Cameron takes aim at corporate tax avoiders

Thu Jan 24, 2013 9:52pm GMT

Britain's Prime Minister David Cameron speaks during the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2013. REUTERS/Pascal Lauener

Britain's Prime Minister David Cameron speaks during the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2013.

Credit: Reuters/Pascal Lauener

Related Topics

Quotes

   

(Reuters) - Prime Minister David Cameron on Thursday attacked multinational corporations that avoid paying their fair share of tax, promising action against such aggressive strategies after a public backlash in Britain.

The issue of tax avoidance by big business has turned toxic in recent years as millions of Britons struggle with low pay rises and austerity measures introduced to reduce the budget deficit.

Firms that are viewed as paying too little tax, such as coffee chain Starbucks, have been targeted by demonstrators and boycotts.

"I am a low-tax Conservative but I'm not a companies-should-pay-no-tax Conservative," Cameron told business leaders at the World Economic Forum in Davos.

"Individuals and businesses must pay their fair share," he said, adding that he would use his presidency of the Group of Eight industrialised nations to press the point.

Cameron did not mention any companies by name. At the height of the uproar last year, British MPs singled out Google, Amazon and Starbucks as companies that pay very little tax in Britain on profit from sales there.

The firms say they comply with British tax law, but under a tide of public outrage and demonstrations at its stores, Starbucks last year said it would pay around 20 million pounds ($32 million) in corporation tax in Britain over the next two years.

"Any businesses who think that they can carry on dodging that fair share ... need to wake up and smell the coffee," Cameron said, adding that he was not anti-business but wanted to keep tax rates low for everyone else.

Cameron's Conservative party has long been criticised for being close to big business, but the prime minister's speech indicated a change of tone towards companies avoiding tax.

"The public who buy from them have had enough," he said

MOUNTING PRESSURE

Much of the anger in Britain has come from smaller local retailers who are unable to take advantage of international tax arrangements while they struggle with high rents and low consumer spending.

With politicians ramping up the pressure, Goldman Sachs also came in for criticism over plans, since scrapped, to delay paying bonuses to its bankers in Britain to exploit an income tax cut for top earners that is due in April.

The bank changed its plans after being publicly rebuked by the Bank of England Governor Mervyn King.

Despite growing public anger it will be difficult to change the rules.

"Cameron's statements on the taxation of multinational companies will no doubt receive strong support," said Ben Jones, a tax expert at law firm Eversheds. "But he will have to work hard to ... avoid the issue becoming mired by the bureaucracy of international tax policy.

"Central to many of the tax structures put in place by multinational companies are the international rules on transfer pricing. Changing these rules requires broad international agreement, which typically takes a long time to obtain."

The Trades Union Congress - Britain's labour union federation - said Cameron's government needed to start by making the British tax system far more transparent.

That process may be helped by a Supreme Court ruling on Wednesday which said that advice by accountants could not be kept secret in the same way that legal counsel is confidential.

"David Cameron has been quick to highlight the problem of tax avoidance but slow to actually do anything about it," the TaxPayers' Alliance, which campaigns for lower tax rates, said in response to the speech.

"Families are left feeling short-changed and let down by their politicians because international corporations can take advantage of loopholes and reliefs not open to them," it said.

It was a view that struck a chord on the streets of a cold London on Thursday. "It's disgusting ... We pay tax, we haven't got a choice," said Clive Read, a 54-year-old printer. "They should pay their taxes, just like other companies."

(Reporting by Kate Holton and Costas Pitas in London; Writing by Kate Holton; Editing by Peter Graff and Giles Elgood)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
DR9WX wrote:
I think the entire tax system needs simplifying to one side of A4, including explanations!

Accountants can then get productive jobs. 95% of the Inland Revenue Service can go and get productive jobs.

We seem to have more people sat on the cart than are actually pushing it!

Jan 24, 2013 4:36pm GMT  --  Report as abuse
finchley wrote:
There are ways of making multi-national groups be more responsible.

A little tweek might be as follows;

All royalty payments to foreign entities would be subject to corporation tax at the paying country’s rate. This would be repaid to the receiving company at the rate of corporation tax imposed by the receiving country.

I will have to devise something else for Amazon. I do like the Australian and New Zealand approach to Amazon: just stop them from doing any business there.

Jan 24, 2013 4:41pm GMT  --  Report as abuse
GlobalFamily21 wrote:
why you are not posting any comment? What is your standard?

Jan 24, 2013 8:23pm GMT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.