Is tax just a question of ethics?

In the wake of Starbucks’ tax U-turn, we need to acknowledge that multinationals already choose whether to pay tax or not - and make them pay their fair share.

So Starbucks is paying up.

Whether or not they will ever pay back all the tax they’ve allegedly avoided is still unclear. But the company’s announcement yesterday that they will “pay or pre-pay” around £20m to the Exchequer in the next two years is hugely significant for all sorts of other reasons. It proves the power of consumer democracy, showing that damage to a brand can reverse a company’s behaviour in a matter of weeks. It moves tax from the backroom of a tax negotiation to the heart of a corporation’s public responsibility to the countries and communities where it does business. And it throws the gauntlet down to other multinationals which use exactly the same kind of intra-company payments to shrink their tax bills, not just in the UK but around the world.

But some are already raising concerns that Starbuck’s back-down heralds a worrying new age of voluntary tax: at best, companies claiming that paying tax is philanthropy rather than legal duty, at worst a sort of ‘tax by mob rule’. The New Statesman’s Martha Gill argues that we’re approaching “a tax system which relies on public pressure to a few high profile firms” rather than changing the rules themselves.

Of course we need to change the rules, and we can’t rely simply on companies behaving themselves. Nor should we be replacing clear, certain tax laws with judicial or media activism. But the unappetising truth is that we are already living in an age of voluntary corporate tax for large multinationals, and have been for some time. If this is true in the UK, where online businesses can effectively choose whether to book their profits from UK sales in the UK itself or in a tax haven, then this is even more the case across Africa, Asia and Latin America, where countries lack our armour of anti-avoidance legislation, and whose tax inspectors are far more overstretched than even cuts-threatened HMRC.

In this environment, it’s gone largely unremarked that a few multinationals are already taking a different tack in complying with the "letter of the law". Financial services firm Hargreaves Lansdown, for example, has no tax haven subsidiaries, despite operating within a sector no stranger to "offshore". Legal and General explicitly aims to be categorised within the "low risk" category of HMRC’s risk rating. This is not to endorse these companies’ business practices, or even their tax affairs, but to point out that companies already make active choices, all the time, about their tax structuring. Starbucks’ announcement may go further than the others, and beyond the existing rules. But ironically, their corporate spin on their "voluntary" tax payments is actually a refreshing shot of reality: it calls a spade a spade, acknowledging that the rules are currently so wide that companies can indeed choose whether to pay tax. That’s an ethical choice, whether we like it or not.

Changing the rules to stop corporate tax being just “a bit of a bonus”, to be paid as and when companies choose, will ultimately require international action. To take just one slightly technical example: stopping companies booking their "UK" profits through Irish or Luxembourgish subsidiaries may arguably require strengthening the tax-law definition of a "permanent establishment", to allow national tax authorities to tax profits actually generated in a given country by a low-tax affiliate company registered elsewhere, and prevent that company’s profits floating free like a pirate ship in international waters. A change that will need to be written into both domestic laws and dozens of international tax treaties. And far more far-reaching reform is needed than that.

Next year offers a raft of vital opportunities at the G8 and elsewhere to start changing the international rules in earnest. Like all international action, it will take some time. In the meantime, countries all around the world, including the poorest, are haemorrhaging revenues into tax havens faster than they receive aid. While we wait for the rules to be changed, other multinationals need to explain why they now can’t or shouldn’t start paying their fair share of taxes: companies like Grolsch and Peroni owner SABMiller, whose perfectly legal Starbucks-type transactions we estimate have deprived African and Asian countries of enough revenues to put a quarter of a million children in school. It’s right that consumers should put these questions to companies. And that governments too should use their purchasing power to stop buying from tax avoiders, as a quiet announcement tucked away at the back of yesterday’s Autumn Statement suggests the UK government is mulling. At stake is not just a guilt-free cup of coffee, but revenues that are needed – right now – in the UK and some of the world’s poorest places.

Starbucks. Photograph: Getty Images

Mike Lewis is a tax justice campaigner at ActionAid

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Forget the flat caps - this is what Labour voters really look like

Young, educated women are more typical than older, working-class men. 

In announcing the snap election, Theresa May set out her desire to create a “more united” country in the aftermath of last year’s referendum. But as the campaign begins, new YouGov analysis of over 12,000 people shows the demographic dividing lines of British voters.

