Coffee House

Tax avoidance needs to stop – and companies themselves must lead the way

11 February 2013

5:48 PM

11 February 2013

5:48 PM

Tax avoidance on an industrial scale in a country where almost half of children are malnourished and their families live on less than $2 a day? When I read the results of a 12-month investigation by ActionAid into Associated British Food, one of the biggest companies in Britain, it took my breath away to discover that $13 million a year was being transferred out of Zambia into tax havens. The tax avoidance ensured a maximum return for shareholders. But will those shareholders sleep soundly in the knowledge that Associated British Foods removed almost 19 times the amount the British taxpayer donates in aid money to this developing country?

The time has come for companies to accept that their customers, employees, and yes even their shareholders believe that paying a fair share of tax is an important measure of corporate social responsibility. Fancy corporate lawyers can eloquently describe the differences between tax avoidance and tax evasion, with the lines between them becoming increasingly blurred. Tax evasion is clearly wrong, illegal and unfair to the rest of society, as everyone else has to pay more in taxes to make up for those who do not pay their fair share.

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There is growing anger and concern at the fact that some large companies are hiding behind complex accounting rules that may be strictly legal, but are considered to be unethical by the public. The problem of the missing billions in tax is not just a problem in the UK; it is worldwide, and it does the greatest damage to poor and developing countries that cannot stand up to massive corporations. Action Aid’s report brings into stark contrast the power of large corporations in developing countries.

However, despite the best of intentions, Governments from around the world will struggle and I believe that in the end it will be up to the companies themselves to lead the way and they will only do that if their customers — the British public — drag them kicking and screaming towards tax transparency and a fairer tax system for us all.

Associated British Foods are one of the companies that has not yet responded to my tax challenge campaign, where I asked all FTSE 100 Chief Executives to commit to tax transparency and support an international accounting standard. I am publishing all the responses I receive on my website www.taxchallenge.co.uk so every one of us can decide individually whether the biggest companies in Britain really do care about the poorest at home and abroad.

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Show comments
  • http://www.facebook.com/manfredo.felice Manfredo Felice

    And I assume you will be overpaying your taxes this year as well?

  • zimjono

    This article is complete garbage.
    It’s wrong both in detail and principle.

    Associated British Foods don’t pay much tax in Zambia because they are entitled
    to use the capital allowances generated by their significant investment in Zambia.
    Those capital allowances are there because the Zambian Govt want to encourage
    that investment. Unlike the author, they are not idiots and realise that the
    country (and its exchequer) benefit far more from foreign investment and the
    resultant jobs than it ever will from a punitive corporation tax rate. That is
    why generous capital allowances are an OECD tax standard. Even the UK Govt uses
    them to encourage investment.

    As for the general principle, corporations do not pay tax. They never have. The
    burden falls on some combination of the owners (e.g. our pension funds), the customers and the employees. In the case of third world agricultural development, that
    burden will fall mainly on employees as their jobs and salaries are almost
    entirely a function of the amount of overseas capital invested (the difference between
    being a subsistence grower and a commercial framer is capital) and anything
    that raises the cost of capital will result in less and more expensive capital.

    After Nick Cohen epic Starbuck’s fail, this is the Spectator doubling down on
    economic illiteracy. Perhaps it should ask someone from the ASI for a
    contribution to counter balance this garbage.

  • http://pulse.yahoo.com/_7INXRFQ7VVXY4O4GVIDFSXXKVI Simon

    I hope UKIP are going to be targeting Stevenage at the next general election.

  • HJ777

    Had it occurred to the author of this piece that it may be the case that the (presumably) favourable tax situation in Zambia may be one of the factors that persuaded ABF to invest there? I’m not saying that it was, but does he know that it wasn’t?

    Companies bring all sorts of benefits to the countries in which they operate – greater economic efficiency, employment, wages, superior goods and services, various sorts of taxes other than the ones the supposedly manage to avoid. Would he rather that they pay an extra $13 per year but risk that they invest less in Zambia as a consequence?

    In any case, what does $13m/year represent compared to their turnover, profit and other taxes paid in Zambia? He doesn’t say. It may be a tiny proportion.

