There's a darker story behind the tax scandal

Need for transparency.

Until recently, tax has rarely been tabloid fodder. Apart from the occasional scandal, tax is just not particularly sexy or newsworthy. Or at least it wasn’t. If you’ve turned on the TV or looked at a newspaper recently, you will have noticed that while it still may lack something in the sex department, austerity has placed tax at the top of the business, political and news agendas.

Governments everywhere are keen to chase every potential pound of revenue and most are equally keen to reinforce the idea that this means everyone bearing an equal share of the burden. The chorus in the UK (and elsewhere) remains that we are “all in it together”. This in turn has led to a sharper focus on fairness and more scrutiny of the contribution made by wealthy individuals and big business.

Even though the vast majority of tax revenue comes from these sources (large firms contribute the bulk of corporation tax and the wealthiest few contribute more income tax than anyone else), there is still a feeling that those wealthy enough to be able to invest in legal means of minimising tax are not contributing as much as they should.

In such an atmosphere, it has been easy to find support for campaigns to “expose” those playing by the rules but not perhaps the spirit of all being in it together. The problem is that such schemes jar with prevailing public notions of the impacts of austerity, fairness and morality. Popular campaign groups, the press and even several senior politicians (most surprisingly including the business secretary) have weighed in to the debate with a wave of naming and shaming businesses in the same way that wealthy individuals were picked out for attention by the Times earlier in the year.

This approach led to the Public Accounts Committee summoning companies such as Starbucks, Amazon and Google to face tough questions about alleged tax avoidance with the result that all potentially face reputational damage. The potential for financial harm through subsequent lost sales has apparently been enough to push Starbucks to make the extremely unusual announcement of a voluntary £10m contribution this year with another £10m next year. This will be seen by some commentators as a capitulation to blackmail and by others as a poor attempt to buy back public favour. Conor Delaney, tax lawyer at Milestone International Tax Partners says the coffee giant has been “publicly embarrassed and blackmailed” into the payments.

So it is into this lively arena that PwC has launched a new report into the total tax contribution made by businesses at the smaller end of the spectrum. Produced on behalf of Prelude Group, an entrepreneurial support and training business that has been described as a “do tank rather than a think tank”, it uses PwC’s Total Tax Contribution methodology to work out the long-term contribution of seven fast-growth businesses.

The unsung heroes of business: entrepreneurs and their total tax contribution, highlights just how much these businesses contribute to the UK economy, through a combination of direct and indirect tax payments. Importantly it also dismisses the increasingly popular notion that all businesses and all entrepreneurs are obsessed with avoiding tax. As Alex Cheatle, co-founder of lifestyle management business Ten Group, and one of the entrepreneurs who opened his books for the report, says, “Like most entrepreneurs I am obsessed with creating high quality products and services and building a team; I am not obsessed with reducing the rate of corporation tax”.

He claims that £34 of every £120 he gets from a customer goes in tax. According to calculations in the report, over the last five years his business has made a tax contribution of equivalent to 789 entry-level nurses, while Instant Offices (another business featured) has contributed the equivalent of 920, and (appropriately enough) Health Management has contributed the equivalent of 1,170. All together the seven businesses analysed in this report have generated a total tax contribution of £104.2m over the last five years.

This report represents a laudable attempt to place a more positive spin on the contribution made by business. And it is essential that the message gets out that just as the vast majority of individual taxpayers at all income levels are paying their way, so most businesses make a huge contribution to the wealth of the economy.

But there is a darker, unspoken story here. None of the entrepreneurs mention it, but surely they must baulk at the fact that they are not operating on a level playing field when it comes to tax. Those with the international operations and the resources to do so can apparently avail themselves of systematic, informal tax breaks, those that don’t have the wherewithal can’t. While many business owners appreciate the government’s efforts to reduce the UK’s corporation tax rate to one of the lowest in Europe, many more would appreciate greater resource being given to HMRC and greater emphasis on closing loopholes.

The Starbucks case shows the importance of business reputation, but what it really highlights is the need for greater tax transparency.

Starbucks was “publicly embarrassed and blackmailed”. Photograph: Getty Images

Richard Cree is the Editor of Economia.

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How Donald Trump is slouching towards the Republican nomination

There was supposed to be a ceiling above which Trump’s popular support could not climb.

In America, you can judge a crowd by its merchandise. Outside the Connecticut Convention Centre in Hartford, frail old men and brawny moms are selling “your Trump 45 football jerseys”, “your hats”, “your campaign buttons”. But the hottest item is a T-shirt bearing the slogan “Hillary sucks . . . but not like Monica!” and, on the back: “Trump that bitch!” Inside, beyond the checkpoint manned by the Transportation Security Administration and the secret service (“Good!” the man next to me says, when he sees the agents), is a family whose three kids, two of them girls, are wearing the Monica shirt.

