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Business leaders back Cameron’s tax ‘crackdown’

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Business leaders have backed David Cameron’s call for all businesses to pay their ‘fair share’ of tax, according to accounts of a private meeting following the prime minister’s speech last week at the World Economic Forum. More high street retailers have called for action to level the playing field on corporation tax, while a partner at one of the big four firms of accountants has suggested that politicians need to ‘stop banging on about morality and change the law’.

The CBI, responding to Cameron’s speech, recognised that the tax system is ‘lagging behind commercial reality’ in some cases. In an interview with Tax Journal last month, which was published on Friday, Kevin Nicholson, head of tax at PwC, said recent corporation tax reforms had created a ‘much more competitive position’ for the UK, but ‘going forward we need to constantly be evolving the international tax arena’.

Nicholson added: ‘Increased globalisation means we are going to have to look at tax differently, especially for the taxation of digital businesses which don't need a [taxable] presence to sell.’

Nicholson will give evidence to the Commons public accounts committee on Thursday, alongside representatives of Deloitte, Ernst & Young and KPMG.

Today’s Daily Telegraph reported that in an interview in Davos Mark Otty, Ernst & Young’s area managing partner for Europe, the Middle East, India and Africa, said: ‘The only way you can resolve this issue is through a legal code. I don’t see how you can have any assessment on payments of tax other than what is in the statute. The simplest solution is to stop banging on about morality and change the law.’

Otty said E&Y would not be changing its tax practices, the paper reported: ‘It comes back to the law … A company has responsibility to its shareholders, its staff and society. In days gone by it was a much easier argument. Now there is this morality test. For an organisation, it becomes very difficult ... you don’t know what the rules are or who the arbiter is.’

‘Nothing but support’

Cameron said at the World Economic Forum: ‘Any businesses who think that they can carry on dodging that fair share or that they can keep on selling to the UK and setting up ever-more complex tax arrangements abroad to squeeze their tax bill right down … Well, they need to wake up and smell the coffee because the public who buy from them have had enough.’

Cameron spoke later to 60 chairmen, chief executives and investors at a private meeting, the Sunday Times reported. Executives who attended ‘said there was nothing but support for the prime minister’s comment that companies should pay their fair share of tax’.

The paper quoted an unnamed FTSE 100 chief executive as saying: ‘There is some cynicism around who is being singled out – there isn’t much consistency or proper investigation – but none of the big corporates disagrees with the idea of lower taxes and everyone contributing.’

Ian Livingston, chief executive at BT, said: ‘I support the prime minister’s comment that companies should pay their fair share. I was among those in the room at Davos when he gave his [public] speech about tax. I didn’t detect any annoyance or disagreement with what he said.’

The Financial Times reported on Friday that high street retailers were ‘putting pressure on the government to deliver a level playing field on tax, or at the very least reduce the tax burden on UK retail chains, following a string of high street collapses’.

John Lewis, J Sainsbury, Waterstones and Home Retail Group, the owner of Argos and Homebase, had ‘told the Financial Times that the government must get to grips with tax avoidance on the part of multinationals and ease the broader tax burden bearing down on the high street’.

Starbucks

Cameron’s suggestion that tax dodging companies should ‘wake up and smell the coffee’ exacerbated ‘tensions’ between the government and the Starbucks coffee chain, the Financial Times noted. But the paper reported that Starbucks said yesterday it had ‘no plans to suspend millions of pounds in investment in Britain’.

The FT added: ‘The US-based coffee chain said it did “not recognise” reports that it had threatened to pull £100m of investment from the UK in a meeting on Friday with the prime minister.’

The company said in a statement: ‘We had a very constructive meeting which was long scheduled. We do not discuss the details of our government meetings but can say that we do not recognise how it has been reported … Starbucks agrees with the prime minister that all businesses should pay their fair share. In the UK, we employ 9,000 people, contribute £300m a year to the economy and are forgoing tax deductions that will make the exchequer at least £20m better off.’

The Sunday Telegraph had quoted a source close to Starbucks as saying: ‘The PM is singling the business out for cheap shots, a company that, it should not be forgotten, has pledged to pay tax now and into the future.’

Grant Shapps, chairman of the Conservative Party, told Sky News in response to that report: ‘I don't think we'd ever single out a single company but I do think that companies in this country need to pay their way … I think they need to do what’s right.’

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