Tax: what's a fair share?

The Public Accounts Committee is back on the tax trail.

And so the Public Accounts Committee (PAC) is back on the tax trail. Although did it ever really stop? Certainly, despite the upbeat assessments of the economy made by outgoing Bank of England governor Sir Mervyn King, the pressures on public and private purses haven’t eased. This explains the strength of public feeling that everyone should contribute a fair share of income in taxation. The tricky bit, as the PAC is discovering, is that working out exactly what constitutes a fair share isn’t as straightforward as it might seem.

Having previously called in the tax partners of the Big Four accountancy firms and the heads of companies already publicly called out for not coughing up as much to Treasury coffers as they might (step forward the apparently unholy trinity of Google, Amazon and Starbucks), this round of committee sessions will see some of the same faces hauled back in to answer many of the same questions.

Earlier this week I was at an event where one senior member of the committee was less than positive about the current direction the committee is taking.

He didn’t seem to agree that this fixation on the effective corporation tax rates of firms who decide to base their head quarters overseas was the best use of the committee’s time and resources.

Elsewhere this week tax campaigners UK Uncut Legal Challenge failed in their bid to bring HMRC to book for what UK Uncut claimed was an unlawful deal struck between HMRC and Goldman Sachs.

In dismissing the case the judge agreed that the deal had not been HMRC’s finest hour but he found nothing unlawful about it. To some extent UK Uncut has achieved some of its objectives by bringing the issue of the way big business deals with HMRC into the spotlight and raising the profile of the Goldman’s case in particular. For its part, HMRC continues to deny claims that it is soft on big business.

But getting money out of most large organisations and wealthy individuals is tougher than it should be. And it is certainly tougher than chasing small business owners. In reality, striking a deal with wealthy corporations or individuals might end up being the quickest, simplest and most cost-effective approach to collecting revenues. Ideally this agreement would be one that displeases the entity paying tax more than it does HMRC (although one that displeases both sides a little is probably the most likely outcome). While such an approach may well be cost effective, without the disinfectant of greater transparency such deals will always stink a bit.

Two phrases that have been bandied around so much in the last 18 months that they are rapidly becoming cliché are that we need greater transparency, and that we need a simpler tax system.

Whether Google, Amazon, Goldman Sachs or anyone else with tax affairs complex enough to involve a potential settlement with HMRC has anything to hide or not, the mere fact that details are kept out of the public eye raises suspicions.

The tax affairs of individuals and corporates are between them and HMRC, but if they opt out of the system that the small business owner or the proverbial hard-working family has to settle for then they should do so in the knowledge that the details of the settlement will be made public.

This article first appeared on economia

Photograph: Getty Images

Richard Cree is the Editor of Economia.

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Amber Rudd's report on the benefits of EU immigration is better late than never

The study will strengthen the case for a liberal post-Brexit immigration system. 

More than a year after vowing to restrict EU immigration, the government has belatedly decided to investigate whether that's a good idea. Home Secretary Amber Rudd has asked the independent Migration Advisory Committee to report on the costs and benefits of free movement to the British economy.

The study won't conclude until September 2018 - just six months before the current Brexit deadline and after the publication of the government's immigration white paper. But in this instance, late is better than never. If the report reflects previous studies it will show that EU migration has been an unambiguous economic benefit. Immigrants pay far more in tax than they claim in benefits and sectors such as agriculture, retail and social care depend on a steady flow of newcomers. 

Amber Rudd has today promised businesses and EU nationals that there will be no "cliff edge" when the UK leaves the EU, while immigration minister Brandon Lewis has seemingly contradicted her by baldly stating: "freedom of movement ends in the spring of 2019". The difference, it appears, is explained by whether one is referring to "Free Movement" (the official right Britain enjoys as an EU member) or merely "free movement" (allowing EU migrants to enter the newly sovereign UK). 

More important than such semantics is whether Britain's future immigration system is liberal or protectionist. In recent months, cabinet ministers have been forced to acknowledge an inconvenient truth: Britain needs immigrants. Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. Brexit Secretary David Davis, for instance, recently conceded that immigration woud not invariably fall after the UK leaves the EU. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants." 

In this regard, it's striking that Brandon Lewis could not promise that the "tens of thousands" net migration target would be met by the end of this parliament (2022) and that Rudd's FT article didn't even reference it. As George Osborne helpfully observed earlier this year, no senior cabinet minister (including Rudd) supports the policy. When May departs, whether this year or in 2019, she will likely take the net migration target with her. 

In the meantime, even before the end of free movement, net migration has already fallen to its lowest level since 2014 (248,000), while EU citizens are emigrating at the fastest rate for six years (117,000 left in 2016). The pound’s depreciation (which makes British wages less competitive), the spectre of Brexit and a rise in hate crimes and xenophobia are among the main deterrents. If the report does its job, it will show why the UK can't afford for that trend to continue. 

George Eaton is political editor of the New Statesman.