Corporate Tax Dodging: Visible Leadership needed

Am I the only one wondering about the ‘silly season’ flavour to the story about Starbucks & friends not paying their fair share of corporation tax? Obviously said corporations are not helping themselves by being paralysed by PR fear and looking greedy and foolish as a result… Here’s my take: Both the British Government and the British press need a distraction from their current woes. There is nothing better than a bit of US Big Bad Corporate bashing and the story pretty much writes itself. Cue every backwater MP jumping on the bandwagon to show that ‘we are all in this together’. There are many counter-arguments (see below), yet none of the representatives of Starbucks, Google or Amazon has been given the permission to use them. They essentially lack what we call Visible Leadership: the ability to think correctly and communicate clearly under pressure. The price they pay is accepting to be used as punch bags and seeing their sales suffer as a result. Here are some of the arguments that they could have used: 1) Tax planning is positively encouraged by every government. What is true for us when we shop for ISAs or invest in VCTs is equally true for companies 2) Many more British companies than US ones deprive the Exchequer from corporation tax through tax planning, something which is legal and sensible business practice 3) Transfer pricing (e.g. licensing) is a well documented area of international tax law. HMRC has the power to turn-down practices such as those discussed about Starbucks 4) The 3 companies under the microscope employ thousands of workers for whom they pay various levels of ‘payroll tax’, mainly National Insurance. They also collect billions in VAT and allow thousands to pay income tax. So a company can act ‘morally’ while planning its tax affairs efficiently 5) Amazon in particular is still making minuscule profits: 1.3% worldwide last year on revenue of $50bn. The latest quarterly results show a loss, so there is no money to ‘hide’ Our leaders behave as if they believe their own rhetoric about risk – nobody dares say anything by fear of offending somebody somewhere and risk a boycott or equivalent. Although we would agree with Warren Buffet’s quote that ‘one should not pick up a quarrel with people who purchase ink by the barrel’, NOT acting produces exactly the same effect. Time for a bit of Visible Leadership.