David Gauke and the government’s double standards on corporate tax affairs

David Gauke

This morning David Gauke, the Treasury’s tax secretary, made an announcement on Radio 4 that HMRC was going to be clawing back £500m from Barclays bank over the use of tax scams that the revenue believed to be illegitimate, or going beyond the “intention of parliament”. This is a very welcome announcement, and indeed the first question that springs to mind is, what cuts can we now reverse with this new found money?

I interviewed a library campaigner in Brent at the weekend and she told me how six library closures by the local authority will save £1m. Or what about the disability campaigner who is fighting her local authority to keep her 35 hours of personal care that provides quality to her life? This £500m should immediately be put into public services that people have lost as a result of the banking crisis!

However, not long after leaving BBC studios, David Gauke trotted off to give a speech endorsing the message of a report that has been released by PriceWaterHouseCooper and the One Hundred Group today. This shows complete double standards when it comes to corporate tax affairs.

The One Hundred Group are essentially the FTSE 100. But they are a lobby group. Their chairman is Andy Halford, the finance director of Vodafone. He was the one who negotiated the tax settlement with HMRC that cost us £8bn in tax. You couldn’t make it up!

The research by PwC argues that in the financial year 2010 – 2011, the tax paid by the One Hundred Group rose by 13%, to £69bn, thereby providing 13% of total government tax revenues. This, they both chime, shows the value of big business to the British economy. This, they both chime, is why Britain should aim to lower its corporate tax rates in order to keep us in the UK, because you cannot do without us.

The report is more notable for what it doesn’t say. It doesn’t mention the £12bn in corporate tax that is estimated to be avoided every year. It doesn’t mention the £25bn in taxes that corporations are currently trying to not pay by fighting HMRC. It doesn’t mention that the One Hundred Group are one of the key architects of the new Controlled Foreign Companies rules that will mean offshore profits will only get taxed at 5.5%. This the treasury admits will cost us £1bn, but tax experts believe it will costs us much more in lost revenue.

PwC are also one of the largest players in the tax avoidance industry. They advised Vodafone and Goldman Sachs on their tax avoidance structures that cost us £8bn and £20m respectively. You couldn’t make this up!!

Gauke & Government double standards

Today’s announcement on Barclays, although welcome, is clearly a PR move to look tough, while in reality David Gauke and his pals want to make Britain into a tax haven in its own right. Gauke cuddles up to big business whenever he can. This evening Newsnight wanted to set up a debate between UK Uncut and David Gauke, but Mr Gauke refused to come and speak. Why?

Big business and low tax rates

The business community and the government want the UK to have some of the lowest tax rates for corporations within the G20. There is little evidence that companies choose to locate in a country solely because of a tax rate. Ironically, things such as public services and infrastructure also play a key role.

Is a low corporate tax economy even healthy? Ireland famously had a 12% tax rate, they didn’t fare too well did they? Germany on the other hand, which arguably has one of the strongest Eurozone economies has an effective corporation tax rate of 30%.

But there is a wider issue at hand. We are being held to ransom by the large companies who want to make as much money as possible, and they have no conception of a wider society. Yes, these companies pay a lot of tax, but so they should!

Take the retail industry for example. Tesco likes to complain how much tax it pays- well that is what happens when you take over the market. If you dominate the market place, push out other competitors and producers, then you can’t just keep their profits, you have to pay their tax as well.

Take the energy sector. Oil, gas and other forms of energy are common resources to this country. They are extracted by private business for a profit, so the very least they can do is pay the stipulated rate of tax to give something back to the country whose resources they have taken.

And then there’s the banks. We gave them £800bn and I don’t see much of that returning any time soon.

The PwC report says that big companies made big profits so paid more in tax. That’s not news. This does not necessarily demonstrate the value of big business to the British taxpayer, it merely shows the mass concentration of wealth and profit in the hands of a few businesses.