There is nothing more ridiculous than Margaret Hodge railing against the likes of Google and Amazon. Perfectly ridiculous. Her party had over a decade to change the tax laws as they pleased and to change the rules by which HMRC operate.
It is just stupid to hector the companies. Really stupid.
For starters, this debate gets framed in the wrong terms. The message gets through that companies x,y and z pay no tax in this country. That is how Jo Bloggs gets the message. Of course, it is utter poppycock. They pay national insurance for their employees, part of their employees’ salaries go straight to HMRC via PAYE, they pay business rates and they pay their employees salaries and their UK suppliers’ invoices, all of which whirls round the economy creating more revenue for HMRC.
They don’t pay a great deal of corporation tax on their profits. That is what the issue is. But they are doing nothing illegal and it is the basic duty of a company to maximise profits for its shareholders through all legal means. We live in a global cyber economy with international rules of taxation laid down in the 1920s.
Parliament is at liberty to change the tax laws and the government is at liberty to direct HMRC to tighten its rules. Governments across the world are at liberty to revise those 1920s rules. It’s no good berating companies. Get on and change the laws and the rules, politicians!
Professor Prem Sikka of the University of Essex is calling for reform of the international tax laws. He has proposed:
…a redesign of the international system for taxing corporations. The proposed system would tax companies (such as Microsoft, Google, Apple, Amazon) as single economic units. In other words, each subsidiary would not be treated as a separate taxable unit, something that encourages companies to shift profits through spurious techniques.
The profit of each company would then be allocated to each country based on the variables that generate profits. These are likely to be sales, assets and the number of employees. Since companies in tax havens have very few sales, employees or assets, they would not be able to book profits there. Thus companies would not be able to avoid taxes.