  • Daedalus

    Tax avoidance needs to stop – and companies themselves must lead the way.

    The above quote is all I have read of this article. I did not need to read the rest because the title said it all!

    IT IS TOTALLY WITHIN THE RIGHT OF ANY PERSON AND ANY COMPANY TO REDUCE THE AMOUNT OF TAX THEY PAY AS LONG AS IT DOES NOT CONTRAVENE THE LAW!

    There is no requirement what ever for any entity to pay more tax than it needs to; in fact I would propose that it is any entities duty to minimise the amount of tax they pay.

    Daedalus

  • Deputy Dawg

    Take a look at the Spectator accounts. It is presently paying no tax. Is it in a position to condemn others?

    • HooksLaw

      As I hinted at earlier I would welcome the Barclay Bros paying more tax. Their Ritz hotel has not paid corporation tax for 17 years. I think this hints rather at the scale of the problem.

  • Colonel Mustard

    This website seems to have a virus – or maybe a trojan. Almost every post has spam from something called telemachus attached to it.

    • Smithersjones2013

      There is also the ‘Hookslaw’ bug as well. I do wish they would fix their system but hey what can you do?

  • Deputy Dawg

    Isn’t it the case that the Spectator is paying no corporation tax? That being so why should we not demand that this publication pay a fair share to support the poor, the elderly and the unemployed in this country.

    The Spectator tax status can be found in the accounts published at Companies House.

    What about challenging the Spectator about its tax status?

  • Smithersjones2013

    And how many of those who get outraged at the taxes avoided by companies then go home and ask their builder whether they can do a job for cash?

    The stench of hypocrisy is grotesque. All this is is the usual whining/ bullying parasite political classes getting into a froth because those nasty nasty companies are abiding by the law. If Parliament doesn’t like it, it knows what it can do. Close the tax loopholes. Don’t keep bleating to the masses. Actually DO something.

    Of course Westminster won’t because when they do. they screw it up like they did the pasty tax and if they did it to large corporations who then responded by moving out of the country then MP’s would wet themselves at the thought of all the unemployment they caused by their pathetic whining. It seems to me that MPs want the electorate to do their job for them which begs the question of what exactly is the point of MPs?

    Furthermore it was not these companies that have made our government
    nigh on bankrupt. The blame for Westminster and Whitehalls profligacy
    and financial incompetence lies squarely at the feet of the the political
    classes and particularly those of a blue and red persuasion.

    Additionally has anyone noticed that politicians have not taken on those who you would think were most guilty of tax avoidance (i.e. the management consultancies, accountancy, financial and legal professions) but instead have chosen to pick on retail organisations which in many cases have a difficult enough job in surviving in this age of the Internet.

    Of course we all know where the largest group of MPs come from as well?.
    So we can all guess why but surely its the case if MPs continue to be
    so impotent and spend increasing amounts of time whining and trying to
    stir up ‘lynch mobs’ have we come to the point where we would be better off without them?

    One final observation about this Parliament. Never have I heard more pathetic claptrap and whining from politicians about morality and associated themes (particularly hypocritical as politicians are amongst the lowest forms of moral life on the planet) instead of them actually doing something which tells me one thing. MPs are increasingly impotent.

    • Harold Angryperson

      Superb piece, agree 100%

  • Colin

    Note to Fraser Nelson:

    You really must do better than this. This is rubbish. Did anyone even bother to look at this prior to publication? This infantile nonsense makes the guardian look semi credible.

    • Smithersjones2013

      Its what Tory 2010 intake lobby fodder does. They all write this sort of garbage. I put it down to the abolition of Grammar Schools across the country and the subsequent dumbing down of education…..

    • Grrr8

      I say that every time I read Liddle, Murray, Maher and that odious catholic woman, Melanie something or the other 😉

  • http://twitter.com/FBLiberty FB

    Stephen – there’s this thing, wots called the ‘rule of law’. Its quite important, means people have to obey the law rather than the word of some bloke called Stephen. You should look into it sometime.

  • Andy

    Just looked up Stephen McPartland. History degree, graduated in 1997. Did MSc in 1998. Started his political career in 1999 in Warrington where he managed various election campaigns. Moved to Hertfordshire in 2001 to work as a ‘Campaign Manager’ He is now 36. I’m looking for WORK in all of this. Not finding very much of it.

    Has he run a business ? Has he been responsible for employing people and making widgets, as opposed to PR bullshit ? As Nigel Farage points out Cameron, Clegg and Miliband have one thing in common: never done a days work in their lives. As he says we’ve been taken over by a bunch of college kids. Here is another.

  • Archimedes

    Spot on. I feel the same about many things, for example, murder must stop and the murderers themselves must lead the way. There is growing public anger and it’s time they faced up to that, and then maybe they’ll be rainbows every day — and — and….

    • telemachus

      Yousurely will know of a law of physics stating that the upward buoyant force exerted on a body immersed in a fluid is equal to the weight of the fluid the body displaces. In other words, an immersed object is buoyed up by a force equal to the weight of the fluid it actually displaces.
      So my friend companies composed of our compatriots that sin in this way displace the moral courage that the reasonable among us exhibit

      • Archimedes

        Remember what I told you about writing things as soon as they come into your head? Well – you’re doing that again…

        • telemachus

          Murder indeed

  • spofforth

    “Associated British Foods removed almost 19 times the amount the British taxpayer donates in aid money to this developing country?”

    It’s also 17000 times the temperature of the Moon multiplied by the wingspan of a butterfly. We call these spurious facts non sequiturs because they have no relevance to the point being argued (insofar as there is an argument rather than a Guardian-style rant).

    The question you didn’t ask is how much ABF has invested in the country in the first place. Which is £150m:

    http://timworstall.com/2013/02/10/now-theyre-whining-about-sugar-and-zambia/

    Even in terms of Moons and butterflies, that’s a heck of a lot. Having a reasonable return on that investment is the very reason the investment was made in the first place, so your idea of stopping the return is a good way to stop the investment. And it’s the investment that Zambia needs, not the destructive foreign aid that does little more than make you feel good about yourself.

  • Andy

    Perhaps you should reflect that if Governments – ours is a prime example – hadn’t made Tax Law so bloody complicated, to such an extent that no one properly understands it, you wouldn’t have ‘tax avoidance’. You also might care to reflect that tax avoidance is perfectly legal and all compaines and individuals are doing is applying the law which the likes of you have written.

    And finally perhaps it is time that Governments such as those who have held office in the UK recently, spend too much damn money. We need reform not only of the tax system but also of what the state squanders our money on.

  • fantasy_island

    Stephen, grow up.

    These companies are operating entirely within the law, if you have evidence to the contrary then go to the police.

    If the government was more responsible and squandered less of other peoples money then maybe this wouldn’t be an issue at all.

    • telemachus

      He is grown up
      Grown up enough to expect moral leadership from our great companies
      We need a moral crusade against culprits

      • fantasy_island

        Moral leadership is not the business of our great companies, the bottom line is.

        Grow up yourself.

        • telemachus

          You state the moral bankruptcy of the Thatcher era
          We are moving on

          • spofforth

            “You state the moral bankruptcy of the Thatcher era”

            What moral bankruptcy? Everyone is better off as a result of what she did. Pity we don’t have a leader now that has the courage to see off the professional whining class like she did.

            • telemachus

              Better off in what way?
              She made selfish personal aggrandisement respectable.
              This is the reprehensible moral bankruptcy that we all find so reprehensible

              • fantasy_island

                I disagree, my formative years were of the chaos caused by militant trade unions and the ceaseless industrial actions of the early 70’s together with the inevitable consequence of national power cuts and 3 day week. The poor man of Europe tag was thoroughly deserved.

                For me, a working class kid in a Barnsley pit village, the arrival of Thatcher was a revelation. This was the beginning of the understanding that perhaps we could aspire to own a property, start a business, expect financial success, provide well for our families. Not simply enter the mines or the steel works and reside in a council property.

                The great ladies victory in 1979 most likely had the single greatest effect on my life to date, they were jaw dropping days.

