The taxing question that dare not speak its name: What should Scotland do?

Tax Dodging Hurts the Poor

by Kevin Williamson

Next year, hopefully, the Independence debate will move out of the intellectual shallows of a Labour-SNP Punch-and-Judy Show and begin to put flesh on the bones of alternatives and possibilities.

An onus needs to be put on all participating parties to explain their hopes for Independence or their hopes for Scotland within the Union.  Although the individual dots and commas of specific policy, out of necessity, will form part of the 2016 post-Indy Holyrood elections (if Yes wins), the driving force of alternative visions needs to come to the fore to help Scots make the biggest decision of our lives.

Here at Bella we’ll try and both reflect and pro-actively contribute to the debate.  One of the areas of strategic vision we’ll try and stimulate discussion around is the concept of fair and progressive taxation. With the Tax Dodgers Alliance of Starbucks, Google and Amazon in the headlines this week 2013 would be a good time to start thinking about how Scotland could do things differently.

Evidence collated by the authors of the book The Spirit Level strongly suggests that reduced inequality leads to greater social cohesion and a happier people.  But the reality is that reduced inequality needs fair and progressive taxation on the wealthiest corporations, landowners, banks, utilities, and individuals.

It can be argued that this straightforward concept needs to be the beating heart of any future Scottish government if it deserves to call itself a progressive social democracy.  The idea of fair and progressive taxation, and what it could mean in practice, for our communities, needs to be patiently and carefully explained over the next two years.  No manifestation of taxation need be excluded from this debate and nor should it be. Not personal taxation nor corporation tax, land value taxes, Robin Hood bank charge taxes, VAT, utility windfall taxes, local income tax, property tax, inheritance tax or whatever.

In this respect we call on The Reid Foundation and others to publish as many papers as possible on alternative taxation strategies and their social and economic implications.  (Journalist George Kerevan was correct when he identified an economic weakness not yet properly addressed by the Scottish left at the recent Radical Independence Conference.)

While the taxation specifics can be left to after 2014 it would be the clearest possible signifier if the major players in the Independence movement were to spell out their commitment to the idea of fair and progressive taxation in advance of the 2014 referendum.  This underpinning concept – which so far has been inexplicably excluded from the Independence debate – has the potential to take lofty sentiments and make them understandable, tangible and workable.

Rubbing up hard against the idea of fair and progressive taxation in an Indy Scotland is the continued collective existence of living in the 4th most unequal country in the world.  It was reported this week that the richest 10% of UK households are 850 times wealthier than the bottom 10%.  This socially destructive and absurd level of inequality is a one way ticket to social breakdown, alienation, and, as a consequence, more crime, more violence, more self-destrcutive behaviour, more ghetto-isation, and more cries of injustice and despair.

But do the major Independence players have the suss or the courage to state in advance of 2014 they intend to tackle it head on? Here at Bella we’re delighted that Deputy First Minister, Nicola Sturgeon, summarised her positive progressive vision of Independence:

My conviction that Scotland should be independent stems from the principles, not of identity or nationality, but of democracy and social justice.

This is a great leap forward in thinking which can help unleash the democratic and popular potential of the Independence movement.  It implies that the input and infrastructure of community will be at the heart of our drive for Independence.

It also implicitly says that the Scottish government cannot sing one pleasing song to the 99% while whispering sweet nothings into the ears of bank execs, powerful landed elites nor giant corporations.

This raises awkward questions about the type of Scotland we hope to build. Do we need to attract more or less corporations to Scotland?  What are the benefits weighed against the negatives?  How do we stop the theft of our county’s wealth into offshore tax havens?  How do we encourage and sustain SMEs if special tax favours are given to corporations in direct competition with SMEs?

It is often argued that corporations bring huge employment benefits.  This is true but it also masks the number of jobs lost from businesses who are driven to the wall by an unfair playing field framed by corporate lobbying.

If, for example, Starbucks upped and left because they were made to pay their fair share of taxes would people stop drinking coffee?  With the loss of thousands of jobs? Or would it provide an opportunity for new local businesses to flourish?  Can this argument be applied to every other corporation in Scotland?

The bigger picture argument about cutting corporation tax – as suggested by some strategists in the SNP – needs to recognise that an international race to the bottom would inevitably hollow out the economic resources needed for building the infrastructure of an inclusive social democracy.

The article below is a re-blog of the editorial in yesterday’s Guardian. It is worth a close read.  If the London liberal media can ask good pertinent questions of corporations then surely we can start posing similar questions within our own movement.

* * *

Tax Justice Not Tax Havens

TAXING CORPORATIONS:  ONE LAW FOR THEM

Guardian Editorial, 3rd Dec 2012

“Don’t be evil” was a Google catchphrase, back in the days when corporate evil-doing was conceived in terms of what a company did – shafting workers, polluting rivers, flogging baby milk in places waters were already poisoned. Increasingly, however, the people are raging at companies not so much for their positive actions as for their omissions – specifically, for their failure to pay full tax. In truth, the super-complex shenanigans that officials badge as “extreme avoidance” make minimising tax bills a very pro-active option indeed.

Nearly four years have passed since the Guardian’s tax gap series, as have two since the founding of UK Uncut and one since Occupy. In different ways, each shone a spotlight on the murky world of business tax, and to some extent succeeded – though until now nobody would have called it a mainstream concern. But the tax affairs of Google itself, together with Amazon and Starbucks, are suddenly just that – thanks to the chutzpah of the public accounts committee chair, Margaret Hodge, in hauling corporate colossi over the coals. The report that the committeehas published states that the intention was not to single out these three multinationals, only to illustrate wider points. But with voters facing higher VAT, shredded tax credits and swollen energy bills, news that these three big brands coughed up at most 1.5% (Google) and at least 0% (Starbucks) of 2011 UK turnover in corporation tax risks making them public enemies.

