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.

Getty
Show Hide image

Hillary Clinton can take down the Donald Trump bogeyman - but she's up against the real thing

Donald Trump still has time to transform. 

Eight years later than hoped, Hillary Clinton finally ascended to the stage at the Democratic National Convention and accepted the nomination for President. 

Like her cheerleaders, the Obamas, she was strongest when addressing the invisible bogeyman - her rival for President, Donald Trump. 

Clinton looked the commander in chief when she dissed The Donald's claims to expertise on terrorism. 

Now Donald Trump says, and this is a quote, "I know more about ISIS than the generals do"

No, Donald, you don't.

He thinks that he knows more than our military because he claimed our armed forces are "a disaster."

Well, I've had the privilege to work closely with our troops and our veterans for many years.

Trump boasted that he alone could fix America. "Isn't he forgetting?" she asked:

Troops on the front lines. Police officers and fire fighters who run toward danger. Doctors and nurses who care for us. Teachers who change lives. Entrepreneurs who see possibilities in every problem.

Clinton's message was clear: I'm a team player. She praised supporters of her former rival for the nomination, Bernie Sanders, and concluded her takedown of Trump's ability as a fixer by declaring: "Americans don't say: 'I alone can fix it.' We say: 'We'll fix it together.'"

Being the opposite of Trump suits Clinton. As she acknowledged in her speech, she is not a natural public performer. But her cool, policy-packed speech served as a rebuke to Trump. She is most convincing when serious, and luckily that sets her apart from her rival. 

The Trump in the room with her at the convention was a boorish caricature, a man who describes women as pigs. "There is no other Donald Trump," she said. "This is it."

Clinton and her supporters are right to focus on personality. When it comes to the nuclear button, most fair-minded people on both left and right would prefer to give the decision to a rational, experienced character over one who enjoys a good explosion. 

But the fact is, outside of the convention arena, Trump still controls the narrative on Trump.

Trump has previously stated clearly his aim to "pivot" to the centre. He has declared that he can change "to anything I want to change to".  In his own speech, Trump forewent his usual diatribe for statistics about African-American children in poverty. He talked about embracing "crying mothers", "laid-off factory workers" and making sure "all of our kids are treated equally". His wife Melania opted for a speech so mainstream it was said to be borrowed from Michelle Obama. 

His personal attacks have also narrowed. Where once his Twitter feed was spattered with references to "lying Ted Cruz" and "little Marco Rubio", now the bile is focused on one person: "crooked Hillary Clinton". Just as Clinton defines herself against a caricature of him, so Trump is defining himself against one of her. 

Trump may not be able to maintain a more moderate image - at a press conference after his speech, he lashed out at his former rival, Ted Cruz. But if he can tone down his rhetoric until November, he will no longer be the bogeyman Clinton can shine so brilliantly against.