                • telemachus

                  I just wonder what has happened to your former neighbours in the village after Thatcher robbed them of their livelihood

                • fantasy_island

                  I still live amongst them, one is the landlord at my local, others started businesses of their own, some settled into retirement and fulfilled lifetime ambitions, others found new careers, all took very generous redundancy payments, all are glad to be out of the mines.

                  Everyone survived.

                • telemachus

                  Try going up to the decrepit villages of Durham or South Wales

                • realfish

                  Just for your information the numbers of pit closures in the Durham and Northumberland coalfields, since 1950, are as follows:

                  1950’s: 16

                  1960’s: 73

                  1970’s: 19

                  Thatcher’s years: 17

                  Post Thatcher: 5

                • Harold Angryperson

                  Indeed. It’s a little-known fact that Harold Wilson closed more coal mines than Margaret Thatcher.

                • Daniel Maris

                  Irony of ironies…and Mrs Thatcher closed more grammar schools than anyone else.

                • Harold Angryperson

                  Correct. Ain’t life strange…

                • telemachus

                  I concede
                  However if we look across the UK manufacturating base we see a significant contraction with social consequences and aggravation of the North South divide

                • fantasy_island

                  Wow, you’re up early

                • Gary smith

                  Speaking as an ex- miner, Anthony Ben holds the record for pit closures. By the way, I urge you to read, Politics and the English language by Orwell. You will save yourself a lot of time !

                • Andy

                  And manufacturing industry declined at a far greater rate between 1997-2010 than it did between 1979-1997. Another Labour achievement.

                • HJ777

                  It didn’t decline from 1979-97. Output grew by nearly 20%.

                  It did, of course, fall from 1997 to 2010, by over 10%.

                • HJ777

                  We saw a growth in manufacturing output of around 20% under Thatcher/Major – and it was growing strongly when Labour came to power. New industries were attracted to the North – Nissan, Komatsu and Fujitsu being just the highest profile examples.

                  Growth in manufacturing output stalled under Labour – and then it fell. When they left power, it had fallen by over 10% since they came to power.

                • Harold Angryperson

                  The miners robbed themselves of their livelihoods – particularly during the 1984-85 strike when their customers found out that it was cheaper to import coal from Sweden (another high-wage, high social cost economy) than buy it from the NCB who were literally digging it out next to the power stations.

                • telemachus

                  I guess that is how you salve your conscience when you see the wastelands of South Yorkshire

                • Harold Angryperson

                  The miners, like many other heavy industries at the time (British Leyland etc) had a choice, though they failed to accept this at the time – egged on by weak and vacillating management they remained bloated and inefficient (often with a poor product as well) and paid the price.

                  As a current analogy, try and imagine a situation where there was a widely affordable and better quality alternative to the NHS – do you honestly think that the latter would survive?

                  And as Fantasy Island points out, they’re not “Wastelands” – in fact if anything they look considerably less like one these days.

                • HooksLaw

                  Unlike BL who had ample opportunities to run a profitable business, the Mining Industry was running out of saleable product and such that it could produce was increasingly expensive to obtain.
                  It was also faced with cheaper competition for the same and alternative products.

                • Andy

                  How much coal do you burn on your grate in a year ?

              • spofforth

                “Better off in what way?”

                In every material way.

                “This is the reprehensible moral bankruptcy that we all find so reprehensible”

                Well it’s good that you find reprehensible moral bankruptcy so reprehensible. If you found it not reprehensible then where would your logic lead you? Of course, you make your personal judgements of morality based on received wisdom with no study in the matters. You probably even think Mrs. Thatcher destroyed manufacturing. Your moral code is not absolute for the simple reason many don’t share it. I suggest you stop trying to impose it on others.

                • telemachus

                  How do we want our children to grow up
                  “this is mine.I want more.Sod the consequences to you”
                  Not for me and mine

                • spofforth

                  “Not for me and mine”

                  Fine by me. But you want to impose your “this is what I call fair” on me and mine.

              • Austin Barry

                “This is the reprehensible moral bankruptcy that we all find so reprehensible.”