Other people are content with the shirts they arrived in (“Waterboarding – baptising terrorists with freedom” and “If you don’t BLEED red, white and blue, take your bitch ass home!”). There are 80 chairs penned off for the elderly but everyone else is standing: guys in motorcycle and military gear, their arms folded; aspiring deal-makers, suited, on cellphones; giggling high-school fatsos, dressed fresh from the couch, grabbing M&M’s and Doritos from the movie-theatre-style concession stands. So many baseball hats; deep, bellicose chants of “Build the wall!” and “USA!”. (And, to the same rhythm, “Don-ald J!”)

A grizzled man in camouflage pants and combat boots, whose T-shirt – “Connecticut Militia III%” – confirms him as a member of the “patriot” movement, is talking to a zealous young girl in a short skirt, who came in dancing to “Uptown Girl”.

“Yeah, we were there for Operation American Spring,” he says. “Louis Farrakhan’s rally of hate . . .”

“And you’re a veteran?” she asks. “Thank you so much!”

Three hours will pass. A retired US marine will take the rostrum to growl, “God bless America – hoo-rah!”; “Uptown Girl” will play many more times (much like his speeches, Donald J’s playlist consists of a few items, repeated endlessly), before Trump finally looms in and asks the crowd: “Is this the greatest place on Earth?”

There was supposed to be a ceiling above which Trump’s popular support could not climb. Only a minority within a minority of Americans, it was assumed, could possibly be stupid enough to think a Trump presidency was a good idea. He won New Hampshire and South Carolina with over 30 per cent of the Republican vote, then took almost 46 per cent in Nevada. When he cleaned up on Super Tuesday in March, he was just shy of 50 per cent in Massachusetts; a week later, he took 47 per cent of the votes in Mississippi.

His rivals, who are useless individually, were meant to co-operate with each other and the national party to deny him the nomination. But Trump won four out of the five key states being contested on “Super-Duper Tuesday” on 15 March. Then, as talk turned to persuading and co-opting his delegates behind the scenes, Trump won New York with 60 per cent.

Now, the campaign is trying to present Trump as more “presidential”. According to his new manager, Paul Manafort, this requires him to appear in “more formal settings” – without, of course, diluting “the unique magic of Trump”. But whether or not he can resist denouncing the GOP and the “corrupt” primary system, and alluding to violence if he is baulked at at the convention, the new Trump will be much the same as the old.

Back in Hartford: “The Republicans wanna play cute with us, right? If I don’t make it, you’re gonna have millions of people that don’t vote for a Republican. They’re not gonna vote at all,” says Trump. “Hopefully that’s all, OK? Hopefully that’s all, but they’re very, very angry.”

This anger, which can supposedly be turned on anyone who gets in the way, has mainly been vented, so far, on the protesters who disrupt Trump’s rallies. “We’re not gonna be the dummies that lose all of our jobs now. We’re gonna be the smart ones. Oh, do you have one over there? There’s one of the dummies . . .”

There is a frenzied fluttering of Trump placards, off to his right. “Get ’em out! . . . Don’t hurt ’em – see how nice I am? . . . They really impede freedom of speech and it’s a disgrace. But the good news is, folks, it won’t be long. We’re just not taking it and it won’t be long.”

It is their removal by police, at Trump’s ostentatious behest, that causes the disruption, rather than the scarcely audible protesters. He seems to realise this, suddenly: “We should just let ’em . . . I’ll talk right over them, there’s no problem!” But it’s impossible to leave the protesters where they are, because it would not be safe. His crowd is too vicious.

Exit Trump, after exactly half an hour, inclusive of the many interruptions. His people seem uplifted but, out on the street, they are ambushed by a large counter-demonstration, with a booming drum and warlike banners and standards (“Black Lives Matter”; an image of the Virgin of Guadalupe, holding aloft Trump’s severed head). Here is the rest of the world, the real American world: young people, beautiful people, more female than male, every shade of skin colour. “F*** Donald Trump!” they chant.

After a horrified split-second, the Trump crowd, massively more numerous, rallies with “USA!” and – perplexingly, since one of the main themes of the speech it has just heard was the lack of jobs in Connecticut – “Get a job!” The two sides then mingle, unobstructed by police. Slanging matches break out that seem in every instance to humiliate the Trump supporter. “Go to college!” one demands. “Man, I am in college, I’m doin’ lovely!”

There is no violence, only this: some black boys are dancing, with liquid moves, to the sound of the drum. Four young Trump guys counter by stripping to their waists and jouncing around madly, their skin greenish-yellow under the street lights, screaming about the building of the wall. There was no alcohol inside; they’re drunk on whatever it is – the elixir of fascism, the unique magic of Trump. It’s a hyper but not at all happy drunk.

As with every other moment of the Trump campaign so far, it would have been merely some grade of the cringeworthy – the embarrassing, the revolting, the pitiful – were Trump not slouching closer and closer, with each of these moments, to his nomination. 

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism