Whatever angle you come at it from, the state at national
level, as well as key global agencies, exist to make life easier for
corporations like Amazon and Google when it comes to taxation.
States everywhere may be short of revenue as the worldwide
recession continues to takes it toll. But instead of demanding more from the
corporations, the very opposite is happening.
The ConDems are telling business they can pay less. In the March budget, they cut
corporation tax for the third time since 2010. It’s now fallen to 24% and will
be reduced to just 21% next year. The cut will cost the Treasury about £400
million in 2015-16.
Where’s this shortfall to come from? Chancellor George
Osborne is demanding £11 billion more in spending cuts in 2015-16, a level which
has even frightened most of the cabinet into passive resistance. Front-line
services like fire face draconian
cuts and mass redundancies following today’s announcement by the
government’s former chief fire and rescue officer.
Of course, global corporations do everything they can to
avoid paying tax on their operations in Britain . Instead, companies like
Amazon are registered in lower-tax territories like Luxembourg . They claim that
although they employ thousands of workers in Britain , they are not actually
based here!
MPs on the public accounts committee can rant and rage all
they want – as they did yesterday when they had Google up before them – but the
fact is that the UK
tax authorities are pretty powerless to do anything about it. Moral pressure
cuts no ice with the Googles of this world.
Take the example of Amazon. A Reuters
investigation shows that over the past six years, Amazon has paid just £5.9
million in tax on over $23 billion of sales to British customers. Yet Amazon claims it runs a single European
business out of Luxembourg .
Reuters says, however, has gathered evidence which shows
that Amazon’s UK
operations have a high degree of autonomy, and while the corporation likes to
identity itself as a virtual company, this is far from the case. Microsoft and
Expedia are other firms that claim a similar position in order to minimise tax
bills.
The investigation explains: “The practice is based on
international tax rules which allow companies to conduct ‘preparatory and
auxiliary’ activities in a country without creating a taxable presence there. The
UK tax authority, Her
Majesty's Revenue and Customs (HMRC), has never sought to define in court the
limits of what an internet company can do in Britain before it is deemed to have
a taxable presence.”
However, does such a limit actually exist? Not according to Jacques
Sasseville, head of the tax treaty unit at the Organisation for Economic
Co-operation and Development (OECD), which advises rich nations on tax policy. He
said where sales were conducted online, it was almost “impossible to prove a
taxable presence in a jurisdiction, irrespective of how much activity is
conducted in that country.”
So with the tax authorities pretty much powerless in the
face of transnational, internet-based operations, Osborne is playing along. The
cut in corporation tax to 21% puts the rate on a par with Luxembourg ’s, although well above Ireland ’s
12.5%.
Corporations exist solely to maximise profits, minimise
costs (including tax) and increase the market value of traded shares. This is a
legal obligation, enforced by the same capitalist state that is at their beck
and call. Herein lies the problem.
The state and its agencies through essentially political
actions sustain the economic system. They are a perfect example of the division
of labour first noted by the economist Adam Smith as capitalism established
itself in Britain .
That’s why we should never look to the present state to sort out the
corporations. That’s not the job of what is now a market state.
Paul Feldman
Communications editor
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