Kirk deserves praise for stance against tax havens

Wednesday 18 April 2012

WHEN a huge global corporation is making billions of pounds worth of sales in a country, can it be right that it pays no tax into that country's exchequer?

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Since it was revealed recently that Amazon has paid no UK corporation tax over the last three years, in spite of a reported turnover here of more than £7bn (Amazon.co.uk transferred to Luxembourg in 2006) that question has been causing consternation on a scale almost as great as the company's profits.

Acting to minimise one's tax bill is legal, of course, but there is sometimes a distinction to be made between what is legal and what others would regard as morally right.Where the use of tax havens by large companies is concerned, the Church of Scotland, for one, has strong misgivings, and has made the admirable decision to act on the issue. The Church's Special Commission on the Purposes of Economic Activity will seek support from the General Assembly next month to ask companies from which the church procures large amounts of goods and services to reveal how much they use tax havens. The move is unlikely to prompt an overhaul of corporate tax policy, but the church is right to take a stand. In a globalised economy, it is becoming increasingly common practice for large companies to transfer to tax havens and this is understandably causing serious concerns. After all, can it be fair that companies which can only operate effectively due to a country's state-run or state-subsidised infrastructure, such as its roads, should not contribute through taxation to the upkeep of that infrastructure? True, successful multinationals bring jobs, but the quid pro quo for that is the profits they make; it should not be too much to expect a fair contribution to the Treasury as well. When it is reported that Apple pays £10 million in tax on an estimated UK turnover of £6 billion, it is small and medium-sized enterprises (SMEs) who feel most disadvantaged by comparison. SMEs, First Minister Alex Salmond said recently, "are vital to the long-term success of our economy", yet many have struggled in the recession to keep afloat. These are often the very businesses that find themselves undercut by larger multinational rivals. It is not in their power to relocate to minimise their tax bill.It's true that most of us engage in some legal tax avoidance, like paying money into ISAs, yet it would be facetious to make no distinction between that and the use of tax havens to obliterate or almost obliterate a corporation's tax liability. With tax havens being established worldwide, there is no easy legislative fix. A climate in which companies feared damage to their reputation, however, could help reverse this worrying trend.

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Kirk deserves praise for stance against tax havens

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