Getting the taxes paid

19 Nov

Some recent stories in the press and radio have brought to light the fact that many large firms operating in the UK pay little or no tax. This reminds me of the infamous quote from Leona Helmsley, ‘We don’t pay taxes. Only the little people pay taxes’. Two of the worst offenders are Starbucks and Amazon. Starbuck have arranged their finances so that the profits appear in Switzerland, but are generated in the UK. They claim not to have made an operating profit in the UK for over ten years. This is, according to the company, legal tax avoidance. Legal, possibly; immoral, definitely. Amazon Europe have an arrangement whereby they are registered for tax in Luxemburg, an EU state.
We have a crisis in the EU because not enough money is coming into the coffers of the various governments to pay for the necessities of society in terms of healthcare, education and many other things. Some of the smaller states, such as Luxemburg are able to offer much lower rates of tax to companies than the larger countries. A small percentage of the earnings of a large multi-national company is a lot of money for a small country. Greece in particular has suffered, and continues to suffer, from people not paying taxes. These are rich people and companies, able to make arrangements whereby they do not pay tax at the proper rate.
I propose a solution to this problem. Now, I understand that it would require agreement throughout the EU to change corporate tax arrangements. That is, every country would have to agree the change. This is not to the benefit of Luxemburg and other small countries. Here is the answer. Firstly, if you trade in the EU you have to pay taxes in the EU. Switzerland is outside the EU, by the way. The EU is a big financial block and multi-national companies would not argue too much about this if it was agreed by a unanimous vote. Arrangements such as Starbucks have could be declared illegal, and an estimate of taxes to be paid provided. If they fail to pay they will be told to get out. Secondly, the taxes should be paid where the profits are generated, that is a fair principal. To get this agreed, the tax paid to the small countries should be ring-fenced, but additional taxes charged according to where the profit is generated, minus the tax paid to the registered company, and maybe a small sweetener for agreeing to this change.
If such arrangements were put rapidly in place, a degree of fairness could be introduced to the system, the companies would know what their responsibilities were, a level playing field would be introduced and money would go where it was needed. If the EU represents anything it should be free trade. As a block it is big enough to enforce these changes.

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One Response to “Getting the taxes paid”

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  1. Getting the taxes paid « Jon Wakeham's Blog - November 19, 2012

    […] Getting the taxes paid. […]

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