Tax avoidance is the real catastrophe for Britain
It has been well reported by the right-wing press that Stefano Pessina, the chief executive of high street retailer Boots, told the Sunday Telegraph that a Labour government would be a “catastrophe” for Britain.
But it’s safe to say that his intervention, intended to cast doubts over Labour’s business credentials, hasn’t been a complete success. This is because much of the reaction to his comments has centred on the issue of tax avoidance, following scrutiny of his own company’s tax arrangements.
One of the first things the Monaco-based billionaire did after taking over Boots in 2007 was move its headquarters from Nottingham to a low-tax region of Switzerland. Anti-poverty charity War on Want claim this has helped Boots to dodge £1.1bn in taxes over the last seven years – enough to fund 78,000 NHS nurses for a year.
What makes this a particularly galling example of tax avoidance is the fact that a large proportion of Boots’ UK revenue – War on Want estimates 40 per cent – comes from the taxpayer, through its expanding service contracts in the NHS.
While it may be legal, tax avoidance is morally indefensible, especially at a time of economic hardship. And it is endemic, costing the UK £3.1bn in 2012/13, according to HMRC figures. And this is almost certainly a significant underestimate, as analysis by tax researcher Richard Murphy has shown.
There is cross-party consensus on the need to tackle tax avoidance, and there has been no shortage of politicians calling for action to be taken. In 2012, chancellor George Osborne labelled aggressive tax avoidance “morally repugnant”.
Unfortunately, his rhetoric hasn’t been matched by action. In the 2010 Spending Review he cut HMRC’s budget by £2bn, including 10,000 job losses, which has limited their ability to collect taxes. This is not the act of someone serious about getting to grips with tax avoidance.
Shadow chancellor Ed Balls said in November that a Labour government would double the fines that can be levied on people who avoid tax. This should be welcomed, but Labour could (and should) go further.
Companies engaged in tax avoidance should be denied public sector contracts. A simplified tax code would make it harder for avoiders to find loopholes. Greater international cooperation is required to ensure that companies cannot move profits across national borders to avoid paying tax, in the way Boots has. And we need to invest in HMRC to ensure it is properly staffed.
Getting tough on tax avoidance chimes with Labour’s pledge to stand up to big business. Of course, the Tories and right-wing media will claim it is indicative of an anti-business agenda.
But there is nothing anti-business about levelling the playing field on which businesses operate. If Boots can lower its prices because it doesn’t pay all the tax they owe, it forces the local pharmacist down the street out of business because they can’t compete.
And there is an electoral prize that awaits those committing to take meaningful action on this. There are few things in politics that resonate with the public more than pledging to clamp down on tax loopholes. Four in five Britons say that tax avoidance makes them feel angry.
At a time when the welfare state is being cut for the vulnerable and public sector workers enter their fifth year of a pay freeze, it offends a basic sense of fairness that wealthy individuals and multinationals get away with avoiding tax.
Mr Pessina believes Ed Miliband in number 10 would be a catastrophe. A Labour government should ensure that it is indeed a catastrophe – for those who avoid paying their fair share, because tax avoidance is a catastrophe for Britain.
Matthew Whittley is a recent graduate and Labour Party member and works as a researcher for a Midlands-based housing association. Follow him on Twitter
145 Responses to “There is nothing anti-business about wanting Boots to pay tax”
Kevin Stall
http://www.theguardian.com/money/2014/dec/03/treasury-repay-war-debts-bonds-uk
Is just one of the articles available about the debt repayment.
And here is the ww2 information.http://news.bbc.co.uk/1/hi/uk/6215847.stm
Kryten2k35
Fair enough.
Kryten2k35
The world economy is based on borrowing and debt. You are not grasping this fact at all, but it is a fact.
The UK’s central bank, the Bank of England, literally prints money form nothing. There wasn’t been a value (gold, silver, bronze) backing the pound for decades.
Those countries are not in that position because of my view on debt. They’re in that position because Germany, and the European Central Bank, cannot risk devaluing the Euro even further by printing more money to give to these countries.
This world is run on debt. Without it, the financial system collapses. This is EXACTLY what happened in 2007. Banks stopped lending to each other, because they were unsure of their ability to collect their debt from their customers (because the banks were lending money to people who cannot pay it back). When the flow of debt stopped, panic ensued and the markets went crazy.
The UK has borrowed money every year for over 100 years and more, and will continue to do so:
http://www.economicshelp.org/wp-content/uploads/blog-uploads/2012/09/national-debt-percent-1900-12.png
Kevin Stall
Yes they print fiat money, but that isn’t necessarily debt. Money based on gold is an out of date concept that fixes it value to a stone. Governments have more assets of value beyond the gold reserve. And if a country prints too much money it becomes worthless. Look at the Weimar republic in the 20’s. Or the continental dollar of the 1780’s. Just printing paper does not create money. The system of currency is more complicated than borrowing money. The money that government spends over the receipts is borrowed. And interest must be paid on it. The GDP is the total the people of the country has generated (a simplified description). We currently barrow a significant portion of what everyone earns in operation to run the government at the current austerity level. Countries like Greece and Italy shave to borrow more than the entire country earns in a year. And they have to have countries forced to hold their debt in order to stop it from going into receivership. They have to pay the interest on it and that is more money than Greece has. Do you want the UK to get in a similar position? More debt can lead to that situation. Look at the US, they have been cutting the spending less since Obama came into office but the amount owed has increase almost 8 trillion dollars. Just to service the debt.
Kevin Stall
Countries in the past have had it happen. A major depression, a time when the people really need a government, can cause a total collapse. It has happened to many lesser countries and nothing says it couldn’t happen here. If the banks had collapsed in 2007, that could have led to such a collapse under the right conditions.
If people will not buy our debt the collapse will happen, no matter what we do. And the larger the world’s debt is the more we have to pay to the people/governments loaning the money. The less money there is for everyone to borrow. It may not be a problem now but that’s not to say it couldn’t become one.