Britain: Big business tax scandal - "Can pay, wont' pay!"

The campaign group 38 Degrees has compiled a list of well known companies operating within the UK that are currently not paying their “fair share”. Companies such as Amazon, eBay, Boots, Cadbury, Ikea, Vodafone and Starbucks are all guilty of abusing the UK tax system.

This is done in several ways, most commonly by having the business headquarters registered to low-tax havens, such as Ireland, Switzerland or Luxembourg. This means that these companies then do not have to pay the same amount of tax to the British treasury as a UK-based firm would have to. Also, companies have abused the tax system by creating subsidiary companies abroad. These subsidiary companies then “loan” the UK operation vast sums, meaning that the UK operations can then levy the repayments of the “loan” against their tax bill, resulting in a reduced tax bill or in many cases no tax bill at all.

Due to the crisis and the cuts, these schemes are being subjected to more scrutiny and working people are rightfully outraged. Workers and youth are continually being asked to pay for the crisis of capitalism with stagnant wages, worse terms and conditions at work, cuts to education and pensions, and rising costs of living. At the same time, the Coalition accuses the working poor of trying to cheat the system. Yet meanwhile, big business is employing every means at its disposal to avoid paying any tax. This has even resulted in George Osbourne, in his budget speech in March of this year, calling firms that aggressively avoid tax as “morally repugnant” and Margaret Hodge recently announced in her role as chair of the Public Accounts Committee, “This is outrageous and an insult to British businesses and individuals who pay their fair share.”

The driving feature of capitalism is the need to continually seek out higher profit; this is what made capitalism progressive for a historical period. When capitalism was in ascent, companies reinvested a portion of the profits to increase productivity, with the hope of realising higher profits. Yet capitalism today is not in ascent but in decline. The top firms in Britain and worldwide are not investing, but are instead sitting on a giant pile of cash – over £700bn of idle money in the hands of the biggest companies in the UK alone. Big business is experiencing a “slack in productivity capacity” – i.e. a crisis of overproduction. Put simply, the capitalists can produce more than they can sell on the market, therefore there is no incentive to invest. On the contrary, there has become an even greater incentive to cut down on costs to maintain profit levels, including the lowering of wages and attacks on conditions whilst cutting down on other “expenditures”, such as tax. The overriding concern of business is to maintain and further profits. As this is the case under capitalism, businesses are being “fair” in avoiding tax, but only to the people that matter for them: their shareholders.

Recently Starbucks took the decision to pay a voluntary donation to the HMRC of £20m over the next two years; this is at a time when they have forced 7000 of their staff to sign new contracts that include cuts to paid lunch break, sick leave and maternity benefits. This decision to make a voluntary donation was taken by Starbucks to try to circumvent the growing anger against a giant multi-national company who have been avoiding tax. This cynical PR exercise does little to help the treasury balance its books, with an annual deficit of £117.5 billion for 2011-12. This shows how big business sees the tax system as a joke, and the only reason to pay taxes is if you can gain some form of brand value in the process.

The logic of capitalism

There are many who have used the example of Starbuck and other big tax evaders to argue the case for a fairer, more responsible capitalism, and it is understandable that people want to see a system where business pays it’s “fair share”. But this is not achievable under capitalism. If you accept capitalism, you have to accept the laws and logic that govern capitalism. As said previously, capitalism is a system where the overriding aim of business is to further their profits. Expecting big business under capitalism to be nice and pay its fair share is like trying to persuade a tiger to try vegetarianism.

Every business tries to minimise costs; if one does not do so, it will become less competitive and ultimately will not be able to compete on the market. As a consequence, big business employs teams of tax advisers to find loop holes in the system to minimise their costs. This makes clear economic sense on a capitalist basis: if the cost of employing teams of advisors is less than the tax bill, the problem of tax evasion will persist. HMRC being bolstered by £77 million to tackle tax evasion will do little to recoup what is owed to the working class. As Marcus Haupt, former vice-president of Lehman Brothers, says in Michael Moore’s film “Capitalism: A Love Story”, “If you work for the government as a lawyer, you come in to see if you can work out if these schemes are legal. If you work it out, they [the big corporations] will offer you a job.”

Even bolstering HMRC and implementing an anti-evasion tax law – which is very fashionable at the moment – will not fundamentally stop big business from finding holes in the tax system. The only way to completely stop corruption and tax evasion is for the major banks and corporations to open up their books to the labour movement so that people can see where their money goes – to see how many millions are paid to the consultants, managers, and bosses; how many millions are being made in profits; and how many millions are being evaded in tax-dodging schemes.

This does not mean that we are against the notion of the capitalists paying their “fair share”; but we must ask the question – what is a “fair share” and how do we go about obtaining it from the rich? As it is the workers that produce all the wealth of society, it follows that a fair share is far from the 20 or so percent that the corporation rate is currently based at (and which has just been cut by George Osborne even further).

With democratic workers control of the financial power that the top 100 businesses in the UK hold, the British working class could not only overturn the cuts completely, but also begin the transformation of society with socialist policies, where we provide for people and not for profit. At a time of deep crisis, cuts, and class struggle, the real utopianism is to believe that the capitalists will be “moral” and pay their “fair share”. The only way forward for working people is for the labour movement to find its voice and put forward the slogan of nationalisation of the banks and top 100 monopolies under democratic workers control. Then the working class could set about getting a more equitable share of the wealth that they create.