What's fair about MPs' tax sniping?

by Kevin Reed

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03 Dec 2012

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FAIRNESS AND MORALITY. What do they have to do with tax?

As much as it would seem easy to say ‘nothing', they can't be dismissed.

It's understandable that we can look at Starbucks and say that is unfair that it has paid barely any corporation tax in the UK over the past 15 years.

But is it immoral? Don't think so.

Call me mischievous, but I wonder if most of the public's ire is down to that fact that, without complex tax affairs of their own, they're not in a position to mitigate their own bills. No one in their right mind would hand over more than they have to. It's not that Starbuck's deserves a pat on the back for its actions, but without any moral arbitration and principles expertly enshrined within legislation, then companies will do what they have to do to keep their tax bills down.

For Starbucks to have apparently stepped forward to make a change to its structure seems like madness. It certainly should structure itself to not overpay tax. The question then becomes – if what it pays (or doesn't) is unfair, then what is fair?

Perhaps it has reached a tipping point where the furore will do it more financial harm than merely maintaining its current tax strategy. Perhaps the taxman has indicated it will again run the rule over Starbucks' tax affairs – or try and retrospectively target the ‘loopholes'. In that sense, corporate pragmatism continues to rule. Ironically, it would be the public that has stepped in where the government has failed miserably.

Is Starbucks a corporate angel? Well, it seems as if it's gone to great lengths to end up in a situation where it pays little UK corporation tax. Has the taxman done enough? Perhaps not – but it is merely an agent of government.

Let's talk about fair and unfair. Maybe it's unfair of Hodge, Gauke, Osborne and other publicly appointed representatives to blame others. They need to spend a bit more time navel-gazing, and accept that they need to work harder to enshrine 'fairness' and 'principles' into legislation.

So it will be fascinating to see if the GAAR can add fairness or morality-checking into the UK's tax framework. But if it creates uncertainty and complexity, then we might need something stronger than an espresso to protect investment into the UK.

Kevin Reed is editor of Accountancy Age and Financial Director

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