As GSK is exposed, the government must clamp down on tax dodging

Panorama adds another company to the list of tax-dodgers

The BBC’s Panorama tonight will add to a long list of allegations of corporate tax dodging. Companies like GlaxoSmithKline, which Panorama claims has used complex offshore structures to avoid millions in UK tax, now join Barclays, Vodafone, Amazon, Apple, Boots, SABMiller and Topshop (amongst others), accused of aggressive tax avoidance.  In a time of austerity, public anger continues to grow against those companies believed to be operating under different rules to the rest of us. 

In an interview last year, GSK’s own chief executive Andrew Witty lamented that:

one of the reasons we've seen an erosion of trust, broadly, in big companies is they've allowed themselves to be seen as being detached from society and they will float in and out of societies according to what the tax regime is. I think that's completely wrong.

Recent polling by ActionAid supports this view (pdf): 79 per cent of UK citizens want to see tougher action from government against tax avoidance. This is an issue that unites voters from all parties; 74 per centof Conservative voters, 83 per cent of Labour voters and 87 per cent of Liberal Democrat voters want to see tax loopholes for big multinationals closed.

Rhetorically at least, the government has responded. George Osborne branded aggressive tax avoidance "morally repugnant" in this year’s Budget speech.  But at the very same time, tucked away in the technical detail of the Budget, are changes that would actually water down the UK’s anti-avoidance rules for multinationals, making it easier for them to avoid taxes. 

These "Controlled Foreign Company Rules" have protected the UK tax base for the last 25 years, making it less lucrative for companies to siphon profits into tax havens, as HMRC have simply topped up the company’s overall tax rate to match the standard UK rate.

While some have inevitably found loopholes in these rules, they’ve been an important tool to discourage profit shifting into tax havens. Not only have they helped protect the UK tax base – they’ve also protected developing countries from tax avoidance by UK companies.

The Government's new proposals in the Finance Bill, currently being scrutinised in parliament, will radically alter this. The Treasury's own figures show they’ll lose revenues of almost £1bn as a result.

Developing countries, meanwhile, could lose as much as £4bn a year – almost half the UK aid budget. The OECD estimates that developing countries currently lose three times more to tax havens than they receive in aid.  This means less money that can be invested in schools, hospitals and roads, keeping countries locked in the cycle of poverty. With the government staunchly (and rightly) defending its decision to spend 0.7 per cent of GNI on aid, it seems nonsensical to be making it harder for developing countries to reduce their dependency on aid by raising their own revenues.

One chink of light is an amendment to the Finance Bill tabled by the Liberal Democrats and supported by Labour, that the changes are not made without a proper impact assessment (recommended by the IMF and World Bank), and measures to mitigate the damage. Hopefully the Conservatives on the Bill Committee will join this emerging consensus.  

Another important remedy would be to open up tax haven operations to scrutiny.  Low headline tax rates – like those in Luxembourg that Panorama claims UK companies have exploited - are just one of the attractions of tax havens for tax dodging (over half of FTSE100 companies have a total of 336 subsidiaries registered in Luxembourg). The other is secrecy. As with impenetrable Swiss bank accounts, this veil of secrecy prevents effective scrutiny of deals done in tax havens. Indeed, ActionAid research has shown that 98 of the FTSE100 use tax havens, where they locate almost 40 per cent of all their overseas subsidiaries. 82 also have operations in the developing world.

If the government is serious about tacking tax avoidance, and serious about sustainably ending poverty, it needs to be putting its weight behind international efforts to break tax haven secrecy, making multinationals publish accounts of their tax haven subsidiaries. 

Right now, though, it should urgently rethink its plans to water down the UK’s anti-tax haven rules. It should be making it harder – not easier – for British multinationals to siphon their profits into tax havens, and make sure they pay their tax bills right around the world. 

Update: Response from GlaxoSmithKline

A spokesperson for GlaxoSmithKline responded to Panorama's investigation with the following statement:

GSK is very disappointed with this programme which was extremely misleading and lacking in context.  Specifically, the programme’s selective use of facts led to a misrepresentation of GSK’s actions and a failure to recognize GSK’s significant UK tax contribution.

