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

Matthew Lewis/Getty
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120 years on, and rugby league is still patronised as “parochial”

Even as Leeds and Hull Kingston Rovers do battle in the 2015 Challenge Cup final, the century-old conflict between rugby league and rugby union isn’t over.

When Leeds and Hull Kingston Rovers step out onto the hallowed Wembley turf on Saturday afternoon it will be a celebration, regardless of the result. The final of rugby league’s oldest competition is expected to be watched by over 85,000 fans, with countless more watching on the BBC. And the reason for celebration? This year’s Challenge Cup final falls on rugby league’s 120th birthday. 

Saturday will mark exactly 120 years to the day that the custodians of 22 clubs rendez-voused at the George Hotel in Huddersfield to split from the amateur Rugby Football Union (RFU). The teams who formed the guerrilla organisation were dependent on millworkers, miners and dockers who unlike their more affluent and privately-educated southern counterparts, could ill-afford to miss work to play rugby. As such, the Northern Football Union (which later changed its name to the Rugby Football League) announced its separation from the RFU and immediately accepted the principal of receiving payment for playing. Taking the schism as a declaration of war, the RFU struck back by issuing lifetime bans to any player associated with its northern kin. 

Neither league’s revolutionary spirit nor the promise of a pay cheque lead to a change in fortunes, though. It remains, according to one journalist, a “prisoner of geography”, ensnared by its older kin. Wembley is its parole, the chains are off, for but a short while, as league earns a pass out of its Northern confinement. Union, on the other hand, is the dominant code in terms of finances, participation numbers and global reach, while league is still viewed as a “parochial” sport. 

To understand why league is viewed as parochial, and union global, the writings of the Italian Marxist Antonio Gramsci on cultural hegemony are particularly useful. Union embodies the resource-rich and powerful historic bloc, institutionalised through its strong standing within public-schools and its big-business connections. League, on the other hand represents the downtrodden and plucky subaltern. Its agency has only stretched so far as to command superior TV figures perhaps a ringing endorsement from the masses.

In order to quell its fellow oval-chasing brethren there are examples of union shockingly suppressing the spread of league. In France the 13-a-side code had overthrown union’s dominance as hundreds of clubs switched to le treize towards the end of the 1930s. As the Second World War divided France, union bigwigs held office with members of the Nazi-collaborating Vichy government who were persuaded to outlaw rugby league once and for all. 

On 19 December 1941 a decree forced league clubs to hand over kit, stadia and funds to their union counterparts. The game has never fully recovered in France, although two Frenchman are in contention to play for Rovers on Saturday – Kevin Larroyer and John Boudebza, testament to the art of treizistance.

There are other instances of union dignitaries stifling league’s growth in places as wide-ranging as Japan, Serbia, South Africa and Italy. Examples exist in the United Kingdom too. Cambridge student Ady Spencer was banned by the RFU from playing in the Varsity Rugby Union match having enjoyed the rigours of league as a youngster in his native Warrington. The incident was subject to a parliamentary motion in 1995 being condemned as an “injustice and interference with human rights”.

But even as rugby union followed its heretic sibling into professionalism a century after the split there’s little to suggest the relationship has changed, highlighted this year through the case of Sol Mokdad. A Lebanese national, Mokdad will be watching the final in Beirut with friends, but it’s a far cry from where he was just a few months ago – locked up in a jail cell in Dubai at the behest of UAE Rugby Union (UAERU). 

“I moved to the UAE in 2006 and set up rugby league there a year later. I was arrested for fraud and for setting up a competition without the UAERU’s permission,” he tells me. “I was baffled as they’re a completely different body. It’s like the Cricket Federation demanding that they control all baseball matches. We’d just got a huge deal with Nissan to sponsor our competition which the UAERU weren’t happy about. They said I’d impersonated their president in order to get the money which was a complete lie. They weren’t too happy that we were getting a lot of exposure in western media outlets too, because I’d suggested that the UAE would be a good place to host the World Cup, that’s where it all started to go wrong.”

“I was at a corporate event when I got a phone call to say that UAERU had ordered my arrest. I tried ringing my mate George Yiasemides who was the COO of UAE Rugby League. He’d promised to help me out, but he didn’t want anything to do with me. He sold me down the river. I was chucked into a cockroach-infested cell. The bathrooms were covered in s**t  and I was locked up for 14 days with no contact with the outside world.” 

Eventually an agreement was reached and all Mokdad had to do was sign a document which would guarantee his release, subject to conditions. Easy enough right? But as he explains it wasn’t. 

“They sent me to the wrong police station and when I eventually got hold of the document they’d added conditions I hadn’t agreed too. I had to make a public apology on all of our social media, destroy all documentation and was told that I was financially liable for any damages or legal fees that may come up in the future. Any monies gained from our sponsorship was to be handed over to the UAERU, as well as having to agree to never participate in any rugby activity in the UAE again.”

Homeless, broke and jobless, Mokdad returned to his native Lebanon and he is unsure of where his future lies. “I definitely want to stay in the sport however I can. It was incredibly hard to leave what I’d created in Dubai.” he says. “I still think about it now. It was so surreal.” 

He’s backing Leeds in the final, in case you were wondering. Although it all makes Saturday’s game seem rather irrelevant if in 2015 you can be jailed for establishing a sport. Perhaps it shows more than ever, that after 120 years of separation, rugby league is still trying to shake off the shackles of its older brother.