The real corporate tax scandal (Cambridge U.)

[eppur_se_muova]

Western governments have finally begun to pay close attention to tax avoidance by multinational corporations in rich countries. But where, Cambridge Judge Business School’s Professor Paul Tracey asks, does that leave poor countries, where the effect is arguably much more devastating?

In the midst of last month’s investigation by the UK Commons’ Public Accounts Committee into PriceWaterhouseCoopers, the committee chair Margaret Hodge concluded there was “promotion of tax avoidance on an industrial scale”. While the company was not accused of breaking any laws, and while PwC maintain that they operated within the laws of individual jurisdictions, there was a general acceptance that the complexities of the tax system leave it open to confusion to say the least.

What is certain is that Western governments have come out fighting on the subject. In the recently declared war on corporate tax evasion in Europe and North America, US technology companies have taken a particular beating. First President Obama called them “deserters” for changing the country in which they are officially domiciled in order to cut their tax bill. Then the European Commission decided to investigate Apple for its tax arrangements in Ireland, suggesting that these may constitute “illegal state aid”.

In the UK, as in other rich countries, politicians have come to realise that being seen to be tough on corporate tax avoidance is a vote winner. At last year’s Conservative Party conference in Birmingham, Chancellor George Osborne sharply criticised multinational technology companies for going to “extraordinary lengths” to avoid paying tax. Adopting an almost Churchillian tone, he went as far as to say: “If you [corporations] abuse our tax system, you abuse the trust of the British people.”

New legislation – dubbed the “Google Tax” – was promised to ensure that revenue earned in Britain would be subject to UK corporation tax rather than transferred abroad to be taxed at lower rates.
***
UK politicians are justifiably proud of becoming the first – and to date only – G8 country to meet the UN target of spending 0.7 per cent of Gross National Income on aid for international development. This was a decision that, interestingly, was not especially popular in political terms. These same politicians who had the courage to make this bold commitment on international aid now need to go further and bring UK multinationals to account by ensuring that they act as global citizens and pay their way in the world.
***
more: http://www.cam.ac.uk/research/discussion/the-real-corporate-tax-scandal (many links within the body of the article)