None of these companies are charged with breaking the law, and the ethics depend on the detail. Corporation tax, after all, is not meant to be a tax on sales but only profits. Financial flows around global empires are necessarily complex, and pinpointing where a profit – and thus a tax liability – was generated will on occasion be open to real debate. The systematic pushing of profits away from these shores, however, is more a question of distortion than interpretation. The ordinary taxpayer may only half-understand the report on the radio but is left with one clear thought: if I told HMRC to regard my personal earnings as the preserve of my Dutch division or Irish operation, they’d tell me where to get off.

The agitation of British-based retailers who have to compete with footloose foreign players raises the political temperature. John Lewis is the shop that Westminster loves to love – politicians endlessly cite the staff-owned retailer as inspiration for their latest schemes for the Post Office, the NHS and everything else – and yet its chief executive, Andy Street, has warned that the tax advantages of border-hopping rivals such as Amazon could jeopardise its future. With talk of boycotts picking up, Starbucks has realised that holding the opinion of your customers in contempt is not good business; it has signalled it would redraw the organogram it uses for tax purposes, so that it pays at least a smidgeon of UK tax.

In free market circles before the crisis, it was commonly argued that it would be better to “pierce the corporate veil”, tax shareholders and staff directly, and scrap corporation tax. This argument always ignored the huge benefits that corporates enjoy from social structures such as limited liability, but regardless of its merits this is now a cause for bow-tied bores. Politicians are belatedly catching up with the reality that the electorate regards companies as entities with a moral duty to pay tax. Next week Vince Cable, a scourge of avoidance in opposition, will return to the charge.

The Treasury, however, still lives in something of a parallel world. Wednesday’s autumn statement will give some nods to the mood of the moment, but on Monday the chief secretary, Danny Alexander, was misapplying the idea of taxpayer confidentiality, which evolved to protect not faceless companies but individuals, to resist demands to name and shame top corporate avoiders. With another tranche of welfare cuts about to pick poor pockets, such indulgence of big business empires cannot be sustained. If the Treasury cannot grasp that, it will have to reckon with the wrath of voters who have already got the point.



Categories: Economics, Possibilities, Referendum on Independence, Tax Justice, YesScot

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7 replies

  1. There is an element of ‘putting the cart before the horse’ in this article’s concentration on taxation, rather than wealth-creation. Amazon and their ilk are enticed here because of our failure, over generations, to create an economy which can afford to turn its back on outside investment. (If anything the situation has worsened as the companies we now attract are often offering only low skilled work.) If the left in Scotland has a proposal for how we get by without Sky TV, Amazon etc, let’s hear it.

    done this for the

    • When it comes to wealth creation and taxation its not an either/or situation. Serious ideas – in outline at least – need to be on the table now for both. The re-industrialisation of Scotland has already been raised at the highest levels. As for Amazon.. prior to the scrapping of the Net Book Agreement Scotland had a very competitive and diverse network of bookshops so its just not true to say that Amazon arrived because of our failure. It was Westminster free market hucksterism that created the type of High Street which allowed Amazon to flourish here. A combination of progressive taxation and book price control can challenge their drive towards monopoly and open up opportunities for Scottish enterprises.

      KW

      • I agree on the need for serious ideas about both wealth creation and taxation but the left in Scotland seems to ignore the former. Would it be books alone that would be subject to a ‘price control’, or would it apply to all online shopping ?
        I can’t see the public supporting either. Amazon is popular because it supplies a demand. Denouncing this success as ‘free market hucksterism’ is a dead end. It should of course pay taxes on its profits.

  2. Florian –

    ‘If the left in Scotland has a proposal for how we get by without Sky TV, Amazon etc, let’s hear it.’

    Are you serious?
    Why do you assume that ‘the left’ should respond to such an asinine comment? Is anyone else permitted to make ‘proposals’, or do you take it as a given that only foaming-mouthed Marxists object to the behaviour of these parasites?
    The article raised serious questions – you didn’t.

    • There is nothing asinine in pointing out that for decades Scottish governments, of different political hues, have gone to great lengths to persuade corporations to set up in Scotland, mainly to provide jobs.
      Those to the left of SNP and Labour are, at present, politically irrelevant. Why should they respond – as I suggest – to the challenge of how to create more wealth in Scotland ? Because until they do so they will remain politically irrelevant.

      and

      • florian albert-
        If I offended by using the word ‘asinine’, I apologise.
        I am a member of the SSP. We are currently enjoying a resurgence in membership and attendances at branch meetings across the country. Unless you are privy to those statistics, please tell us how you can dismiss ‘the left’ as politically irrelevant. The SSP is committed to a Yes vote. (Other ‘left’ parties are available) – are you saying those votes are irrelevant?

  3. “… While the taxation specifics can be left to after 2014 it would be the clearest possible signifier if the major players in the Independence movement were to spell out their commitment to the IDEA of fair and progressive taxation in advance of the 2014 referendum…”
    Before the Referendum the ‘Official Campaign View’ need state no more than …” that Scotland will pursue a tax system which is fair and progressive”… and nothing more should be volunteered willingly because it would just open up the campaign to innumerable unanswerable questions from the Bitter Together crowd and the media.
    That does not mean that outside organisations cannot produce papers and suggestions vis a vis different tax strategies et al to their hearts’ content. But let them always make it clear that they are private opinions.

    .

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