£3.8 trillion of tax will be lost to tax avoidance globally over the next decade, Tax Justice Network estimates.
A lot of this is down to large multinational companies ‘shifting’ profits to countries where corporation tax is low or non-existent. Our friends at TaxWatch recently demonstrated how big tech firms could be starving the UKs public purse of billions a year. This is standard practice by many wealthy global companies, however it’s deeply unfair and deprives countries of tax revenues they need. Let’s take Amazon for example. For two years their main UK division has paid no corporation tax in the UK, despite making hundreds of millions of pounds in profits (£222m in 2022 to be exact). How? Firstly, Amazon has benefited from generous tax breaks for business investment in the UK. Secondly, Amazon declares a lot of its revenue in Luxembourg, instead of the UK, where the rate of tax is generally lower than the UK. Amazon does not have to declare where sales are made on a country-by-country basis, so the scale of tax avoided in the UK isn’t certain. Amazon uses this arrangement in many European countries. It was claimed in 2017 by the European Commission that this means Amazon don’t pay tax on nearly three quarters of their profits in the EU. Taking and not giving back Companies like Amazon rely on the things taxes pay for, yet they don’t contribute in a fair way to the bill. Roads, police and fire services, power and water networks, public transport – Amazon relies on all of these things to run an effective business. They need the UK to have healthy, well-educated workers – so the NHS and our education system contributes to their business success too. It’s unfair that companies like Amazon can use the UK’s public resources to generate record profits, while doing what they can to lower their tax bills. At the same time, Amazon staff complain of poor working conditions in warehouses. Thousands of their workers recently went on strike over pay and conditions. A historic UN vote Things can change, however. On Wednesday evening at the United Nations, 125 countries voted to create new global rules on tax. It could be the next step in creating a fairer global tax system – and the next step in concerted action against international tax avoidance. This could be a game-changer: ensuring Amazon and other corporate giants cough up their fair share. 48 countries voted against it – including the UK, US and many of the richest countries in the world. You may be wondering why. It’s simple. Tax Justice Network estimates these rich countries enable 75% of global tax avoidance. The rich countries voted against The UK voted to keep the status quo, in part because the UK benefits from tax avoidance. Not ordinary people, of course, but financial and legal services – those with the government’s ear. It’s shameful that our government voted this way. The UN will now start discussing and negotiating a plan for new global rules on tax, a UN Framework Convention on International Tax Cooperation. We now need to make sure that the UK government does not try to obstruct the process going forward. We’re going to continue following the process, and campaigning in favour of strong global rules to tackle tax avoidance. Comments are closed.
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