Public Accounts Committee interrogate Amazon and Starbucks on UK taxes

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Public Accounts Committee interrogate Amazon and Starbucks on UK taxes

Jonathan Cavell, Partner, Head of Property, asb law"And my advice to those who died, declare the pennies on your eyes..."

Like me you might have heard the recent interrogation of leading executives from Amazon and Starbucks by the Public Accounts Committee.  Apart from proving that there's a lot more to decent cross-examination than rudeness (a fact a number of committee members failed to grasp), I was struck by how a truly global economy rewards only those who genuinely create value.

In many ways Starbucks and Amazon are success stories, employing thousand of people across the UK. But the point picked up on by the MPs (that multi-national corporations can decide where they pay their tax and structure their business accordingly) is the result of the core value in their business not being created in the UK. Just as Apple manufacture i-phones in China but derives the majority of the value in their products through design and marketing driven out of California, Amazon and Starbucks have built a brand and business model and then applied it to the UK market.  As such the value in their businesses isn't British and it's probably no surprise that they don't feel any particular obligation to pay more tax in the UK than they have to.

I recent heard that the decision by French President Francois Hollande to impose a top rate of income tax of 75% has resulted in London becoming the city with the sixth largest French population. Apart from a lesson in why being a chip-on-the-shoulder culture rarely leads to wealth or happiness, French tax policy - like Starbucks and Amazon - also shows how important it is that we celebrate and support UK businesses who are building genuine value and often against the odds.

While it may not be in tune with the current political climate, we need to be a nation that not only supports and celebrates the creation of wealth, but also respects that individuals and corporations are entitled to hang on to a decent chunk of the wealth they create.  

In 1966 the Wilson government imposed a 95% "super tax".  George Harrison was less than impressed (the lyric in the title of this piece comes from ‘Taxman’ on the Beatles' Revolver album). The net result of an attempt to tax our way out of a slump (discouraging rather than supporting innovation and wealth creation) was the three-day week, power cuts, the stripping of productivity from UK industry, UK manufacturing falling off a competitive cliff, hyper-inflation, IMF intervention, the winter of discontent and (ultimately) Thatcherism.

Let's hope the Public Accounts Committee recognises the lessons of the past and limits its actions to occasional rudeness to the employees of multi-national corporations. 

Jonathan Cavell, Partner, Head of Property Services

Published: 4 Dec 2012

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