CGD in the News

Multinationals and Tax: A Bad Smell (The Guardian)

May 24, 2013

Senior fellow Alex Cobham's work cited in a Guardian editorial about multinational tax practices.

From the article:

Call it the smell test. When Google justifies paying minimal taxes in the UK because "no money changes hands" here, while admitting that up to 70% of its relevant ad revenues are handled by UK staff, then all may be legal – but something still doesn't smell right. When Amazon negotiates the deals in its Slough office, but gets the paperwork done in ultra-low-tax Luxembourg, the whiff really is pretty overpowering. When a high court judge allows as legal a "sweetheart" deal struck by Revenue and Customs with Goldman Sachs to let the bank off £20m in payments, but also slams the settlement as "not a glorious episode in the history of the Revenue", then something really stinks.

These three incidences of the bilking of the public purse are from just the last couple of days. In each case, the full gory details only came into the public domain because of committed (in some cases bloody minded) individuals and organisations. Google had to face the wrath of Margaret Hodge after former employees pointed out that the internet giant's previous testimony had been misleading. The extent of Amazon's business dealings in the UK, a country in which it claims not to be what tax lawyers call a "permanent establishment", have emerged through a Guardian investigation this week. And we only know that HMRC waived a £20m bill for Goldman Sachs so as to avoid "potential embarrassment" to George Osborne because of a legal challenge by the pressure group UK Uncut. Without backbench MPs and whistleblowers, journalists and activists, all of these details would have been obscured from the public gaze. And that really doesn't smell right.

What has been on display again this week is the brokenness of our system of taxing businesses. True, that is a big conclusion – yet hardly anyone disputes it: not campaigners and academics nor tax accountants, nor even government ministers. George Osborne summed up the problem admirably in his March budget speech: "We want the global rules governing the taxation of multinational firms to be updated from the 1920s when they were first written, and made relevant to the global internet economy of the 21st century."

Read the article.