Hi ,
In the fight to get multinational corporations to pay their fair share of tax, the first step – just knowing how much tax they should be paying in each country – can be extremely hard. The OECD and EU have gradually been introducing tougher requirements for multinationals to publicly publish their financial information country-by-country in order to make it more difficult to quietly shift profits made from UK sales to, for example, Ireland, where there are more tax breaks.
Unsurprisingly, companies with valuations larger than some countries have been wailing that it's too difficult for them to compile and publish information that they must already have in order to shift profits in the first place. What happened next will shock and dismay you: Romania implemented the first round of EU-mandated public reporting and actually it's fine and not that difficult at all.
Research from the Fair Tax Foundation finds good news: nearly two thirds of these reports are sincere attempts to comply. As much as 78% of UK-headquartered business reports are genuine, they say – but US giants made little effort to comply, with companies like Apple keeping as much as possible shrouded in mystery.
The profit shifting that the public reporting is attempting to expose can be serious amounts. For example, Chinese ultra-low cost manufacturing and retail giants Temu and Shein have done an excellent job moving their enormous profits around to minimise their tax bill. Temu is estimated to have seen $10bn of sales in the EU and $2bn in the UK, but officially employs just 8 people in the EU and paid only $13mn in tax ($3mn of which was from the OECD minimum tax rate agreement), an effective tax rate of 0.13%. Not bad! Fashion retailer Shein, meanwhile, paid £9.6m of tax on £2bn of sales in the UK because £1.76bn of those sales were instead routed through Singapore as purchasing costs. Smart! Defending itself, Shein issued a statement saying “This is a standard, widely used corporate structure across industries.” Well, yes! It is!
But this shouldn't be seen as a story of the UK being a blameless victim of unfair Chinese corporate practices. Shein Singapore, located in a former British colony, is ultimately owned by an entity based in the second biggest tax haven in the world: the Cayman Islands, which is a British Overseas Territory. In fact, it's one of many enormous British Overseas Territory tax havens. And our governments have repeatedly refused to take even the most basic action to tackle this. Really, we have nobody to blame but ourselves here. Together with War on Want, we've written to the Foreign Office and Treasury to tell them exactly this ahead of the next round of UN Tax Convention meetings in November.
Now, the only reason we know about this is because of the hard work of the Fair Tax Foundation, which poses a reasonable question: why aren't HMRC doing this work? In fact, parliament's Public Accounts Committee has warned that HMRC don't even know how much tax is actually paid by UK billionaires, let alone by multinational corporate giants. Our governments have said repeatedly they want the richest to pay their fair share of tax, but you have to wonder if that's true if they won't give HMRC the resources to actually tax them – which we know works – or take action against our tax havens which are starving us of our tax revenue. |
