Hot Features
Premium
Register to chat with like-minded investors on our interactive forums.
The political class is today delighted as Starbucks appears to be caving in and agreeing to pay more tax. No doubt Amazon and Google will follow suit. My warning here is that what is going on will cost British jobs and it stinks of high hypocrisy. And yes Margaret Hodge MP I am talking about you.
I start with Hodge who has appointed herself as witchfinder general sniffing out big American companies who pay tax rates of as little as 1% in the UK. You may remember that this was the vile woman who ran Islington Council at a time when an institutionalised paedophile ring operated in its care home system. When this started to be exposed she attacked those doing the exposing as homophobes. Her reward for allowing little kids to get buggered by council employed nonces was to be made Children’s Minister by Tony Blair. You could not make it up.
But it gets better. Hodge is part of the incredibly wealthy Oppenheimer family. And so her income comes from the family firm which pays tax at…. yes you guessed it 1%. So the words rank hypocrisy do spring to mind.
To receive a free biweekly newsletter from Tom Winnifrith including a free share tip every Wednesday and links to all his US and UK writings click HERE
But of course what Comrade Hodge’s family firm and Starbucks etc do is all perfectly legal. They use the system in a clever way (as, of course, does the Guardian newspaper) to pay as little tax as is legally required. At least Starbucks does not (as do Hodge and the Guardian) lecture the rest of us about how we should pay more in tax. Perhaps that would appease Hodge and Lib Dem Treasury Minister Danny Alexander who, pompously announced, that he is now personally boycotting Starbucks.
“ One grande latte, semi skimmed with extra cinnamon on top, that will be £2.90 Mr Alexander but would you like to donate an extra 50p to be sent to Dfid so that it can go to pay for the new private jet ordered by the President of Uganda?”
But caving into this onslaught the American firms appear to be saying “wee minimise our tax in a legal way but we may agree to donate extra money to the UK Government to bury this issue and move on.”
In theory this closes the deficit. Since the deficit is £120 billion a year and we are talking tens of millions here (at most) it does not close it by much. But it will be a symbolic victory for the political classes. But it may also be a pyrrhic one. That is to say that if Starbucks generated a Return on Investment of x% paying a 1% tax rate by opening a new coffee bar in the UK, it will now generate a return of something less than x%. Thus in new potential locations where the return was marginal it will simply not open. It will instead use its capital to open an extra new store in China or wherever.
If the politicians wish to change the tax law fine. But what they are actually doing is making companies that have not broken the law just “donate” more to the Government. This is the way third world countries behave. And either way it makes the UK a less attractive place to do business which means fewer real jobs here. Governments cannot themselves create jobs, wealth, tax papers but they can create the climate where others do just that. This Government appears intent on doing just the opposite. In bankrupt Britain this is the politics of envy and of the madhouse.
Libertarian investment writer Tom Winnifrith writes extensively for a number of US and UK financial websites. All of that material appears on his own blog, which also carries his extensive original non financial material, at TomWinnifrith.com – for alerts on all Tom’s writings follow him on twitter at @tomwinnifrith
