If we want to get more foreign investment and help the economy grow we need to stop this anti-business sentiment instilled in people’s minds.
This week has been a rollercoaster ride for firms like Starbucks, Amazon and Google in the UK, and it’s all because of this so-called ‘tax scandal’.
Labour MP Harriet Harman got in on the action by announcing that she’s boycotting Starbucks, something many British people have declared they will also do.
I’m not sure whether Harriet Harman even understands the tax system or how a business works, instead following everything she’s been told without truly understanding what is happening.
Starbucks paid no corporation tax, we can all agree on that, but what some seem to not understand is that companies like Starbucks pay other taxes.
There’s the Uniform Business Rate (UBR), which is a tax on each of the company’s many branches based on the rental price.
UBR accounts for 4.35% of all UK tax, which isn’t a small number. That’s £19.9billion, which might not be quite as near as corporation tax which accounts for 9%, but why should companies have to pay 13.35% of all UK tax?
Of course that’s untrue, since companies charge VAT on their products, so therefore have to transfer that money to the government too, and VAT equals 15% of all UK tax.
Businesses are simply paying too much tax, which in a difficult economic climate may stunt their growth and force them to either stop expanding or to downsize.
No one likes to hear that a company is cutting jobs, but if the company’s tax bill becomes too high, then they’ll no doubt not have the cash to spend on staff wages.
If a company like Starbucks pays UBR but not corporation tax, I say let them.
With the smaller tax bill Starbucks can invest more into the UK creating more branches, which in turn pay UBR, and then create more jobs, which will create more income taxpayers.
I read a comment in the Metro yesterday which said that it’s a company’s privilege to operate in the UK, therefore they should pay tax.
Let me address that comment for a second – I completely disagree with that sentiment.
A company chooses to operate in a country where there is demand for its products.
Without some big foreign corporations, we wouldn’t have an economy anywhere near as big as it is now. UK firms simply cannot fill every single gap.
Imagine if you told Google because of the amount of tax they pay, they can no longer operate in the UK. Who would miss who more?
Would Google miss its UK business, or would you miss Google?
The UK government needs to stop attacking companies for its business practices and start lowering the amount of taxes it has to pay in the UK.
Look at countries like Luxembourg. It’s an incredibly wealthy country with very low tax which in turn has attracted many businesses to the area.
Imagine if we had the same thing, maybe businesses will find the UK an attractive place to have their EMEA HQ, which in turn creates jobs and local investment.
David Cameron talks all the time about how the UK is open for business and wants to attract foreign investment, and then his own government goes on the offensive against businesses who have tried to cut the costs of operating in the UK so it can expand?
It just doesn’t make sense to me.
To address a point many of you may have, specifically about Starbucks making no profit, that’s technically true.
Many multinationals charge their subsidiaries fees for using their services and brand, something that is called transfer pricing.
Therefore if we take into account Starbucks’ profits after paying its EMEA HQ the transfer pricing fee, it has made none.
It’s common practice and it’s not unreasonable.
If we want to get more foreign investment into the UK and help the economy grow we need to stop this anti-business sentiment that labour seem to have instilled in many people’s minds.
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