Tax inversion isn’t just for the big boys any more, it seems. High street traders in the picturesque Welsh town of Crickhowell have adopted the same offshore arrangements as powerful multinationals Starbucks, Google and Amazon to slash their corporation tax bills.
‘Until now, these complicated offshore tricks have only been open to big companies who can afford the lawyers’ fees,’ Jo Carthew of the town’s Black Mountain Smokery told the Independent. ‘But we’ve put our heads together, and worked out a way to mimic them. It’s jolly clever.’
Along with Crickhowell’s baker, optician and coffee shop among others, she’s submitted proposals to HMRC based on American multinationals’ clever accounting plans, and has visited the Isle of Man and Amsterdam for a BBC documentary, The Town That Went Offshore.
If HMRC accepts the proposals, the town plans to share its tax formula with others in an effort to pressure the government to close offshore loopholes. It certainly proves a point, but will it actually make any difference?
Tax inversion isn’t exactly an unknown phenomenon and there’s already plenty of political momentum against it - just look at campaign promises from such diverse figures as Jeremy Corbyn and Nigel Farage to cut the deficit by soaking up unpaid taxes.
More to the point, the government already wants to close the loopholes. Popular opinion may have it that multinational executives can charm politicians merely by rubbing shoulders with them in swish London clubs, but in truth there’s nothing in it for Westminster to let those taxes go unpaid. It’s not as though Starbucks or Facebook wouldn’t trade or invest in the UK if they had to pay more tax on the profits they made here.
The reason tax inversion hasn’t been eliminated already is not the undue influence of wealthy businesses, but the near impossibility of getting the world’s nations to agree on a common tax policy. Some, like Ireland, will always want to use tax policy as a competitive advantage.
That said, Chancellor George Osborne did announce a ‘Google tax’ on diverted profits back in March, which resulted in Amazon ditching its practice of routing bookings via its registered office in Luxembourg (not a big deal though, given the firm’s preference for growth over profits).
The government also implemented a point of consumption tax on gambling profits last December, though it is being challenged in the EU Court of Justice for violating European competition rules.
Whether those or subsequent measures to close loopholes for multinationals will work remains to be seen. But the Welsh tax rebellion by itself is unlikely to create any more urgency in Downing Street, unless of course it does spread to high streets across the country.
Even then the Chancellor probably won’t be too worried though. As Tesco has found out, business rates take in plenty on their own – and no bricks and mortar store can avoid them.