in Britain as reported in the Guardian[i] are in the region of £460 per week = £23,920 pa. Assuming you are married and excluding other factors affecting your tax, your net pay would be around £372.17 per week. So total direct taxation (PAYE and NI) will soak up 19% of your income. If you are lucky enough to earn say £200,000, tax deductions would reduce your take-home pay by nearly 42%. Even lower paid workers on perhaps £16,000 would see almost 13% “disappear” to the taxman.
So it is a bit of a sickener to read about some multinationals engaging in tax avoidance. Earlier this year, The Mirror highlighted a number of global giants who have traded in the UK and pay little tax. Companies named included Amazon, Apple, E-bay, Facebook, Goggle and Starbucks. Industry analysts estimate true UK sales of the six at £14.2billion. Yet they paid £41.3million in UK corporation tax – just 0.3 per cent. [ii]
I have no doubt these companies will claim they generate employment and help raise indirect taxation (such as VAT). But this is a far cry in percentage terms compared to what the average Briton has deducted in direct taxation.
At a time when many organisations are engaging themselves and their staff in different activities, in the name of Corporate Social Responsibility (CSR) – i.e. putting something back into society – this goes against the grain. Avoiding paying tax is doing the exact opposite. It is draining huge resources which would have been utilised to improve services and infrastructure for whole communities.
For many years governments in various countries have either complained but done nothing or ignored the problem. At last G20 nations have agreed to co-operate to jointly tackle the issue of global tax avoidance by large multinationals, under the watchful eye of the Organisation for Economic Co-operation and Development (OECD). According to the Office for National Statistics, recently the OECD suggested “extremely conservative” estimates of lost tax income as a result of tax avoidance which cost the world’s economies $100bn-$240bn (£65bn – £160bn) per annum. [iii]
According to MSN Money, the European Commission is looking closely at the activities of Fiat and Starbucks initially which could result in these companies paying huge amounts of back tax. And larger players such as Apple and Amazon are on the radar.[iv]
Slowly but surely, the concept of tax avoidance and is becoming socially and morally unacceptable. And unless these companies change their strategies this will adversely affect the value of their brands. Already some consumers are voting with their feet and boycotting the services and products of such companies.
It’s time the multinationals who are avoiding their tax responsibilities heeded the words of Franklin and Defoe and realised that paying tax isn’t avoidable. Even Al Capone wasn’t able to dodge the tax man.