David Cameron has written to UK tax havens (places like Jersey, the Cayman Islands and British Virgin Islands) about revealing the details of who owns the thousands of companies registered there.
Remember that these companies don’t make or sell anything; they exist only to help rich people pay far less tax than everyone else. (Reportedly, HMRC estimates that £5bn a year is lost in tax evasion from wealthy individuals and, get this, £35bn overall to evasion and non-payment.)
The plan is that legislation will force these tax havens to set up registeries that the public can access to find out who owns what. In a letter to the Overseas Territories, Cameron said: ‘It will give businesses and individuals a clearer picture of who ultimately owns and controls the companies they are dealing with and make it easier for banks, lawyers and others to conduct due diligence on their customers.’
More transparency can only be a good thing. But let me play devil’s advocate for a second. When it comes to SMEs, are these tax havens the real problem? I wonder if legal tax avoidance by massive companies like Starbucks and Amazon (to name but a few) has a greater effect on the high street.
According to the Guardian, Amazon UK’s boss oversaw £4.3bn in sales to UK shoppers in 2013, but his unit paid only £3.15m in UK tax the year before. The Evening Standard says that by 2012 Starbucks had paid just £8m in tax on £3bn in UK sales since 1998. The less tax these companies pay, the more cash they have in their war chests for expansion and targeting new markets – and the more SMEs will feel it.
Remember that these huge businesses aren’t doing anything illegal. They’re just really good at minimising the amount of tax they have to pay. For example they argue that just because you buy a product in the UK, doesn’t mean it’s sold by a UK company. Maybe things wouldn’t seem as unfair if all SMEs had easy access to top-notch tax advisors and overseas premises. But as it stands, if you run a newsagent in Loughborough, you can hardly argue the packet of crisps you sold came from Luxembourg.
We should welcome all attempts to try to make the tax system fairer and more transparent, but we perhaps we shouldn’t get our hopes up for a level playing field just yet.