                And this is the Telemachus tautological nonsense we all find so nonsensical.

                • telemachus

                  No you may not like it but simple pursuit of profit cannot be the correct moral way forward
                  Except for the Cosa Nostra

          • fantasy_island

            It may be that you require a commercial organisation to act as your moral compass, I don’t.

            • telemachus

              Not commercial.
              Remember the prponent of the moral compass, Gordon
              He showed us the way in caring and his charismatic heirs are taking it forward.

              • fantasy_island

                You mock me.

                • telemachus

                  Like the rest of the revanchists you protest when beaten

                • Harold Angryperson

                  It’s “Comical Tele”!

              • Austin Barry

                Eh?

                • telemachus

                  No
                  A health service that stopped the insolence of half the cardiac waiting list dying before surgery. A 5 year hip waiting list cut to 18 weeks
                  Children in Tower Hamltes having shoes for school

      • Andy

        Companies obey the law. What could be more moral than that ?

        By the way, do you have an ISA ??

        • telemachus

          But companies interpret how to lay their balance sheet in relation to the law

          • spofforth

            “But companies interpret how to lay their balance sheet in relation to the law”

            Signed off by auditors. None of these “wah wah, companies are evil!” cases has withstood scrutiny: whenever HMRC has investigated the cries of “wolf! wolf!” they’ve found there to be no wolf.

            • alexsandr

              actually it is a requirement that companies maximise the return for their shareholders. if they stopped legal avoidance they would be open to legal action form their shareholders

              • telemachus

                In theory
                What you are saying is that profit trumps morality

                • Andy

                  There is NO morality in paying taxes.

                • alexsandr

                  no. legal requirement trumps morality. If you dont like that then ask your MP to get the law changed.
                  As to slave labour in china, use your buying power to boycott such products. That is now outsourcing to indis was stopped because people would not use it.

              • HooksLaw

                Thats right, maximise returns by employing slave labour in China. That requirement huh?

          • Andy

            Answer the question.

            • telemachus

              I am not required to tell the taxman the answer to that and without having to give personal thought to the issue

              • Andy

                So you have. You are, therefore, Guilty of Tax Avoidance.

                • Hugh

                  ISAs are designed – by the government – to allow people to avoid paying tax on their savings. Tax loopholes are – by definition – not designed for this purpose. In both cases you are obeying the letter of the law, but a company exploiting a tax loophole is not obeying its spirit, whereas as an ISA purchaser still is. They can clearly be usefully distinguished.

                • Andy

                  Wrong. You contradict yourself. If you ‘obey the letter of the Law’ you are OBEYING the Law. Period. It is complete bollocks to talk about ‘not obeying its spirit’. Everyone, a company included, has a right to arrange their afairs in the most tax efficient way possible. If people like McPartland cannot write clear simple Law then we should elect people who can.

                • Hugh

                  The idea that the intention behind a law should be relevant to its application is pretty well established in jurisprudence, so I don’t think it is bollocks. I agree, however, that in the UK at least the anger is probably better directed at legislators or probably HMRC, who seem a bit reluctant to take on larger companies, than the businesses who take advantage of their weakness.

        • HooksLaw

          Companies sneak and squeeze through any loophole they can find.
          Stop parroting the line about ‘obeying the law’.
          Why if this is so has Barclays closed down its tax dodging wing?

          • Smithersjones2013

            Why if this is so has Barclays closed down its tax dodging wing?

            Because Westminster have got Barclays by the short and curlys globally over rate fixing (which I assume is illegal unlike tax avoidance)

            Stop parroting the line about ‘obeying the law’

            Are you suggesting that we should not obey the law then or that Government should not acknowledge/ abide by the laws that they and their predecessors have created?.

            Companies sneak and squeeze through any loophole they can find.

            And why shouldn’t they? Their purpose is to make a profit not to make the Governments financial budgetting easier (which is what all this is about). Governmentis skint it wants more money but lacks the spine to legislate to get it. So insteasd its trying to coerce charity out of companies by stuffing its begging in their faces claiming its the ‘moral’ [sic] thing to do.

