George Foulkes on taking back the agenda from those who seek to excuse corporate tax avoidance
Tax avoidance is shaping up to be one of the dominant political issues of the next general election. As a crisis, it taps many of the seams of political sentiment in the country: anger at the City, suspicion of a government that gets too close to big business, and a growing sense that the gap between the middle and the top has stretched to distended and ugly proportions.
Ed Miliband was right to seize on this as a campaign that is a natural fit with the Labour Party – the historic champions of fairness. Squaring up to Ed’s challenge, organisations such as the CBI have defended the status quo. The organisation’s President, Roger Carr warned that political attacks on tax avoidance could damage Britain’s businesses.
This is a shrewd piece of manoeuvring by the CBI, which has attempted to frame the debate in terms of being ‘pro-fairness but anti-business’ and ‘pro-status-quo and pro-business’. Its hope is that the moral indignation will shrivel – drowned out, perhaps, by a couple of well-timed scandals, withering away to leave a practical question of what works best for business.
Labour cannot allow the debate to be framed in this way. For, whatever those such as Mr Carr are prepared to say, ‘pro-tax’ is a pro-business position. The people who are profiting through tax avoidance are, in truth, a very small segment of the British business community. For every Apple, Google and Starbucks, there are thousands of small businesses paying their fair share.
By allowing the largest multi-nationals to get away with paying minimal amounts of tax, we are creating an uneven playing field – and one that constrains our ability to produce innovative and competitive businesses. This is why we have seen such strong calls for tax reform from companies such as Waterstones and others who are losing out due to the off-shore skulduggery of their competitors.
We are in a position where shops are closing on our high streets at an astonishing and accelerating rate, 11 times that of 2011. In many instances, these bricks and mortar retailers are losing out to online businesses that are able to base themselves offshore and thus avoid paying tax. When Amazon pays just £2.4m on UK sales of £4bn, they undermine the market and drive reputable firms out of business.
This is the narrative the CBI would like to suppress, but it needs to be at the centre of our campaigns to tackle the tax crisis. The cost of this crisis is growing with glacial menace. At present, the gap between what we ought to collect in taxes and what we actually receive is around £39bn. That figure is larger than the budgets of some Whitehall departments, and twice the size of Housing Benefit expenditure. On its own, tax avoidance is costing the Exchequer as much as £25bn a year.
These figures give an indication of the damage tax dodging is doing to the public sector. What is far harder to measure but equally important is the damage that it is doing to the private sector, disadvantaging precisely those businesses needed to drive to our economy – locally, regionally and nationally. We should confront this challenge head on and not be cowed by the likes of Mr Carr. To be pro-tax is to be pro-business.
Lord George Foulkes of Cumnock is a backbench Labour Peer in the House of Lords
Published 5th June 2013