The Town That Took On the Taxman was the title of a BBC2 programme aired on 20 January and highlighted a number of moral and thought provoking points about Corporation Tax.
Starting with an interesting fact; in 2015 Strabucks paid just £8.1m in UK corporation tax, which is fair less than many independent UK high street businesses. Incidentally this figure for 2015 was nearly as much as Starbucks paid in corporation tax in its first 14 years in the UK. This simple fact has outraged many small (and large) business owners and inspired a group of local business owners from the Welsh town of Crickhowell to try and do something about it.
The program followed Steve Lewis, a café owner and his compatriots, that included an optician, bookseller and electrical supplier, as they investigated the ways in which multinationals are able to significantly reduce their UK tax liabilities and to see if this group of small business owners could do the same. Interestingly, the initial expectation was that they would find a complex arrangement but after a trip to the Isle of Man and then to the Netherlands, they discovered a surprisingly simple process.
By signing a few forms to set up a corporate service provider in the Isle of Man and then by creating a ‘Double Dutch’ operation in the Netherlands meant the businesses of Crickhowell effectively paid themselves for the rights to use the intellectual property (such as logos and branding), money which was sent between the territories before arriving back in South Wales in the form of dividends or interest free loans. And all completely legal.
At this point I started to wonder whether they were now as bad as the big “multinational” boys and would they start to feel a sense of moral guilt. Surely if all small business decided to group together to move profits offshore it would clearly be depriving the UK tax authority of the funds needed for local services, schools and hospitals. A huge moral dilemma.
It was about this point that one of group did suggest they could use the tax savings to invest into community projects or used to cut prices to enable them to compete with the multinationals and I felt that this group of plucky business owners were now seeing the moral high ground.
By the end of their interesting journey, the team had decided to launch the Fair Tax Town initiative, with its own logo and a video. This well thought out initiative has been pick up in other small towns and is encouraging small, independent shopkeepers across the UK to speak out against what they see as preferential tax treatment for big organisations in the hopes of building pressure for government action.
The program answered some interesting questions and highlighted the methods multinational companies will use to reduce UK taxes. However, it also left some questions unanswered; what do we think is the right amount of tax for an Amazon, Starbucks or a Google to pay? HMRC clearly have a very different view to the man or lady in the street. Is there a reason that the Tax Man agreed to letting Starbucks pay just £8.1m for 2015? What did Starbuck threaten to do if they were asked to pay more or the loop hole was closed?
Perhaps the next instalment should be a “fly on the wall documentary” following the HMRC civil servants as they negotiate with the big brands tax accountants and board members. I think that would be an eye opener!
The TV programme is available until 26th February 2016 here
Next head of HMRC
In an interesting sub plot to the program, Steve Lewis, the café owner, is now bidding to become the next head of HMRC. ‘The chief executive of the HMRC executive board just stepped down. Instead of replacing her with a lifelong civil servant or someone cosy to big business – the government should appoint someone who champions ordinary citizens and understands small businesses.’
There is an on line petition that when I last looked today had already over 149,470 supporters, just 530 short of the target.