            • HooksLaw

              And where is morality in your lexicon?
              The purpose of a company is to make a profit by servicing a need in the community.

              The community is not served by being ripped off by a series of scams. By squeezing through various loopholes which are closed as soon as they are identified.
              Your love affair with these lying dipsticks who are impoverishing us all does you and your friends no credit. It is I guess another symptom of the hysteric.

          • Andy

            Don’t be so silly. Companies, like you (one hopes), obey the law. What else are they supposed to do ? Obey ‘HooksLaw’ ? And how are they to know what that is pray tell ??? There is no morality in paying taxes.

            A company, like an individual, is required to pay tax according to Law. If people like McParland are incompetent at drafting the law that is not the fault of the company nor the individual. It is the fault of Parliament. All of which points to the fact that we should simplify the tax system and move towards a flat tax.

            • HooksLaw

              ‘Normal people’ pay our normal taxes.
              Why should companies and other entities sneak through dubious loopholes mostly centred overseas which are closed as fast as they are discovered?

              Its a scam – and anyone who refuses to face up to that needs their heads examining because its a scam which impoverishes us all.

              Your flatulance about ‘the law’ is total fantasy.

              • Andy

                It is perfectly obvious that you know diddly sh*t about Tax Law. It is fiendishly complicated and defies the simplistic twaddle you are pandering.

                A company, just like an individual, pays tax according to the law. You seem to think they should pay what you think is a ‘fair amount’. There is the fantasy.

      • HooksLaw

        The Guardian Media Group? I am certainly happy to see the Barclay Bros (owners of the Speccy) pay their share.

        • Andy

          Ah yes, the Guardian Media Group who are famous for their Tax Avoidance.

      • Smithersjones2013

        Morality is a smokescreen behind which politicians hide when there impotence and incompetence is becoming too obvious…..

        • telemachus

          Then what is the excuse for the coaltition incompetence

      • Austin Barry

        It’s the sort of simplistic argument advanced by sixth form pupils burning with naive, neon-lit sincerity or the useful idiots of the average ‘Any Questions’ audience.

        If legislators want to close tax loopholes, then the drudge-like parliamentary draftsmen, seemingly only barely literate, should do a better job – but second-rate public service lawyers will always be out-smarted by their cynical, amoral, private practice peers.

        Sad, but true.

      • HJ777

        You’re pontificating on morality? Now I’ve heard everything.

    • HooksLaw

      You support massive tax avoidance amounting to theft? You need to grow up.
      if all these entities and people paid their tax then tax would be lower for all of us.
      well at least with a tory government it would.

      • fantasy_island

        Theft you say.

        Lodge the complaint, start the prosecution.

        • HooksLaw

          they are robbing us blind

      • Ab

        Taxes would not be lower for all of us – the government would simply spend more, as it always does

        • HooksLaw

          A labour govt would.

          But your assertion is fatuous. These scams impoverish us all.

      • telemachus

        Cut not off the hand that feeds us all
        Nico is watching

        • Colonel Mustard

          Well, I expect his legal team are.

      • Smithersjones2013

        If you think a crime has been committed don’t bleat about it on here report it to the police. Or have you already done that and the police gave you the address of the place where they make tin-foil hats?

        • HooksLaw

          HMRC are spending increasing sums to do just that and pursue people for these scams.
          The problem in pursuing prosecutions is to find the resources to do it.

    • michael

      all so vested

    • http://twitter.com/JunkkMale Peter Martin

      An MP lecturing on moral obligation is always quaint. And as one of an oft included ‘we’ by presumptive media or pols or NGOs, I do wish they’d stop until actually asking me.

  • alexsandr

    it is up to legislators to make the tax rules. They should change the law and stop bleating about avoidance.

  • Daveyyy12

    When you start doing posts about corrupt African leaders. Never, only tell white folk off. Only have a go at white businesses. Only have a pot at the west.

    Zimbabwe the Chinese are exporting crops to Africa while Africans are starving. You will never do an article about that.

    As you can see I think the entire left are a bunch of hypocrites.

    Let the

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