Tax havens

Tax Collector, by Marinus Van Reymerswaele (1542) (picture in the Alte Pinakothek, Munich)

The front page story in today’s Financial Times makes interesting reading. “One-third of biggest businesses pays no tax” runs the headline. The article itself points out various ways in which large companies might avoid paying corporation tax – by claiming capital allowances for investment, for example – and also mentions the fact even if not paying corporation tax, they nevertheless pay tax in other ways, but this blog couldn’t help noticing one particularly interesting comment from Bill Dodwell, of Deloitte:

“That 700 of the largest companies and groups are only paying 54 per cent of the corporation tax shows the giant contribution of small companies. It is probably because many are less international and so have different planning opportunities.”

Think about what is meant by those small words “different planning opportunities”. It means ways of avoiding tax that would otherwise legitimately be due. Companies operating in more than one country can play off one tax jurisdiction against another and so duck out of paying their fair share of tax. That’s what it means to have “different planning opportunities”.

It is a long-standing principle of this blog that international should make no difference. National borders are not an excuse for evading the criminal law – read about extradition here – nor should they be an excuse for failing to pay tax.

John Maynard Keynes described taxation as “the membership fee we pay for living in a decent society” and it is wrong that the biggest companies and the richest people can avoid paying their share. As long as taxation is seen as purely a national matter, though, this is a situation likely to continue. Maybe that explains why so many of the super-rich are against supranational institutions and federalism.

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