At the Conservative Party conference the role of business in our economy and society has been a hot topic of conversation, starting with the Chancellor of the Exchequer’s speech on Monday and concluding with the Prime Minister’s speech today. Over the course of the week we have heard about the party’s long term vision for the economy, plans for reducing the deficit, tackling youth unemployment through creating new apprenticeships, and encouraging saving through making changes to pension funds.
Tax avoidance on the agenda
But in addition to the eye catching announcements around personal taxation it was George Osborne’s message to companies about tax avoidance, emphasised again by David Cameron today, that really caught our attention here at The Great Business Debate.
Singling out large tech companies in particular the Chancellor said that, “while we offer some of the lowest business taxes in the world, we expect those taxes to be paid — not avoided” and claimed that some organisations go to “extraordinary lengths to pay little or no tax here”.
Corporate tax avoidance has been identified as one of the major factors undermining public confidence in business in recent years, and it continues to dominate the media and political agenda.
In all the debate, there is no question that companies evading tax is unacceptable. If companies knowingly avoid paying tax which is due under law, this is illegal and is tax evasion. Tax avoidance is harder to define, but the CBI has said that abusive arrangements which are highly artificial, with no commercial purpose are unacceptable.
Overwhelmingly businesses organisations operate within the law and within the spirit of the law when it comes to the amount of tax they contribute, which amounted to £172bn in 2012–2013, more than the budgets for the department of health and education combined.
So is criticism of companies managing their tax affairs within the bounds of the law justified when what they are doing is entirely legal?
Nobody in the debate disagrees that companies should play by the rules. But some are arguing that operating within the law as it stands is insufficient, and that some companies are deliberately trying to avoid paying their ‘fair’ share.
The conclusion that the Chancellor and many others have now arrived at is that the tax rulebook has to be updated and made fit for the world we live in. George Osborne’s announcement comes soon after the Organisation for Economic Cooperation and Development (OECD) unveiled new plans to update the international tax rules, but the Chancellor has signalled his intention to move faster.
In its response to the Chancellor’s speech the CBI said it, “will work with the Government to ensure that tax rules are fair on both sides. Companies will always want to operate within the rules.” The CBI has previously published its statement of tax principles to move forward the debate on the responsible management of tax by UK business, which you can read here.
Give us your views
So what is your view on the tax debate? Do you think companies are paying their ‘fair’ share? Is operating within the law sufficient? And are the proposals for updating the tax rules at home and overseas a good starting point?
Over the next few weeks The Great Business Debate will be exploring the arguments in a bit more depth in an attempt to get to the bottom of what is going on, and why this debate remains a big issue for the public. We’d love to hear your views so do let us know what you think over twitter using #bizdebate.