Labour Member of
Parliament Margaret Hodge was Minister for Children in Tony
Blair’s government and Minister for Culture and
Tourism under Gordon Brown. With her party in opposition, she
now chairs the PAC. Here she has found a new voice, stridently
chasing tax avoidance and the lack of transparency in corporate
accounting, which Google, Amazon and Starbucks have learned to
fear since being hauled before her earlier this month on the
charge that they have acted immorally by not paying their fair
share of tax in the UK.
Companies and their lawyers,
however, argue that they pay the amount of tax they are
required to under law and that it is for politicians and
supranational bodies to take responsibility for the tax systems
they have designed.
Hodge accepts that governments
do have a responsibility to devise a law that ensures fair
contributions from individuals and corporations.
"We have such a complex tax
code, we spend our time chasing our tails," she says. "Every
time you think you’ve closed a loophole, another
one is devised."
Tearing it up and starting again appears to be beyond any
government, she says however, pointing out that the
Conservative government appointed a "simplification czar", but
only gave him six people to work with.
She is also keen to note that the tax code was designed for
the nation state, not for a globalised world. It is clear,
then, that she thinks reform is necessary.
"But, passing the buck back to the government is not good
enough either," she says. "There are responsibilities on
companies to behave ethically. And there are responsibilities
on the government to make it harder for them to avoid tax."
Hodge also says there are responsibilities on HM Revenue
& Customs (HMRC) to "step up its game" and she calls on the
tax authority to "aggressively deal with those companies that
are deliberately exporting profits from the UK to low-tax
jurisdictions".
"HMRC has to build up better skills and use them in the
right way to toughen up its stance when negotiating things like
transfer pricing deals," Hodge adds.
Country-by-country reporting and FATCA
On the regulation side of things, Hodge is singing from a
similar hymn sheet to Richard Murphy and the Tax Justice
Network, whose work she praises.
"Country-by-country reporting and unitary taxation both seem
like really good ideas," she says.
However, Hodge cautions that these will take forever to
negotiate given the speed at which Europe and the rest of the
world moves, "so we can’t put all our eggs into
that basket".
"The time has come to stop relying on Private Eye to tell us
when things go wrong," Hodge says. "We need to see how the
negotiations occur. I would start that off with the FTSE 100,
and if the world doesn’t fall apart
we’ll see if we can take it further. And I
don’t think the world’s going to fall
apart."
Hodge says she cannot understand why the information
corporations have to file in the US is so much more transparent
than the information they have to file in the UK at Companies
House.
"It’s inexcusable to me that
Starbucks can give one story to Companies House and another
to investors," she says.
"We could name and shame those who are found guilty of tax
avoidance in the same way we name and shame benefit cheats,"
Hodge adds.
Hodge does not declare herself to be a tax expert, but she
says that she would support any method of tackling tax
avoidance that works, including a UK version of the US Foreign
Accounts Tax Compliance Act (FATCA), which
International Tax Review recently revealed the
government was secretly preparing.
"At a time when there are fiscal constraints, the idea that
big corporations get away without paying their fair share is
anathema," she says.
Corporate citizens
On Starbucks reducing its royalty rate from 6% of sales to
4.7% after being challenged by HMRC, Hodge said: "it appeared
to be just what you could get away with", something she
describes as "deeply unfair".
Hodge is keen for
companies to be good corporate citizens. One thing that
makes her particularly angry is big companies promoting their
corporate social responsibility credentials by saying they fund
good work projects and using this as a justification for not
paying their taxes. She is also incensed by the standard
company response that the amount of corporate tax they pay does
not matter because they pay other taxes.
"The country’s about to spend about £1
billion ($1.6 billion) extending broadband into rural areas,"
Hodge says. "Google will benefit from that. That’s
entirely taxpayer and council taxpayer funded investment. The
idea that they don’t benefit from
taxpayers’ expenditure but only contribute to the
public purse is absurd."
A key fact that has weighed heavy on Starbucks’
reputation is that it has not paid UK corporation tax for 14 of
the last 15 years. Hodge wonders what business will continue
expanding while making such losses.
But equally, one wonders why it has taken 15 years to become
an issue.
"There’s a greater focus when money is tight on
demonstrating we’re all in this together and
paying our fair share," Hodge explains.
Of course, it has not just become an issue for politicians
and the PAC. As Occupy and UK Uncut have spectacularly
demonstrated in the last year, the public too has lost patience
with corporations they believe are paying less than their fair
share in an era of biting cuts. Hodge is not exactly ready to
set up a tent outside St. Paul’s Cathedral in
London, but she is encouraged by the popular outcry from across
the political spectrum.
"Both the TaxPayers’ Alliance on the right and
UK Uncut on the left support the work that the PAC is doing,"
she says. "That shows we’ve touched a raw nerve
here and corporations should take note because it is creating
reputational damage which costs them business."
"There’s a self-interest for them to get on and
pay their ruddy tax".
Report
The PAC will release its report on Monday.
"We want to influence at the last minute the Chancellor in
his Autumn Statement."
Meanwhile, the PAC is taking evidence on the K2 type of
scheme infamously used by comedian Jimmy Carr. And it will not
be forgetting about other multinationals it believes are not
respecting the spirit of the law.
"We won’t let go of it because
it’s a hugely important element in the public
finances," Hodge says. "We will be raising issues that have
been raised with me by whistleblowers or in the media. Almost
every other day there’s a new secret exposed."
The interview concludes as another public scandal takes
immediate precedence and Hodge rushes to hear Prime Minister
David Cameron’s response to the Leveson Inquiry
into press ethics. But tax avoiders can rest assured, if not
easy, that their affairs will continue to be among
Hodge’s highest priorities.