GSK strongly refutes any allegation of wrongdoing. At all times the company proactively disclosed its tax transactions to the relevant authorities and both the UK and Luxembourg tax authorities are agreed that GSK paid all the taxes due.

GSK is a global company with 95% of its sales outside the UK however 20% of the company’s tax bill is in the UK. In total, over the period covered in the broadcast, GSK paid around £1billion in UK corporation and business taxes, plus an additional £1.3bn through income taxes of its UK employees.

The difference between UK and EU laws in this area has always created uncertainty for global organisations like GSK. GSK supports the new Controlled Foreign Company tax rules developed by the UK government related to the taxation of overseas earnings which will provide greater certainty despite the fact that they will increase the company’s UK tax bill.”

Treasure Island: Grand Cayman, which has no income tax or corporation tax. Photograph: Getty Images

Mike Lewis is a tax justice campaigner at ActionAid

Christopher Furlong/Getty Images
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Want to know how you really behave as a doctor? Watch yourself on video

There is nothing quite like watching oneself at work to spur development – and videos can help us understand patients, too.

One of the most useful tools I have as a GP trainer is my video camera. Periodically, and always with patients’ permission, I place it in the corner of my registrar’s room. We then look through their consultations together during a tutorial.

There is nothing quite like watching oneself at work to spur development. One of my trainees – a lovely guy called Nick – was appalled to find that he wheeled his chair closer and closer to the patient as he narrowed down the diagnosis with a series of questions. It was entirely unconscious, but somewhat intimidating, and he never repeated it once he’d seen the recording. Whether it’s spending half the consultation staring at the computer screen, or slipping into baffling technospeak, or parroting “OK” after every comment a patient makes, we all have unhelpful mannerisms of which we are blithely unaware.

Videos are a great way of understanding how patients communicate, too. Another registrar, Anthony, had spent several years as a rheumatologist before switching to general practice, so when consulted by Yvette he felt on familiar ground. She began by saying she thought she had carpal tunnel syndrome. Anthony confirmed the diagnosis with some clinical tests, then went on to establish the impact it was having on Yvette’s life. Her sleep was disturbed every night, and she was no longer able to pick up and carry her young children. Her desperation for a swift cure came across loud and clear.

The consultation then ran into difficulty. There are three things that can help CTS: wrist splints, steroid injections and surgery to release the nerve. Splints are usually the preferred first option because they carry no risk of complications, and are inexpensive to the NHS. We watched as Anthony tried to explain this. Yvette kept raising objections, and even though Anthony did his best to address her concerns, it was clear she remained unconvinced.

The problem for Anthony, as for many doctors, is that much medical training still reflects an era when patients relied heavily on professionals for health information. Today, most will have consulted with Dr Google before presenting to their GP. Sometimes this will have stoked unfounded fears – pretty much any symptom just might be an indication of cancer – and our task then is to put things in proper context. But frequently, as with Yvette, patients have not only worked out what is wrong, they also have firm ideas what to do about it.

We played the video through again, and I highlighted the numerous subtle cues that Yvette had offered. Like many patients, she was reticent about stating outright what she wanted, but the information was there in what she did and didn’t say, and in how she responded to Anthony’s suggestions. By the time we’d finished analysing their exchanges, Anthony could see that Yvette had already decided against splints as being too cumbersome and taking too long to work. For her, a steroid injection was the quickest and surest way to obtain relief.

Competing considerations must be weighed in any “shared” decision between a doctor and patient. Autonomy – the ability for a patient to determine their own care – is of prime importance, but it isn’t unrestricted. The balance between doing good and doing harm, of which doctors sometimes have a far clearer appreciation, has to be factored in. Then there are questions of equity and fairness: within a finite NHS budget, doctors have a duty to prioritise the most cost-effective treatments. For the NHS and for Yvette, going straight for surgery wouldn’t have been right – nor did she want it – but a steroid injection is both low-cost and low-risk, and Anthony could see he’d missed the chance to maximise her autonomy.

The lessons he learned from the video had a powerful impact on him, and from that day on he became much more adept at achieving truly shared decisions with his patients.

This article first appeared in the 01 October 2015 issue of the New Statesman, The Tory tide