As time goes by this quote from Peter Mandelson becomes more and more pernicious.
“(I’m) intensely relaxed about people getting filthy rich as long as they pay their taxes”
Paying tax is a devolution of responsibility. It has nothing to do with morality, beyond the basic responsibility of following the law. None of us has much say in how the money Government takes from us is spent. If you read between the lines Mandelson was telling the “filthy rich” that all they needed to do was pay tax. They did not need to worry about any matters beyond making money and funding the state. The catch is that the “filthy rich” can afford to minimize their tax. Starbucks used their size to create the most tax efficient structure, and if I was a shareholder I would expect nothing less.
What the tax exposé highlighted was that beyond providing jobs and medium standard coffee Starbucks has little interest in the UK. This fact has now become part of the consumer decision making process. Consumers may decide such an attitude is fine or that they would rather buy an equivalent product, which costs the same, knowing that some of their money comes back to them by funding the NHS (not MPs expenses or drone strikes of course). I suspect that one of the reasons Amazon has not felt the need to open their cheque book is because their offering is such good value. In a sense we all benefit from their tax efficiency by paying cheaper prices and this doesn’t harm the economy because we buy more.
Starbucks giving more money to the tax man does not deal with the fundamental problem.
Rather than giving the tax man an extra £20million Starbucks should of either:
a) Not apologize for selling coffee and making profit within the law.
b) Move some of their off-shore activity on-shore, creating more jobs and paying more tax.
c) Invested the money in charities of their (or their customers) choice.
Rather than criticising companies for doing what is legal politicians must tackle the overly complicated tax code. (The Treasury might not be the best place to do this as they seem to love the “smoke and mirrors” the complicated tax code allows them to use.)
Blog on Starbucks, tax, community and business morality. Tax code needs sorting but Treasury addicted to complications http://t.co/BqrUOAvR
New blogpost: Starbucks, tax, community and business morality http://t.co/HR3EKWFh
RT @PlatformTen: New blogpost: Starbucks, tax, community and business morality http://t.co/HR3EKWFh
The problem does not lie with Starbucks or any other company. It lies with the tax code created by successive Governments and their inability to cope with multinational investors and corporate entities.
The answer is to return to first principles, who should be taxed and on what?
Customers ultimately pay all costs of a business, including taxes, for without a sale, there cannot be a profit. We have sales taxes (VAT, Fuel, Alcohol and Tobacco duties) to capture some revenue at the point of sale and to try and influence us as to what we spend our money on.
From what is left, businesses pay their running costs including property taxes like Business Rates and other charges like Insurance Premium Tax. If they run vehicles, they will also pay Fuel Duty. If they charge VAT, they will pay any surplus collected from sales over that paid out by them on supplies bought in, to the Government. They also pay all National Insurance and Income Tax due on their staffs wages.
If at the end of that, there is anything left, that’s gross profit and that is what Corporation Tax is applied to before the net profit is either retained for future investment, or paid out to the owners of the business.
So why tax the corporate entity on the profits at all? If they distribute dividend to shareholders, they will pay tax at that point. If they re-invest the money, that will lead to higher profits later (and some tax from the spending itself) so there ought to be no real loss.
Also, prices may fall, because investors want a level of return after tax. If they are not paying tax on profits in the company, they can take a lower figure, so don’t need to charge as much. Or they might pay their staff a bit more.
Finally, if we have no Corporation Tax, then how many businesses would come and base themselves here instead of in tax havens, thus boosting our tax receipts from Income Tax levied on dividends from their investments overseas?
Scrap Corporation Tax. It’ll make the Government loads of money!
Interesting idea. Are there any examples to back this up? The whole of the tax system needs to be looked at, and simplified. Would it be good to exchange standard taxes with consumption taxes, such as VAT and petrol tax?
Why does Starbucks feel it needs to pay more tax when Amazon doesn’t? Should there be a shift towards consumtion taxes? http://t.co/BqrUOAvR
Good stuff from @betapolitics http://t.co/UqZRwd23 Govt shouldn’t pontificate but simplify the law if it doesn’t like our legal tax system
RT @PlatformTen: Good stuff from @betapolitics http://t.co/UqZRwd23 Govt shouldn’t pontificate but simplify the law if it doesn’t like our legal tax system