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.

Drew Angerer/Getty Images
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Donald Trump wants to terminate the Environmental Protection Agency - can he?

"Epa, Epa, Eeeepaaaaa" – Grampa Simpson.

 

There have been countless jokes about US President Donald Trump’s aversion to academic work, with many comparing him to an infant. The Daily Show created a browser extension aptly named “Make Trump Tweets Eight Again” that converts the font of Potus’ tweets to crayon scrawlings. Indeed, it is absurd that – even without the childish font – one particular bill that was introduced within the first month of Trump taking office looked just as puerile. Proposed by Matt Gaetz, a Republican who had been in Congress for barely a month, “H.R. 861” was only one sentence long:

“The Environmental Protection Agency shall terminate on December 31, 2018”.

If this seems like a stunt, that is because Gaetz is unlikely to actually achieve his stated aim. Drafting such a short bill without any co-sponsors – and leaving it to a novice Congressman to present – is hardly the best strategy to ensure a bill will pass. 

Still, Republicans' distrust for environmental protections is well-known - long-running cartoon show The Simpsons even did a send up of the Epa where the agency had its own private army. So what else makes H.R. 861 implausible?

Well, the 10-word-long statement neglects to address the fact that many federal environmental laws assume the existence of or defer to the Epa. In the event that the Epa was abolished, all of these laws – from the 1946 Atomic Energy Act to the 2016 Frank R. Lautenberg Chemical Safety for the 21st Century Act – would need to be amended. Preferably, a way of doing this would be included in the bill itself.

Additionally, for the bill to be accepted in the Senate there would have to be eight Democratic senators who agreed with its premise. This is an awkward demand when not even all Republicans back Trump. The man Trum appointed to the helm of the Epa, Scott Pruitt, is particularly divisive because of his long opposition to the agency. Republican Senator Susan Collins of Maine said that she was hostile to the appointment of a man who was “so manifestly opposed to the mission of the agency” that he had sued the Epa 14 times. Polls from 2016 and 2017 suggests that most Americans would be also be opposed to the agency’s termination.

But if Trump is incapable of entirely eliminating the Epa, he has other ways of rendering it futile. In January, Potus banned the Epa and National Park Services from “providing updates on social media or to reporters”, and this Friday, Trump plans to “switch off” the government’s largest citizen-linked data site – the Epa’s Open Data Web Service. This is vital not just for storing and displaying information on climate change, but also as an accessible way of civilians viewing details of local environmental changes – such as chemical spills. Given the administration’s recent announcement of his intention to repeal existing safeguards, such as those to stabilise the climate and protect the environment, defunding this public data tool is possibly an attempt to decrease awareness of Trump’s forthcoming actions.

There was also a recent update to the webpage of the Epa's Office of Science and Technology, which saw all references to “science-based” work removed, in favour of an emphasis on “national economically and technologically achievable standards”. 

Trump’s reshuffle of the Epa's priorities puts the onus on economic activity at the expense of public health and environmental safety. Pruitt, who is also eager to #MakeAmericaGreatAgain, spoke in an interview of his desire to “exit” the 2015 Paris Climate Agreement. He was led to this conclusion because of his belief that the agreement means “contracting our economy to serve and really satisfy Europe, and China, and India”.

 

Rather than outright closure of the Epa, its influence and funding are being leached away. H.R. 861 might be a subtle version of one of Potus’ Twitter taunts – empty and outrageous – but it is by no means the only way to drastically alter the Epa’s landscape. With Pruitt as Epa Administrator, the organisation may become a caricature of itself – as in The Simpsons Movie. Let us hope that the #resistance movements started by “Rogue” Epa and National Parks social media accounts are able to stave off the vultures until there is “Hope” once more.

 

Anjuli R. K. Shere is a 2016/17 Wellcome Scholar and science intern at the New Statesman

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