All’s fair in love, war….and international corporate taxation

“and on the podium for The 2013 Taxation Innovation Awards: 

3rd place

Amazon, for ensuring that all UK sales are actually transacted with a Luxembourg holding company, despite the customer, the money and the goods never crossing the Channel. An unimaginative ploy, but done on a mind-bogglingly large scale–merits praise.

 2nd place

Google for relying on the hazy semantic difference between marketing and sales to avoid paying tax on (from what I can tell) most of its business in the UK for the past five years. An unconventional move, taking advantage of the technological nature of their products and revenue streams – a well deserved second place.

 1st place:

Apple;  The outright winner. Most companies look for the most accommodating tax regime – whereas Apple simply creates its own. To be fair, you would expect little else from the creators of the various iProducts – why abide by the same rules when you can simply play a different game! And the prize is….a complementary outing to the tax inquiry board of the government of your choice!”

The American author Herman Wouk once said that “tax returns are the most imaginative fiction being written today” and the wonderful creativity currently being displayed by the accountancy departments of large global corporations certainly seems to bear that out.

However, the financial conditions of the last five years have increased the level of scrutiny that is being brought to bear on these multinational companies. Individuals, governments and banks have all been suffering with austerity, and public tolerance of ‘free-riders’ is extremely limited.

Micro-economics textbooks say that the principal duty of the managers of a company is to maximise the value of the business for the shareholders, through whatever legal means available; so by that measure the above three ‘winners’ are all doing the right thing. Yet most people are not habitual readers of micro-economics textbooks – what they do notice regularly is their monthly payslip, and how much tax is taken from it. With every member of the public armed with that very personal knowledge, sympathy for tax avoidance (not evasion, note) is fairly thin on the ground – and politicians are beginning to take heed. The US Senate has been quizzing perceived offenders for a number of months, as has the UK Public Accounts Committee – and last week we saw the G8 leader discussions hijacked by the tax debate.