To my mind, the real issue with corporation tax is not whether it is morally right to avoid it, but whether not paying tax gives larger corporates an unfair advantage against indigenous smaller companies.
Here’s an example of what I mean; picture your local high street a few years ago with its independent butchers, greengrocers, electrical stores, cafes, and the like. Whereas now, around me (in Shropshire) maybe 30% of shops have closed down, most of the rest are run by identikit chains and the surviving small local businesses (you and I) are hanging on by our teeth. All because we have been ‘good’ citizens, paying our taxes which has crippled cash flow, and in some cases was the final nail in the coffin of a struggling business.
If Amazon can turn over £3.4 billion pounds in the UK, but is not constrained to hand over a significant percentage of the profits each year, then we are not playing on a level playing field. If I wasn’t paying corporation tax I might be able to reduce my prices to enable me to compete with the big boys.
Corporation tax for any SME is a cash flow crippler. It is all well and good making a profit, but actually having the cash in the bank to pay that tax demand is often a problem. It sometimes feels as though we are just working and saving for the benefit of the Government. At year end when the accountant says you should put some extra money into the pension fund you still need to have the dosh available to do that.
As we all know, cash flow is absolutely critical for the good maintenance of any business, so in that case perhaps we should be applauding Amazon, Google and Starbucks for the good management of their businesses rather than castigating them - it’s not a question of morals but of good business practice.
I reckon the Government has to change the tax rules to ensure that all companies trading in the UK pay a ‘fair’ amount of tax based on their actual sales here. Maybe increase VAT by 1% and abolish corporation tax altogether. That immediately closes all loopholes and enables a level playing field.
Or maybe HMRC could establish a ‘taxpayers’ charter’ that us taxpaying companies can use in our marketing materials and websites to prove that we actually do contribute our fair share. Then it might encourage UK consumers to vote with their credit cards, shopping where they know that the merchant is actually supporting the economy.
And that leads to a fascinating question, do the buying public actually care whether their coffee or online purchase is helping to paying off the deficit or not? And doesn’t that change the whole debate about ‘moral’ taxes?