We need a full-scale tax revolution

published 23 November 2012

The various tactics used by multinationals to avoid UK corporation tax were revealed last week when executives from Google, Starbucks and Amazon were interrogated by the chairman of the Public Accounts Committee, Margaret Hodge MP, says Peter Campbell in the Daily Mail. But the question is how do we tackle the issue?

Many believe the best way of making the giants pay more would be some kind of unitary taxation or imputation tax system. "Tax would be paid on turnover or sales attributed to the UK marketplace, taking account of numbers of people and assets deployed here."

Unitary tax, already used successfully in most US states, is the best solution, agree Sol Picciotto and Nicholas Shaxson in the Financial Times. The international tax system currently provides "vast subsidies" for multinationals, allowing them to "free-ride on tax-funded benefits roads, educated workforces, reliable courts" and helping them out-compete local rivals (as John Lewis's Andy Street noted, such companies will out-invest and ultimately out-trade' businesses paying full taxes in the UK).

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Unfortunately, however, the Organisation for Economic Co-operation and Development (OECD), whose fiscal committee is steward of the international tax system, has refused to look at unitary tax, preferring to "patch up the present system". George Osborne and his German counterpart, Wolfgang Schauble, have said they will engage with the OECD to tackle the problems, but if the result is mere tinkering, they will fail.

They will, says Allister Heath in The Daily Telegraph. Nothing but a full-scale tax revolution will help. Some companies hand over vast amounts of corporation tax; similar ones don't. Firms with huge debts pay less tax than those with none. "There are endless other issues and loopholes thanks in large part to European single market rules." In order to do what is best for their shareholders, companies "game the system". In response, the tax code gets more complicated.

Taxes levied on companies are actually borne by people; either by investors (through reduced returns) or workers (via lower wages) or consumers (higher prices). So corporation tax is a "grossly unfair and opaque way of raising money", says Heath. We should replace taxes on business corporation tax, capital gains tax, tax on dividends, interest and all the rest by a single, lowish tax, not on profits, but on income distributed to investors.

Emily has worked as a journalist for more than thirty years and was formerly Assistant Editor of MoneyWeek, which she helped launch in 2000. Prior to this, she was Deputy Features Editor of The Times and a Commissioning Editor for The Independent on Sunday and The Daily Telegraph. She has written for most of the national newspapers including The Times, the Daily and Sunday Telegraph, The Evening Standard and The Daily Mail, She interviewed celebrities weekly for The Sunday Telegraph and wrote a regular column for The Evening Standard. As Political Editor of MoneyWeek, Emily has covered subjects from Brexit to the Gaza war.

Aside from her writing, Emily trained as Nutritional Therapist following her son's diagnosis with Type 1 diabetes in 2011 and now works as a practitioner for Nature Doc, offering one-to-one consultations and running workshops in Oxfordshire.