For a while now there has been a very long and heated debate about big multi-national companies avoiding tax. And that’s the problem with this whole debate, companies aren’t actually avoiding tax.
Yes, the amount of tax big companies are paying is VERY small in comparison to their earnings. But, in the defence of the big companies, they are sticking to the rules, all but cleverly, and paying what they should in accordance to the rules set in that particular country. And who can blame them?
Lets look at this on a smaller, more personal scale. How many people do you know who fiddle the books, maximise their receipts, boost expenses etc, all in order to pay as little tax as possible. It’s not against the rules, but it is playing the system without getting into trouble. No one likes paying tax, whether you’re a one person company or one of the biggest companies in the world. It’s how it has always been since tax was ever invented. So, after the MP’s expenses scandal it is a little cheap to see a Government committee grilling companies like Amazon and Google over what they pay in tax.
I think we are all agreed though that the amount the big companies pay in tax does not reflect their overall earnings, that is for sure. But the problem doesn’t lie with the companies themselves, they are never going to just volunteer extra tax cash. The problem lies in the current financial system. There are loopholes and gaps in the current structure which companies can exploit for their own gain. If the Government is as genuinely outraged as they say they are, they will close those loopholes and alter the system to make sure it is far tighter than it is now.
It’s not that simple though. With our economy being intertwined in a very complicated global economy with lots of laws and different agreements, the UK cannot simply just close it’s own loopholes as the big companies will just use the same ones in other countries and make their money flow through a different way. The only way big companies are going to be forced to pay the correct amount of tax is if the world joins together to create a new fiscal systems which doesn’t allow for such loopholes and clauses to exist. This would be a massive undertaking, a huge amount of work and something that most country’s just won’t have the appetite for right now. Plus, those principalities which are currently tax havens enjoy huge benefits from being such havens, so won’t be all that keen to tighten their own rules either.
I don’t agree with it, but it’s the way of the world right now and I cannot see it changing any time soon. But lets get this debate right from that start. It’s not tax avoidance, companies are paying tax, to the laws in each individual country, that cannot be denied. What this is, is a tax loophole debate and one which needs to see them shut.
It is tax avoidance, but not tax evasion…………
Just a pity we SMEs can’t take advantage of the same tax loopholes because we would if we could. We are always delighted when our accountant is able to defer or reduce a liability. We are one of the most heavily taxed countries in the world and I look forward to seeing what other taxes the government comes up with alongside the caravan tax or the pastie tax. I know! The Air tax…we will get taxed on how much air we breathe…you laugh but they tax us on water so logically its the next step!