I can't resist saying something about this tax business that's dominated the news recently although the whole thing is so bonkers it's hard to know where to start. It's also hard to know where to finish but the main conclusion has got to be about the sound-bite culture we live in these days rather than anything to do with tax.
First off, why has everyone picked on Starbucks, Amazon and Google? There are goodness knows how many multinationals operating in the UK and all of them will be using similar techniques to minimise their tax bills. At least they will be if they're doing their jobs right. Companies have a duty to their shareholders to make as much money as possible and this means paying as little tax as possible. Just like the rest of us: do you pay more tax than you need to? Only because of laziness, ignorance or incompetence.
The difference between you and I and multinationals is that the latter have more weapons in their anti-tax armoury. They obviously want to make a profit but they want that profit to appear in the accounts of their companies which operate in the countries with the lowest tax rates. To achieve this, they can buy and sell stuff to each other and lend and borrow money between group companies. That's how the world works and has done for ages.
Other ruses are possible, as I well know. I was once employed by a very large multinational and worked on a deal which involved a subsidiary in one country investing a vast amount of money in a new one set up in Ireland (because they had a very generous tax regime if you made sure you ticked the right boxes), which then lent it back to the first company. This meant the first company paid tax-deductible interest to the Irish one which paid tax on it but at a much lower rate than that being saved by the first company. Result? Tax savings running into the tens of millions. So did I get a vast bonus for administering this lucrative wheeze? Unfortunately not - that wasn't really the done thing in those days. How times change eh?
Another thing I worked on was moving an operation out of London and into Holland. You'll have noticed that Holland has been mentioned in Starbucks' intra-group shenanigans so I guess those friendly Dutch chaps still have some helpful tax laws on their statute book.
So why all the excitement, when this kind of thing is very old news? It must be because of the massive appetite of our massively enlarged news media to gorge itself on tasty news titbits and spew out half-eaten remains of poorly digested (read: poorly understood) stories. So to major on Starbucks is great because we've heard of them. If it had been Mega Widgets plc (who may be even sharper on tax avoidance than the coffee people) it's boring and not news.
The main story here is not Starbucks and co but HMRC and the way they're held to account, or not. That and the EU. As you might expect, HMRC have all sorts of rules to stop companies getting too cheeky with their tax-reducing ploys. Unfortunately, some of these rules have been challenged recently as being contrary to EU rules. The EU take the view that it doesn't matter which EU country you pay your tax in as we're all jolly good friends together in the EU and never mind that some of our "friends" have much lower tax rates than we do. You may think it's a bit lopsided to have rules making us all conform in certain ways but not in others, like tax rates but there you go, and the hands of our tax collectors are, to at least some extent, tied.
But don't think that HMRC are blameless. In recent years they seem to have developed a strategy that involves doing deals with companies rather than getting legal. In fact in the last few years they have hardly taken any companies to court at all. Most spectacular was the deal they did with Vodafone which, depending on who you believe, let Vodafone off a potential tax bill of anything up to £6 billion. That's an awful lot more than anything Starbucks may have dodged.
Then there's the other guilty party, the MPs. The recent goings on in parliament have seen some extraordinary rubbish being spoken which has simply served to highlight the ignorance of those who are in charge of making laws. How on earth can they have a go at a company which has simply played by the rules which the interrogators are responsible for making? Bonkers. If you don't like the rules, change them. Do you seriously expect companies to pay tax voluntarily?
But ironically, and just to increase the bonkers-ness angle further, that's exactly what Starbucks have said they're going to do. Happily, I am not a Starbucks shareholder, or else I'd be pretty cross at this large increase in what amounts to the PR budget. But now Starbucks are being criticised for doing this so they just can't win. These Starbucks knockers should be directing their anger at HMRC, the Government or the EU, rather than an outfit that, despite doing nothing wrong, has offered to chuck many millions into the UK's depleted coffers.
Finally, another bit of drivel has been the dumb suggestion by some MPs that we need a sales tax to recoup the profits tax that is apparently so easily avoided. Er...hello? We already have one...it's called VAT and it's currently set at a very stonking 20%. Not only that, we also have a hefty tax on jobs called employers' national insurance and then the employees have to hand over a not insignificant amount of their wages in tax and (employees') national insurance. Add all this up and you'll find that a very sizable chunk of Starbucks' turnover already finds its way into the UK government's bank account. Not to mention all the other economic activity generated by Starbucks' UK operation.
Of course this is a good thing for the UK and is why we, like all other countries, are very keen to attract multinationals to our shores. This is why places like Holland and Ireland have juicy tax arrangements and why George Osborne has just reduced the UK corporation tax rate.
So what do we make of all this? We can conclude that the job of the multinational is to make money for its shareholders; MPs are stupid; tax law is complicated; HMRC needs to be more accountable and, while we remain in the EU, there's an awful lot of stuff that the UK government can't do much about anyway. But mainly, in the age of the 140 character Twitteresque headline, you need to go out of your way if you want to understand what's really going on.
Phew, I'm exhausted. Double espresso please!