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When is it OK to avoid tax?

Written by on 18 October 2011

When a report by anti-poverty charity Action Aid revealed a quarter of the UK's top 100 companies have offshore subsidiaries, it came as little surprise. I do however, think that the extent to which so many of our largest companies go to in order to minimise tax exposure is stark. Although the report acknowledged that these companies are clearly acting within the law, are they acting ethically?

What’s the message?

The City (FTSE 100) has spent considerable time and effort shaping the media space to portray their contribution to the tax revenue of the UK as a vital part of the economic recovery, yet this isn't really the case. Are large corporate businesses enjoying all the benefits of operating within an advanced economy whilst contributing very little to the infrastructure itself?

What would we do without them?

From one point of view, you could argue that these companies are generating huge amounts of wealth for individuals through employment, which may be seen as sufficient enough and we should perhaps be grateful that they even choose to trade here in the UK. On the other hand, you could also argue that such companies are leveraging themselves into new realms of business wealth as a result of such preferential trading conditions whereby they are allowed to operate offshore subsidiaries in order to avoid paying tax. Surely if they did not exist, new companies would emerge to take their places.

Does everyone benefit?

The individuals that these huge companies employ are also just as polarised as the companies themselves. Employees tend to be either relatively low grade administrative staff or superbly well remunerated executives that enjoy the same complex tax structures in order to mitigate tax exposure. I struggle to see how the liberal benefits that these few large companies enjoy, benefit the country as a whole.

But it's all above board!

Even the relationship these companies enjoy with the political decision makers should be closely investigated, whether it is the lenient dealings the revenue showed to Videophone in relationship to unpaid corporation tax or the uncomfortably close influential relationship that News Corporation enjoyed with successive Governments, society should rightly be skeptical of these corporate bodies and there lack of transparency and accountability.

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