Thursday, 10 January 2013

Why Big Business Is Right To Avoid The Tax Man


By Amanda Vigar, Managing Partner, V&A Bell Brown LLP.

The big brands, eBay, Google and Apple, are notorious tax avoiders who should be hauled over the coals by HMRC – right? Starbucks, for example, has been forced to pay £20m to the tax man over the next two years due to alleged tax avoidance. Should other big multi-national companies now be hounded until they pay up?

Well, that’s a big resounding “no” from me! With an international economy, people are able to move their money across tax boundaries quite freely and legally. And they are allowed to take advantage of the system they operate in. Any curb on this free movement may well deter major international companies from trading in the UK.  That said, there need to be checks and balances in place to prevent abuse.  Hence, the civilised world has introduced rules on transfer pricing to ensure that profits aren’t moved around just to save tax.  There has to be a commercial reason for it. While I’m certainly not arguing for an end to taxation, we have to face the fact that high levels of taxation will prevent some kinds of economic activity from happening. 

We also have to look wider than just what corporation tax they pay.  There’s VAT, National Insurance, landfill tax and customs duties, to name but a few.  We also have to remember that the average Starbucks on the street corner is a franchise – i.e. not owned by the Starbucks ogres, but by small businesses that  are paying corporation tax – assuming they make profits.  

So, rather than whining that the big corporations are getting away with murder by not paying ‘enough tax’ into UK coffers, why don’t we instead breathe a sigh of relief that these big, hugely successful, companies are operating here at all? They invest in our country as they do business here, recruit from our workforce and sell goods and services to us that we actually want. 

So, what’s the point of casting them as the bad guys? Well, there’s no point at all. Where Starbucks leads, by making a token (to them!) £20m tax payment – really, a brilliantly timed PR exercise - I doubt that many other companies will follow. That’s good news for our economy, as those businesses are more likely to stick with us and invest in UK PLC.

Amanda Vigar is Managing Partner at V&A Bell Brown LLP, a Holmfirth-based firm of accountants specialising in all aspects of accountancy and tax affairs on behalf of small and medium sized businesses. The company is part of the V&A Group which also includes V&A Vigar & Co LLP and V&A Corporate Finance. The V&A Group also gets involved in turning around struggling firms and advising on sales.

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