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Tax avoiding corporations

A new book is due to be published on the very topical issue of Corporate tax evasion. I suspect that we will be hearing quite a lot from the author Gabriel Zucman over coming weeks and here is a primer in a piece in yesterday’s Observer

It is understandable why this creates so much consternation. Seeing Starbucks and Amazon paying virtually no tax on profits when they are such a clear retail presence is galling. I also believe there is a significant aspect to this which I will come to later but for the moment, perhaps we should look at the other side of the coin and perhaps pick up on a few of Zucman’s arguments?

Firstly it has often been stated that individuals pay tax , corporations do not. I think that makes for a good starting point.

Zucman claims in his piece that taxes avoided by corporations have to be compensated by higher taxes for the “rest of us”. On the face of it that is unarguable but the fact is that ultimately we all pay the corporation tax. Imposition of high taxes across the board will lead to higher prices.

He further goes on to state, in a rather confused way, that this creates inequality. Im not quite sure what he is suggesting here but the idea that corporations are remote cash hoarding behemoths is frankly wrong. If they are listed, then they are owned by all manner of institutions, most of which are managing the savings and pensions of the average man in the street.

But the inequality is not between individuals. To my mind one of  the biggest issues is that Amazon can easily undercut smaller retailers who do not have the recourse to expensive tax accountants to minimise their liabilities. On the high street you can equate this to Starbucks and the local artisan coffee shop. A less than level playing field that  further exacerbates the trend towards our overly homogenised high streets

So what is his solution?

He advocates a global tax assessment with the revenues being divided between states depending on the proportion of sales. Easy? On the face of it yes but do we really believe that every state across every continent is going to agree to this, because unless it is bought into globally, then havens will remain.

At the present time there is not even a standard tax rate across the EU and disgracefully bailed out Ireland and Luxembourg actually act as effective havens.

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