The call for big companies and wealthy individuals to pay more tax has gathered pace over recent months.
The latest public finance figures tell a story of two countries, where the public paid more and the corporations paid less. The corporation tax take was down 10 per cent for the year to October, whilst tax and VAT receipts were up 6.4 per cent.
Her Majestys Revenue and Customs (HMRC) believe that the tax gap – the amount that corporations ought to be paying versus what they are – is £4.1 billion. This amount would build 300 new schools, provide 430,000 nursery places or 153,000 nurses.
Overall, HMRC estimates that in 2010/11 it was deprived of £9.6 billion in VAT, with £3.3 billion in excise duties, and £14.4 billion in income tax revenues, national insurance contributions and capital gains tax. The HMRC say that the tax gap for the whole economy amounted to £32 billion in 2010/11 or a third of the deficit of £120 billion for 2012/13
Multinational corporations like Starbucks, Amazon, Vodafone and Google have been exposed over the lack of taxes that they pay in this country, despite using the facilities provided courtesy of the tax payer to make handsome profits.
The extent of the tax avoidance became clear at the hearings of the Public Accounts Committee, where the MPs view was that it maybe legal to avoid paying tax but it was not moral.
At the hearings, it was revealed Starbucks paid £8.6m in corporation tax over 14 years of trading in Britain, and none for the past three years, despite sales of £1.2bn in the UK. Starbucks pays a royalty to its parent company in the Netherlands, which offsets profits here.
Amazon reported turnover of £207m in 2011 for its UK operation, on which it paid tax of £1.8m. However, Amazon provided the PAC with information showing that for 2011, £3.35bn of its sales were from the UK, 25 per cent of all sales outside the United States. Its profits are booked in Luxembourg, where the tax is paid.
Google recorded revenues of £396m in 2011 in the UK and paid corporation tax of only £6m. However it is estimated that Google actually had £2.75bn of revenue from its operations in the UK with an estimated pre-tax profit of £836m. Google’s profits are registered in Ireland.
Not to be forgotten, Vodafone increased its underlying earnings in the UK before interest and tax from £1.2 billion to £1.3 billion to March 2011, yet paid no corporation tax.
The truth is that tax avoidance by both companies and highly paid individuals is huge in the UK.
On the individual front there have been the cases of celebrities like comedian Jimmy Carr using schemes to avoid tax. Carr though has since stopped using the much publicised offshore scheme.
Central to the debate at an individual and corporation level is a moral question about avoiding tax. It would seem at many levels it is legal to avoid paying taxes but to do so is also immoral because it amounts to stealing from the rest of us. Failure to pay tax means that there is less money for the NHS, health, education and welfare.
The need to get a grips with the multinational companies on tax points to a wider need to make them accountable across the board for their activities. The net worth of many of these companies now exceeds that of all but the biggest countries in the world.
The practice of only paying tax in the lowest charging country in which they operate is mirrored in other areas, such as labour rights and environmental law where the companies will move around to operate in the least regulated domain in order to maximise profits.
So in the longer term there needs to be international regulation in order that the huge multinationals do not just move their operations from country to country in order to maximise profit.
There are though encouraging signs of progress in the fight to at least make companies and individuals start paying their fair share of tax. The bad publicity that Starbucks received following the PFC inquiry, has led to negotations starting between the company and the UK government as to how it can pay more tax. Though the sting in the tail appears to being born by Starbucks workers, who the Guardian reports are having lunch break, sick pay and maternity benefits cut.
Consumer power to not purchase the products of companies like Starbucks, Vodafone and Amazon clearly has an impact. What such companies dread in the age of social media is having their brand damaged.
The same is true of individuals, with celebrities like Jimmy Carr quickly moving to change their accounting ways once the publicity came out about their tax avoidance methods.
Even the British government appears to be moving on the issue with Chancellor George Osborne providing another £150 million to HMRC to tackle tax avoidance and looking as to how the laws can be changed to stop multinationals avoiding tax.
Who knows if some of those missing taxes can be collected, then maybe the assault on public services can be halted?