United Kingdom

STEPHEN GLOVER: How I despise the dark arts of tech giants who pay less tax than J.K. Rowling 

Like millions of people, I must submit a tax return in three days’ time. If we are late, we will be fined. 

If we don’t have all the money due to HMRC, we’ll be threatened and charged interest on unpaid tax.

In short, under pain of various sanctions and penalties, most of us are doing our best to behave like responsible citizens, and trying to ensure we do what the authorities require of us.

Miss Rowling may be stupendously rich, but by the side of Facebook (currently valued at nearly £500 billion, more than the size of Sweden’s annual GDP) she is a sprat. And yet she is shelling out not very far short of twice what this mega-wealthy company pays the Treasury

How very different is the experience of American tech companies, as well as some other foreign firms schooled in the dark arts of paying as little UK tax as they conceivably can.

It is not so much the normally assiduous taxman who is at fault, since HMRC lacks the legal means to make these businesses cough up their fair share of tax.

No, the true culprits are successive politicians who promise us that they will bear down on these enormous corporations — and then do little or nothing.

Stunning

Over the weekend, a piece of mind-boggling information was published — the sort of fact that makes one clutch one’s head, and wonder whether there is any sense at all in the way we are governed.

It emerged that Harry Potter author J.K. Rowling paid £48.6 million to the Treasury in the year to last March. 

Miss Rowling, who has inveighed against tax havens in the past, certainly puts her money where her mouth is when it comes to her tax liabilities. For that, she deserves our respect.

Like millions of people, I must submit a tax return in three days’ time. If we are late, we will be fined. If we don’t have all the money due to HMRC, we’ll be threatened and charged interest on unpaid tax [File photo]

But what is so stunning is not just the tax a single person handed over to HMRC — though it certainly takes the breath away. 

What really makes one want to grab hold of the nearest solid object to steady oneself is the revelation that Facebook is thought to have paid the Treasury just £28 million in corporation tax in the 2018/19 tax year on £1.6 billion in revenues here.

Miss Rowling may be stupendously rich, but by the side of Facebook (currently valued at nearly £500 billion, more than the size of Sweden’s annual GDP) she is a sprat. 

And yet she is shelling out not very far short of twice what this mega-wealthy company pays the Treasury.

Nor is she the only one. Figures published by The Sunday Times make a nonsense of Jeremy Corbyn’s characteristically flaky allegation that the super-rich don’t pay their dues. Quite a lot of them do so, and very handsomely.

The inventor Sir James Dyson and his family are said to have paid £103 million in tax in one year. 

The Duke of Westminster is supposed to have handed over £69.3 million. The Government can do useful things with large amounts of money like these.

Top of the list is Denise Coates and her family, whose fabulously profitable company Bet365 has rightly earned opprobrium because of its sponsorship of online gambling, with all the addictive consequences that can entail.

Now is the time for Boris Johnson to be brave — not over Huawei, where it’s in Britain’s self-interest to agree with Trump, but over digital tax, where it isn’t. Hard-pressed British taxpayers don’t want American multi-nationals to have favourable tax treatment

But at least she pays her taxes — reportedly £276 million in a year.

So the super-rich, or at any rate a large number of them, do pay their fair share of taxes, just like the rest of us. I don’t suggest they should be congratulated for doing so. But let’s acknowledge their contribution.

In stark contrast, the highly profitable American tech companies — whose enormously lucrative technological innovations are transforming society, not always for the better — maintain a niggardly attitude towards paying their dues.

Facebook I have already mentioned. Amazon’s most recent UK tax payment of £220 million in direct taxes was on revenues of nearly £11 billion. In 2018, Google paid £49.3 million in corporation taxes on total British sales of about £5.7 billion.

The main reason these and other digital multinationals get away with forking out such relatively derisory amounts is that they manage to shift profits to more accommodating tax jurisdictions such as the Republic of Ireland.

Nor is it only the tech companies that are so fleet of foot. The chocolate manufacturer Ferrero Rocher managed to pay just £110,000 tax in the UK last year despite having sales of £419 million.

This was principally achieved by the British-based business paying a £334 million ‘cost of sales’ charge to Ferrero’s holding company in low-tax Luxembourg.

Why don’t we boycott Ferrero Rocher’s chocolates in favour of confectionery produced by firms that pay UK tax? I admit this won’t be a huge sacrifice on my part because I can’t bear the stuff it produces.

It’s hard not to boil over when one considers that Giovanni Ferrero, scion of the empire, is paying himself and his family a dividend of £542 million. For once, I know what it feels like to be Jeremy Corbyn.

My earlier suggestion was that HMRC doesn’t yet possess the implements to clobber the tech giants. But can it really be so powerless to bring a greedy Italian chocolate manufacturer to heel?

Fruitless

As for the U.S. behemoths, the Government is finally preparing to introduce a two per cent digital sales tax in April, which will honour a manifesto pledge — and, so the Treasury hopes, bring in an extra £500 million a year.

At last, after fruitless undertakings by previous chancellors George Osborne and Philip Hammond that they would force digital multi-nationals to pay their proper dues, it looks as though the tax dodgers are going to be made to stump up.

Or will they? Donald Trump has been throwing his considerable weight around on behalf of these American companies.

What really makes one want to grab hold of the nearest solid object to steady oneself is the revelation that Facebook is thought to have paid the Treasury just £28 million in corporation tax in the 2018/19 tax year on £1.6 billion in revenues here [File photo]

Last week, his Treasury Secretary, Steven Mnuchin, said that if Britain and other countries introduced their own digital taxes they would ‘find themselves faced with President Trump’s tariffs’. 

Did I detect a quaver in the voice of the Chancellor, Sajid Javid, as he vowed to stick to his guns?

Unsurprisingly, Emmanuel Macron of France, once a champion of digital taxes on the tech giants, has rolled over, and shelved his plans, after Mr Trump threatened tariffs on French products such as champagne, cheese and handbags. Not such a brave French president after all.

Will Boris Johnson do the same in the face of threats of punitive tariffs on British exports? 

He is in a ticklish position because the overbearing Mr Trump is also threatening retaliation if the UK allows Chinese telecom group Huawei a role in Britain’s future mobile 5G network.

Partisan

In fact, the American president is correct on this particular issue. Many British experts believe it would compromise our sovereignty to allow Huawei to develop and maintain our 5G network. 

Why don’t we boycott Ferrero Rocher’s chocolates in favour of confectionery produced by firms that pay UK tax? I admit this won’t be a huge sacrifice on my part because I can’t bear the stuff it produces [File photo]

The company’s complete independence from the Chinese government is extremely doubtful.

Here Mr Johnson should be prepared to climb down — not to please Mr Trump but because the American president happens, for once, to be right. 

But Trump is being narrow-minded and partisan in threatening countries planning to introduce a digital tax.

Mr Javid’s tech tax can be subsequently amended if the Organisation for Economic Co-operation and Development is eventually successful in brokering an internationally recognised digital tax acceptable to the U.S.

Now is the time for Boris Johnson to be brave — not over Huawei, where it’s in Britain’s self-interest to agree with Trump, but over digital tax, where it isn’t. 

Hard-pressed British taxpayers don’t want American multi-nationals to have favourable tax treatment.

Let’s hope Boris doesn’t have to learn the hard way that giving in to a bully like Donald Trump will only encourage him to come back for more.