Tweeting from my iPad that multinational companies should pay their taxes in full seemed a little hypocritical, so I thought I’d write about it (using my PC, powered by Microsoft software produced by a company that has had its fair share of run-ins over anti-trust laws).
What a murky world we live in!
At its most simple, it is obvious that all companies, as well as people, should pay all the tax they owe on their earnings. Furthermore, companies, like individuals, should not engage in aggressive ways of avoiding their full tax liability.
So, I’m quite happy to say that it’s outrageous that Apple, Google, Amazon, Starbucks, Vodafone mobile services, Mark and Spencer retailer and many other companies use transfer pricing to locate business that obviously occurs in one territory in another one that has a lower prevailing tax rate.
If I buy a book on Amazon’s United Kingdom website that is dispatched to me from Amazon’s U.K. warehouse and handled by Amazon’s U.K.-based employees, I expect Amazon to pay any tax on the profits from that sale to the U.K. tax authorities.
In exactly the same way, I assume that Waterstones bookstore will pay U.K. corporation tax on profits from the sale of a book bought in its local Bromley store.
Of course, Amazon will still be able to charge lower prices because of the way it does business. So this is not a complaint about business styles, but about paying taxes.
The issue is complicated by inept governments competing with one another over relative tax rates and reliefs as well as by rules about how companies should be governed.
The competition between governments could be resolved through international agreements at the upcoming G8 and G20 summit meetings, which are overseen by the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).
At the very least, it seems to me, the case for a single European Union (EU) rate of corporation tax is pretty strong.
It is nonsense that Ireland has an effective corporation tax rate half that of the EU average, especially when it is the recipient of an EU-led bailout of its economy (partly caused by unwise banking, but not helped by a chronically low tax take).
Companies are obliged to maximize shareholder return. This means that they will try to minimize tax in every legitimate way possible.
So, again, action is needed at the OECD, G20 and G8 levels to change company law and to put other priorities on public companies, such as maximizing social return through paying appropriate taxes and investing in the social capital of communities in which they are based (so-called corporate social responsibility).
Let’s not pretend that either of these courses of action will be easy. Supporting the Tax Justice Network in its work of campaigning and lobbying seems essential as the wealth of research material it produces is invaluable in informed debate.
Protesting against those companies who appear not to be paying their full tax burden is also essential.
I haven’t been to Starbucks since it became clear that it treated tax as a matter of voluntary donation, and I have cut the amount I buy from Amazon. But I still listen to music on iTunes and I have an iPhone and iPad for communication.
Pressure could well pay dividends in the long-term as it shames companies into greater transparency and forces governments to act in the interests of all their citizens and not the elite 1 percent who call the shots; we do, after all, allegedly live in a democracy. But it will take time.
As with everything else, good things only come to those who wait.
Simon Jones is the pastor of Bromley Baptist Church in Bromley, a London suburb, in the United Kingdom. A version of this column first appeared on his blog, A Sideways Glance, and is used with permission.