Tax is not a voluntary arrangement, Danny Alexander tells multinationals
Paying tax is not a voluntary choice, Danny Alexander told the BBC’s Andrew Marr yesterday, after Starbucks stores around the UK were disrupted by protests despite the company’s commitment last week to pay UK corporation tax ‘above what is currently required by tax law’ for the next two years.
Asked about the company’s decision to 'offer up £20m’, the chief secretary to the Treasury said he could not comment on individual companies, but ‘thinking of the tax system as if it’s like the church plate going around on a Sunday morning is completely the wrong way to think about it’.
The responsibility of taxpayers was, he said, to pay ‘the proper amount of tax that they owe’.
Boris Johnson
Starbucks’ action has dismayed some tax professionals, who believe that the company has set a bad precedent. In an interview with ITV’s Laura Kuenssberg, Kris Engskov, Starbucks managing director in the UK, said: ‘Whether it’s a donation or whatever it is, we’re going to pay UK corporation tax.’
Unitary taxationCritics point out that companies have a responsibility to society as well as to their shareholders. Tax campaigners have called on companies to change their behaviour, not to pay more than their actual liability based on their current arrangements. In a paper published today by the Tax Justice Network, Sol Piccioto, emeritus professor at Lancaster University, sets out the TJN’s case for ‘unitary taxation’ of multinationals. Tax should be paid, Piccioto says, ‘according to where the activities generating the income take place, because taxes help to make those activities possible (providing education, infrastructure, etc)’. |
But Boris Johnson has defended the company, pointing out that it has a duty to its shareholders. Sky News reported that in an interview on the Murnaghan programme the Mayor of London admitted that Starbucks had got into a ‘hell of a mess’.
However, Johnson added: ‘Imagine that you are the corporate finance director of one of these companies. Your job is to look at the law as it stands. Your fiduciary duty to your shareholders is to minimise your tax exposure.
‘It is not to say, “this looks pretty bad, we had better write a huge cheque to the government ex-gratia and show that we are good citizens”. Companies do not work like that. Now that Starbucks has stepped up to the plate and announced they are going to be making this payment I think rather than everybody sneering at them people should welcome that.
‘My point is it is a bit unfair to bash the companies and then sneer at them when they try to do good.’
‘A conversation with HMRC’
Starbucks' initial response to criticism over its affairs echoed that of several other multinationals under scrutiny for alleged avoidance. Starbucks chief executive officer Howard Schultz said in a message posted on the group’s UK website in October that the group ‘adheres to both the letter and spirit of the law’ in every country in which it does business.
HMRC was unable to say last week whether a payment in excess of the company’s tax liabilities could be accepted.
Alexander said yesterday: ‘Any business that wants to come forward to the government and say “we think we may have paid too little tax and want to rectify our arrangements” … I of course welcome that.’
Marr asked: ‘Offering up a bit of money for a headline, how would you regard that – intolerable or unacceptable?’ Alexander said any multinational doing that had to ‘have a conversation’ with HMRC. ‘I gather that is still ongoing …’
Tax is not a voluntary arrangement, Danny Alexander tells multinationals
Paying tax is not a voluntary choice, Danny Alexander told the BBC’s Andrew Marr yesterday, after Starbucks stores around the UK were disrupted by protests despite the company’s commitment last week to pay UK corporation tax ‘above what is currently required by tax law’ for the next two years.
Asked about the company’s decision to 'offer up £20m’, the chief secretary to the Treasury said he could not comment on individual companies, but ‘thinking of the tax system as if it’s like the church plate going around on a Sunday morning is completely the wrong way to think about it’.
The responsibility of taxpayers was, he said, to pay ‘the proper amount of tax that they owe’.
Boris Johnson
Starbucks’ action has dismayed some tax professionals, who believe that the company has set a bad precedent. In an interview with ITV’s Laura Kuenssberg, Kris Engskov, Starbucks managing director in the UK, said: ‘Whether it’s a donation or whatever it is, we’re going to pay UK corporation tax.’
Unitary taxationCritics point out that companies have a responsibility to society as well as to their shareholders. Tax campaigners have called on companies to change their behaviour, not to pay more than their actual liability based on their current arrangements. In a paper published today by the Tax Justice Network, Sol Piccioto, emeritus professor at Lancaster University, sets out the TJN’s case for ‘unitary taxation’ of multinationals. Tax should be paid, Piccioto says, ‘according to where the activities generating the income take place, because taxes help to make those activities possible (providing education, infrastructure, etc)’. |
But Boris Johnson has defended the company, pointing out that it has a duty to its shareholders. Sky News reported that in an interview on the Murnaghan programme the Mayor of London admitted that Starbucks had got into a ‘hell of a mess’.
However, Johnson added: ‘Imagine that you are the corporate finance director of one of these companies. Your job is to look at the law as it stands. Your fiduciary duty to your shareholders is to minimise your tax exposure.
‘It is not to say, “this looks pretty bad, we had better write a huge cheque to the government ex-gratia and show that we are good citizens”. Companies do not work like that. Now that Starbucks has stepped up to the plate and announced they are going to be making this payment I think rather than everybody sneering at them people should welcome that.
‘My point is it is a bit unfair to bash the companies and then sneer at them when they try to do good.’
‘A conversation with HMRC’
Starbucks' initial response to criticism over its affairs echoed that of several other multinationals under scrutiny for alleged avoidance. Starbucks chief executive officer Howard Schultz said in a message posted on the group’s UK website in October that the group ‘adheres to both the letter and spirit of the law’ in every country in which it does business.
HMRC was unable to say last week whether a payment in excess of the company’s tax liabilities could be accepted.
Alexander said yesterday: ‘Any business that wants to come forward to the government and say “we think we may have paid too little tax and want to rectify our arrangements” … I of course welcome that.’
Marr asked: ‘Offering up a bit of money for a headline, how would you regard that – intolerable or unacceptable?’ Alexander said any multinational doing that had to ‘have a conversation’ with HMRC. ‘I gather that is still ongoing …’
