x Abu Dhabi, UAEWednesday 26 July 2017

UK's tax-avoidance protests miss the legal point

UKuncut is leading protests against companies in Britain such as Vodafone for their tax avoidance policies: but what these firms are doing is both legal and a way of ensuring they firms have more money to invest in their businesses.

The UKuncut group has been troubling corporate Britain, whose targets include Sir Philip Green and Vodafone.
The UKuncut group has been troubling corporate Britain, whose targets include Sir Philip Green and Vodafone.

UKuncut says British austerity measures might be less severe if big firms paid more tax, but the tax avoidance the group decries happens to be legal and has social benefits

It seemed a great way to engage your younger customers and generate a seasonal buzz. Vodafone asked users to send messages on the social network Twitter about things that made them smile.

Unfortunately, the company did not expect its innocent competition to be hijacked by a determined protest group. The messages posted directly, via Twitter, on to Vodafone's website were nothing to smile about.

UKuncut is a collection of anarchists, serial left-wingers, students and first-time protesters that has been causing corporate Britain something of a headache in recent weeks.

Their first targets have been Sir Philip Green's Topshop and Vodafone. But who knows who will be hit next - the high street pharmacy retailer Boots and the food giant Kraft are in their sights.

Ironically, it is some of the UK's most popular and consumer-facing companies that have suddenly found themselves in the front line, as a new generation of students and activists becomes involved in direct political protest.

UKuncut, which argues that cuts to public services could be avoided and that legal forms of tax avoidance must be stamped out, is building up quite a following. It succeeded for a short while in closing down the flagship store of Topshop, the most popular shop on the UK's busiest high street, in protest at the owner's alleged tax avoidance and held noisy and disruptive protests outside many of Vodafone's retail outlets.

In Vodafone's case, protests have crystallised around an alleged £6 billion (Dh34.31bn) saving in tax made by the mobile phone company. Ten weeks ago, the UK tax authorities said there was "no question" of Vodafone having an outstanding tax liability of £6bn and called the number an urban myth.

But the protests have continued and, if anything, are gathering force. UKuncut's legitimacy has been boosted by supportive editorials and comment in a range of publications, both right wing and left wing. After all, if the squeezed middle and the hard-pressed poor still have to pay their taxes, why shouldn't companies and ultra-rich individuals pay their fair share.

This weekend, UKuncut is planning its biggest day of protest yet on possibly the busiest shopping day of the year, the last Saturday before Christmas.

Yet the supporters of UKuncut are less than clear about what kind of redress they seek against those companies they have singled out.

Legal tax avoidance, particularly on a concerted and large scale, may stick in the throat but it is just that: legal.

In fact, it could be argued that by paying the least tax possible a company is merely maximising its potential to hire more people, open more shops and factories and safeguard the salaries of its existing and future employees.

With personal tax rates climbing to 50 per cent for higher-rate tax payers and corporation tax rates still double that of our neighbour Ireland, there is a debate to be had about taxation in the UK. Unfortunately, the debate seems to be being led by the protesters, who see things only in terms of making the rich pay more. In reality, taxation has an international context and is critical to the competitiveness of the UK economy.

Last week, the government announced a crackdown of its own on tax avoidance, saying that it believed it could raise £2bn by clamping down on creative schemes such as intra-company loans. Ministers also raised the possibility of a general anti-avoidance rule, something the previous government had to scrap in face of opposition from business.

Not very long ago, London was one of the most desirable places in the world for businesses and those that run them to locate. There were many reasons for this - not least our legal and judicial system, our culture and our time zone. But underlying all these attractions was a stable, predictable and reasonable taxation system.

That has all changed since the financial crisis and myriad piecemeal changes to the system. As a country that desperately needs entrepreneurs and innovators to build new businesses and industry to provide private-sector jobs, we need to return to that stability.

Business will pay no more tax than it needs to. It is down to the Treasury to make the rules as simple, but as competitive, as possible, and when those rules are in place, to enforce them.