23rd December 2023
Pay taxes
Paying taxes is an essential part of maintaining safe and sustainable societies. Taxation pays for the public services which benefit the whole of society. Avoiding paying tax is destructive of societies and therefore of individual lives. Avoiding tax – whether as an individual or as a company – is wrong but is is the tax avoidance by large multinational companies that probably causes the most harm.
Ethical Consumer writes “Tax avoidance is shifting profits so you have to pay a lower rate of taxes. It involves using loop holes in tax systems so that you can reduce rates in a way that law makers never intended but which is entirely legal. Often, this means registering sales that took place in one country with a company based in another, where tax-rates are lower. For example, in 2017 Amazon registered almost 75% of its UK sales through a Luxembourg based subsidiary. Tax evasion is hiding profits or fiddling accounts in order to avoid taxes, and is definitely illegal. In 2017, it was estimated that globally tax avoidance was losing nations over $500 billion a year.
“In the UK, tax avoidance is channelling much needed money away from the NHS, housing and other vital forms of public infrastructure. But the cost of tax avoidance is even greater in poor nations. In countries where wages – and accordingly individual income taxes – are low, a far higher proportion of government revenue comes from corporate taxation. This can be as much as 16%, compared to 8% in richer countries.
“If looked at in proportion to GDP, the countries that lose the most from tax shifting are consistently the poorest. In Chad, during 2017, the estimated losses to profit shifting were larger than all of the (non-resource) taxes collected in the country that year.” (1)
In a report published in 2010 Christian Aid estimated “that just two forms of tax dodging, transfer mispricing and false invoicing, cost developing countries US$160 billion every year…roughly one and half times the world’s annual aid budget.” (2)
Not paying corporate taxes also affects the UK’s tax revenue. Corporate Tax News reported this summer that “Amazon’s main UK division, Amazon UK Services, has once again avoided paying corporation tax, thanks to tax credits received for its investments in infrastructure. While the company’s pretax profits and sales have increased, there are concerns about the lack of transparency around its total profits and tax contributions. Critics argue that Amazon’s ability to avoid taxes gives the company an unfair advantage over local businesses. The controversy has highlighted the need for more transparency and fair taxation practices from multinational companies operating in the UK.” And “Amazon invested £12 billion in the UK in 2021. This included £1.6 billion spent on infrastructure, such as more robotics for warehouses and a software development center in Swansea. The company’s sales across its entire UK network also increased by £1 billion, making it larger than Asda, the UK’s third-largest supermarket. Amazon claims that it paid a total of £781 million in taxes in the UK, including business rates, employer’s national insurance contributions, and corporation tax. However, critics argue that this figure does not provide a clear picture of Amazon’s tax contributions, especially when considering the tax credits received in the UK and other European countries.” (3)
Turn this round. Just think how more money could be invested in public services, in tackling the climate crisis, and in addressing global injustices, if all the taxes that should be paid, were paid!
The UN is one of the forums where global tax legislation could be reformed. “Developing nations could have a greater say over global tax rules after winning a diplomatic tussle at the United Nations in New York on Wednesday. A new resolution, agreed by UN members, gives the body a mandate to kickstart intergovernmental talks on tax. The policy area has long been dominated by the Paris-headquartered Organisation for Economic Co-operation and Development (OECD), a body largely formed of wealthy countries including the US, UK and Japan. The resolution, presented by the African Group, ultimately paves the way for a UN convention on taxation and a new global tax body, according to campaigners…The resolution was fiercely opposed by some western diplomats behind the scenes in New York, officials on both sides of the debate around the UN’s role on tax affairs said. Some rich nations, including the US, had fought against the resolution in an attempt to maintain a tighter grip on global tax rules. Campaigners want international agreement on measures such as a floor for corporate tax rates, so countries cannot undercut one another, and forcing multinationals to report how much tax they pay in each country.” (4) One of the key campaign groups is the Tax Justice Network – https://taxjustice.net/
In the UK the Fair Tax Foundation campaigns on this issue. “Tax contributions are a key part of the positive social and economic impact made by business – helping the communities in which they operate to deliver valuable public services and to build the infrastructure that allows business to thrive. Via our Fair Tax Mark accreditation scheme, we seek to encourage and recognise businesses that pay the right amount of corporate income tax at the right time and in the right place. We believe that businesses that pay their taxes willingly, fairly and transparently should be celebrated and rewarded.” (4)
As “Fair Tax is at the heart of a fair society, a strong economy and a functioning democracy.” The Fair Tax Foundation also runs a pledge scheme where by individuals and small traders – http://fairtaxpledge.uk/
(2) http://www.financialtransparency.org/wp-content/uploads/2015/04/ChristianAidTaxReport.pdf
(3) https://tax-planning.org.uk/amazon-uk-services-pays-no-coporation-tax-again/
(5) https://fairtaxmark.net/aboutus/
The Green Tau 