There is nothing more likely to spark anger than an unfair tax regime. The American Revolution was founded on it. So the discovery that some of the largest and most successful companies in the world -- among them Google, Apple, Amazon and Starbucks -- have legally minimized the tax they pay, sometimes to as low as zero, in many nations in which they earn the lion’s share of their revenue is causing considerable irritation.
The result was evident at the G8 meeting in Northern Ireland, where Britain’s conservative government, chairing the conference of the world’s richest nations, put making corporation tax fairer at the top of its agenda, after the civil war in Syria. David Cameron, who like most conservatives believes in low taxes, is in a bind.
In an attempt to reduce public borrowing he is imposing high personal taxation on the Brits -- lifting “value added” consumption tax to a record 20 percent -- but finds that many of the most profitable companies operating in Britain are dodging taxes altogether. He thinks it is unfair. And so do his voters. He is under intense pressure to deliver a solution or he can expect to be turfed out of Downing Street.
At Davos this year he signaled his intention of doing something about it. “Companies need to wake up and smell the coffee,” he said, “because the customers who buy from them have had enough.” “In a world where some companies navigate their way around legitimate tax systems -- and even low tax rates -- with an army of clever accountants,” he said, “some forms of avoidance have become so aggressive that I think it’s time to call for more responsibility and for governments to act accordingly.”
When it was discovered that Starbucks in the UK paid just $13.46 million in corporation tax in its 14 years of trading, and zero in the last three years, despite UK sales of nearly $626 million in 2011 alone, it sparked an informal boycott by customers that is damaging the company’s bottom line. Amazon had revenue of $5.2 billion in the UK in 2011 yet paid only $2.8 million in taxes. Google, too, has been avoiding UK tax, paying just $16 million in taxes on a turnover between 2006 and 2011 of $18 billion. When Vodafone bought Mannesmann last year for $241 billion, but routed its sale through a tax haven to avoid paying UK tax, angry protests led to the company shutting its flagship London store.