Don't tax Amazon. Tax Amazon's shareholders

Corporations dodge tax. So go for their owners instead.

Tax avoidance is a problem which stubbornly refuses to be fixed. Even just defining our terms is problematic, with nearly every definition wide-ranging enough to cover all avoidance also including things which nobody finds objectionable.

And even if you could define it well, there's the fact that tax avoidance is, by its nature, legal. While some avoidance is truly, obviously, taking advantage of sloppy phrasing in statutes and judicial rulings, most of it exists in the grey area where it would be impossible to "tighten up" the law without also removing those deductions or exemptions which were supposed to be there in the first place. (For an example of this in action, look no further than the pasty tax debacle.)

The worst tax avoidance is undoubtedly in the corporate sector. While there are terrible examples of avoidance amongst individuals, like the New Yorker's examination of hedge-fund manager Julian Robertson's tax affairs, they are always hampered by the fact that actually offshoring personal income – the most effective form of avoidance, and the hardest to fight with the law – is tricky. People, after all, have a physical location. Some may become the infamous "non-doms", but to do that you have to spend half the year outside the country. That isn't something which can be achieved by just hiring a canny accountant.

While moralising can convince the worst corporate offenders to pay their fair share – as Starbucks finally agreed to do – it can't work every time. Some companies don't care about their image, others manage to hide their avoidance.

And so we come back to patching up the holes in the system. But with offshoring, some holes seem nearly unpatchable. For all the stirling work of campaigners like UK Uncut and Tax Research UK, the world is still no closer to agreeing on the best way to deal with multinationals which engage in creative "tax planning".

But there's one possibility: forget about them.

The reason why involves looking at the concept of tax incidence. If you accept that the only question of tax that matters is which people pay it, then corporation tax becomes a complicated issue. As a tax alters the bottom line of a company, one of two things will happen: either it will pass the costs on, or it won't. If it doesn't, then the actual people hit by the tax are the shareholders of the company, who see its profitability decline. (This is largely the intended outcome of campaigns against tax dodging.)

But if it does past the costs on, then either its customers and employees must bear the brunt, in the form of increased costs or decreased wages, or other businesses (such as suppliers or contractors) do, and the whole equation starts again.

(It is important to point out that the argument that all costs must be levied on a person at some point is not without its critics. After all, businesses have savings, assets, property and rights; who is to say that they can't be counted as people for the purpose of taxation? And the assumption at the heart of the argument is one which must be taken as faith. It's just as easy to argue, using the same logic, that the costs of all personal taxation must be borne at some point by businesses.)

Tax incidence varies business-to-business and over time. In the early 70s, when it was starting up in Washington state, Starbucks' tax incidence was almost certainly mostly upon its shareholders. Labour was expensive, coffee was a niche product, and investors in a small start-up were probably in for the long haul. Now that Starbucks has access to vast pools of low-wage labour and customers willing to pay up to $7 for a cup, it is far more likely that they will bear the brunt of much excess tax. (Although, of course, as John Elledge rightly points out, even then, it's not certain; and if there's anything we've learned from Lisa Pollack's investigation into the matter at the FT, it's that Starbucks' publicity machine holds a lot of sway within the company)

But here's the thing: if we want to tax just the shareholders of a company, we already have a way to do it. We tax dividends, and we tax capital gains. Increasing those taxes hits the people we hope would take the brunt of corporation taxes anyway.

So here's my proposal: scrap corporation tax, and whack up those two to make up the revenue gap.

There would be two big transfers inherent in this change: the first would be from shareholders in companies which pay little tax to shareholders in companies which pay a lot of tax. Since that's just another way to say "cracking down on tax avoidance", it need not upset us too much.

The other is more uncertain. By and large, international companies have international ownership. Those based in Britain with the majority of their shareholders overseas would be better off; those based overseas with the majority of their shareholders in Britain would be worse off. If the logic of the Conservatives, who have already cut corporation tax significantly, holds, we can expect that latter group to move headquarters here to take advantage of the rates; and if it doesn't, then we can expect the shareholders to sell up and buy into British companies.

There's a reason CGT and dividend taxes are so low, of course, which is to encourage investment. But since we would expect pre-tax shareholder income to go up, investment ought to still be compelling. It would just be targeted more effectively at companies which could actually make a profit, rather than those which could only make a profit if they were avoiding tax which their competitors were not.

If we can stop the biggest corporations avoiding tax, we ought to. But if trying to tax aggregations of people which can twist across country borders with ease is permanently difficult, perhaps we ought to stop trying it, and do something better instead.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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“It was like a religious ceremony”: What happened at Big Ben’s final bong?

Both inside and outside Parliament, people gathered to hear the clock’s final midday chime before undergoing repairs.

“It’s just hacks everywhere,” a photographer sighs, jamming his lens through a gap in Parliament’s railings to try and get a closer look.

New Palace Yard, Parliament’s courtyard directly below Big Ben, is filling with amused-looking journalists, waiting for the MPs who have promised to hold a “silent vigil”, heads bowed, to mark Big Ben’s final chime before four years of silence while the tower’s repaired.

About four of them turn up. Two by accident.

It’s five minutes to twelve. Tourists are gathering outside Westminster Tube, as tourists do best. A bigger crowd fills Parliament Square. More people than expected congregate outside, even if it’s the opposite within the Palace. The world and his phone are gazing up at the sad, resigned clock face.


“It’s quite controversial, isn’t it?” one elderly woman in an anorak asks her friend. They shrug and walk off. “Do you know what is this?” an Italian tourist politely asks the tiny press pack, gesturing to the courtyard. No one replies. It’s a good question.

“This is the last time,” says another tourist, elated, Instagram-poised.

“DING DONG DING DONG,” the old bell begins.

Heads down, phones up.


It finishes the on-the-hour tune for the last time, and then gives its much-anticipated resignation statement:

“BONG. BONG. BONG. BONG. BONG. BONG. BONG. BONG. BONG. BONG. BONG. BONG.”

Applause, cheers, and even some tears.


But while the silly-seasoned journalists snigger, the crowd is enthusiastic.

“It’s quite emotional,” says David Lear, a 52-year-old carer from Essex, who came up to London today with his work and waited 45 minutes beneath Big Ben to hear it chime.

He feels “very, very sad” that the bell is falling silent, and finds the MPs’ vigil respectful. “I think lots of people feel quite strongly about it. I don’t know why they’re doing it. During the war it carries on, and then they turn it off for a health and safety reason.”

“I don’t know why they can’t have some speakers half way down it and just play the chime,” he adds. “So many tourists come especially to listen to the chime, they gather round here, getting ready for it to go – and they’re going to switch it off. It’s crazy.”

Indeed, most of the surrounding crowd appears to be made up of tourists. “I think that it was gorgeous, because I’ve never heard him,” smiles Cora, an 18-year-old German tourist. “It was a great experience.”

An Australian couple in their sixties called Jane and Gary are visiting London for a week. “It was like a religious ceremony, everybody went quiet,” laughs Gary. “I hope they don’t forget where they put the keys to start it again in four years’ time.”

“When we first got here, the first thing we did was come to see it,” adds Jane, who is also positive about the MPs who turned up to watch. “I think it’s good they showed a bit of respect. Because they don’t usually show much respect, do they?”

And, as MPs mouthing off about Big Ben are challenged on their contrasting reactions to Grenfell, that is precisely the problem with an otherwise innocent show of sentimentality.

Anoosh Chakelian is senior writer at the New Statesman.