The debate around corporate tax avoidance has been increasingly audible in recent years, with the likes of Starbucks, Amazon and Google coming under fire from MPs and members of the public alike for artificially minimising their Corporation Tax bills despite huge profits.
Action to close “the tax gap” (the difference between HMRC’s actual tax revenue and what they expect to receive each year) has begun in earnest, with the UK Government signing treaties with various tax havens to ensure financial information from the worst avoiders is disclosed. Chancellor George Osborne has also announced increasingly lavish budgets for HMRC’s anti-avoidance officers.
Action so far has been moving in the right direction, but somewhat muted. At the Labour Party’s National Executive Committee, former London mayor Ken Livingstone tabled a somewhat radical new approach – a tax on turnover rather than profits.
It appears Livingstone’s turnover tax would only be applied to businesses who aggressively attempt to minimise their Corporation Tax bill. The minutes from the meeting note Livingstone’s assertion that:
“Avoidance amount[s] to 10 per cent of GDP and tackling [it] could plug the gap; if people refused to pay, Corporation Tax should be replaced by a tax on turnover.”
If it were given serious consideration, the change would certainly be a dramatic one. In 2012 Google paid £11 million in Corporation Tax on profits of £3 billion. If a turnover tax were applied at just 1%, Google’s tax bill would almost triple to around £30 million. Amazon would be hit even harder, seeing their tax bill rocket from £2.4 million in 2012 to £43 million.
It appears the proposal have been given short shrift by Labour’s leadership, with Ed Balls’ spokesperson reporting they are “not looking at” the idea.