BLOG: What consumers really think about corporate tax avoidance
It asked which was worse – US companies avoiding paying tax in the UK, or UK companies not paying enough tax in this country. Unsurprisingly, nearly 75% of people thought they were as bad as each other, but surprisingly more people thought that UK companies not paying enough tax (17%) was worse than their US counterparts not paying enough (9%).
This week we have seen tax-related fingers pointed at Marks and Spencer, following on from the even more vigorous finger “prodding” of Google by Margaret Hodge and the Public Accounts Committee. Google and Amazon will remain under the cosh, but it looks now like attention may turn to companies closer to home as well.
If public and media attention unearths anything it does not like in the tax affairs of a domestic company, especially if it is a household name, that company could find itself on a major PR defensive. Indeed our survey suggests that the backlash from the public could be far greater than that experienced in the wake of the ‘naming and shaming’ of the US corporates.
It is perfectly legitimate and sensible for a public company to transparently and legally manage their tax affairs for the benefit of their public shareholders. There is no moral imperative for them to pay more tax than they need to, whatever the vibes given off by certain politicians. And looking at the tax rates paid by a snapshot of UK household names, there is little to suggest that they are comparable to Google or Amazon in the sense that the amount of UK tax they pay is out of proportion to their UK economic activity.
Expect domestic companies to come under intense scrutiny nevertheless. What remains to be seen is whether Margaret Hodge and the PAC can continue to use the morality card while conducting their investigations. I suspect not. The position that years of government competition for international business investment is responsible for flourishing tax avoidance, not companies, is gaining traction and we are starting to see Hodge acknowledge this.
While they may come under the microscope somewhat, I think it is unlikely that we will see the sort of mudslinging at domestic firms that we have seen recently against Google and Amazon (and this week, Apple in the US). With David Cameron making tax a priority at the G8, and both he and Ed Miliband now publicly pushing for country by country reporting, it looks like reform will come sooner or later. Whether any reform is consistent with George Osborne’s stated aim of “building the most competitive tax system in the world” remains to be seen, however.
George Bull is senior tax partner at Baker Tilly