Although every voter is an individual, this data shows how demographics relate to electoral behaviour. These divides will shape the next few weeks – from the seats the parties target to the key messages they use. Over the course of the campaign we will not just be monitoring the “headline” voting intention numbers, but also the many different types of voters that make up the electorate. 

Class: No longer a good predictor of voting behaviour

“Class” used to be central to understanding British politics. The Conservatives, to all intents and purposes, were the party of the middle class and Labour that of the workers. The dividing lines were so notable that you could predict, with a reasonable degree of accuracy, how someone would vote just by knowing their social grade. For example at the 1992 election the Conservatives led Labour amongst ABC1 (middle class) voters by around 30 percentage points, whilst Labour was leading amongst C2DE (working class) voters by around 10 points.

But today, class would tell you little more about a person’s voting intention that looking at their horoscope or reading their palms. As this campaign starts, the Conservatives hold a 22 per cent lead amongst middle class voters and a 17 per cent lead amongst working class ones.

Age: The new dividing line in British politics

In electoral terms, age is the new class. The starkest way to show this is to note that Labour is 19 per cent ahead when it comes to 18-24 year-olds, and the Conservatives are ahead by 49 per cent among the over 65s. Our analysis suggest that the current tipping point – which is to say the age where voters are more likely to favour the Conservatives over Labour – is 34.

In fact, for every 10 years older a voter is, their chance of voting Tory increases by around 8 per cent and the chance of them voting Labour decreases by 6 per cent. This age divide could create further problems for Labour on 8 June. Age is also a big driver of turnout, with older people being far more likely to vote than young people. It’s currently too early to tell the exact impact this could have on the final result.

Gender: The Conservative’s non-existent “women problem”

Before the last election David Cameron was sometimes described as having a “woman problem”. Our research at the time showed this narrative wasn’t quite accurate. While it was true that the Conservativexs were doing slightly better amongst young men than young women, they were also doing slightly better among older women than older men.

However, these two things cancelled each other out meaning that ultimately the Conservatives polled about the same amongst both men and women. Going into the 2017 election women are, if anything, slightly more (three percentage points) likely overall to vote Tory.

Labour has a large gender gap among younger voters. The party receives 42 per cent of the under-40 women’s vote compared to just 32 per cent amongst men of the same age – a gap of nine points. However among older voters this almost disappears completely. When you just look at the over-40s, the gap is just two points – with 21 per cent of women and 19 per cent of men of that age saying they will vote Labour.

With both of the two main now parties performing better amongst women overall, it’s the other parties who are balancing this out by polling better amongst men. Ukip have the support of 2 per cent more men than women, whilst the gender gap is 3 per cent for the Lib Dems. 

Education: The higher the qualification, the higher Labour’s vote share

Alongside age, education has become one of the key electoral demographic dividing lines. We saw it was a huge factor in the EU referendum campaign and, after the last general election, we made sure we accounted for qualifications in our methodology. This election will be no different. While the Conservatives lead amongst all educational groupings, their vote share decrease for every extra qualification a voter has, whilst the Labour and Lib Dem vote share increases.

Amongst those with no formal qualifications, the Conservative lead by 35 per cent. But when it comes to those with a degree, the Tory lead falls to 8 per cent. Education also shapes other parties’ vote shares. Ukip also struggles amongst highly educated voters, polling four times higher amongst those with no formal qualifications compared to those with a degree.

Income: Labour’s tax increase won’t affect many Labour voters

John McDonnell, Labour’s Shadow Chancellor, has already made income part of this campaign by labelling those who earn above £70,000 a year as “rich” and hinting they may face tax rises. One of the reasons for the policy might be that the party has very few votes to lose amongst those in this tax bracket.

Amongst those earning over £70,000 a year, Labour is in third place with just 11 per cent support. The Conservatives pick up 60 per cent of this group’s support and the Lib Dems also perform well, getting almost a fifth (19 per cent) of their votes.

But while the Conservatives are still the party of the rich, Labour is no longer the party of the poor. They are 13 per cent behind amongst those with a personal income of under £20,000 a year, although it is worth noting that this group will also include many retired people who will be poor in terms of income but rich in terms of assets.

Chris Curtis is a politics researcher at YouGov. 

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