Through the loophole: companies that have been avoiding huge tax bills are under fire for their perfectly lawful, yet morally dubious, actions. Faced with a groundswell of public opposition, are any firms changing their approach?
| Author | Holmes, Lawrie |
The issue of how big businesses manage their tax affairs has attracted a remarkable amount of public scrutiny this year. A heated debate has pitted activists and some politicians against some of the world's best-known multinationals. The likes of Google, Amazon and Starbucks stand accused of avoiding paying billions of pounds into the public coffers, while such companies, their industry associations and advisers point out that they are operating within the law. The corporate lobby also claims that the media has largely failed to understand the nuances of an incredibly complex subject and explain these properly to a concerned public.
In the meantime, the OECD's "action plan on base erosion and profit-shifting" to support national governments' efforts to "shape fair, effective and efficient tax systems"--a programme that's likely to be highly influential when it finally comes to fruition--rumbles on behind the scenes. But has the furore started changing businesses' attitudes to tax strategy already with regard to implementation and transparency, or are they toughening their stance, insisting that they are sticking to the letter of the law and merely serving the best interests of their shareholders by minimising their tax obligations?
According to the Confederation of British Industry (CBI), companies had been reassessing their approach to tax strategy and how to communicate this for some time before the issue hit the headlines.
"I think the world has changed--and not only because the parliamentary public accounts committee has taken an interest in the issue," says Richard Woolhouse, the CBI's head of tax and fiscal policy. "It's a long-term situation where the relationship between HM Revenue & Customs and large corporations has changed. This has come at a time when corporations have moved away from using more aggressive schemes. In tax affairs, reputation is now a powerful driver of behaviour--as we have seen in recent high-profile cases."
Woolhouse says that a number of CBI member firms have tried to get on the front foot by issuing far more detailed information about their tax-planning activities. "We urge everyone to explain more, but also caution companies to be careful not to send out a wrong message that can be misinterpreted," he says, adding that a host of prominent British businesses have issued comprehensive guidance. "We support companies that are more proactive in narrative reporting and integrated reporting that addresses this...
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