Corporate Tax Avoidance

Stephen Lloyd Excerpts

Monday 7th January 2013 Commons Chamber

[Stephen Lloyd (Eastbourne) (LD)]

I pay tribute to my hon. Friend the Member for Redcar (Ian Swales) for securing this debate. I am well aware that many of the companies mentioned today have not broken the law, but they have broken the spirit of the law. We know that, HMRC knows that and, most important, the public know that. Companies such as Amazon, which has been mentioned frequently this evening, and which paid a tax rate of just 2.4% in 2011, have outraged the British public in recent months, and rightly so. These companies have used the vast resources at their disposal to bypass the tax system, while taking a great deal of money and profit from their UK customers. At a time of such tough worldwide economic circumstances, that is nothing but an insult to the hard-working individuals and businesses who pay their fair share of tax, who understand that we all need to contribute, and who appreciate that, whatever the partisan nay-sayers may say, we are all in this together, because that is the only way that we will get through our desperately indebted situation. Some companies understand that, and some do not.

Let me read a brief quote from two companies’ corporate social responsibility promises on their websites; the companies are in the same sector. The first company says it

“will be accurate and truthful in representing business transactions to government agencies.”

Some hon. Members may have already identified that this CSR missive is from Starbucks. Did it understand that we all need to contribute? Of course not. The whole country probably now knows that since 1998, despite expanding at an incredible rate to almost 800 stores UK-wide, the parent company paid just £8.6 million in tax over that whole period, having racked up more than £3 billion in sales. It said that was because the company failed to make a profit. That not only absolutely beggars belief, but insults the British public, for one very simple reason: many Starbucks stores are franchises, which means that such rapid expansion could only have happened because the parent company promised, and delivered, real profits to the independent franchise owners.

Starbucks has not so much been failing to tell the truth to us or to its franchisees as telling a whopper of such magnitude that it is almost funny. Its clearly nonsensical distance from reality could become a catch phrase equivalent to Baldrick’s “I have a cunning plan”—a great catch phrase which we all know because it is so completely disconnected from reality, similar to Starbucks’ “Trust me, we only made £8.5 million profit over 14 years, while expanding to every high street in the United Kingdom,” except, of course, that it is not funny. It is contemptuous of its franchisees, the public, the taxpayer and its suppliers. The behaviour of Starbucks and other such companies represents the contemptuous face of global capitalism—a pernicious, ugly underbelly beneath the glossy, shiny exterior.

We all know, and it has been discussed this evening by numerous colleagues across the Chamber, that the rules around globalisation mean that companies can switch accounts from country to country to hide their real profitability from the tax man. This makes it difficult for HMRC to challenge the corporate giants, but there is an upside to the whole tawdry affair, and it has been mentioned this evening: the public have the power, and did they not show it with their boycotting of Starbucks coffee shops? I pay tribute to the previous speaker, my hon. Friend the Member for Bristol West (Stephen Williams), who played such a key role in the boycott of Starbucks. In a very short time his campaign had well over 10,000 members of the public determined to call Starbucks to account, and they did—a fantastic effort all round.

I would not want anyone in the Chamber to think that I am anti-business. Nothing could be further from the truth. In my constituency, Eastbourne, my No. 1 priority since the general election has been growing the town’s economy, because to me it is all about jobs and communities, be they local or national. That makes companies which avoid tax through legal loopholes even worse. Their lack of any sense of community integrity or community responsibility means that they do not pay their way.

I am not here just to condemn, so here is an excerpt from my second company’s vision: “We understand the need to incorporate environmental, social, ethical and consumer concerns into the heart of our business operations”. Who is that? Same industry, similar scale and, one could say, similar vision; the difference is the tax take. The second company has paid £34 million in tax over the past two years, compared with Starbucks’ grand total, as I said earlier, of £8.6 million over 14 years. Starbucks paid one quarter of the amount over a period seven times longer. That is deplorable. Hats off to Costa Coffee, which is the second company. It paid its dues, so it deserves the recognition.

The public have power if they choose to use it. Another example is a company called Fruit of the Loom, a clothing manufacturer which summarily decided a few years ago to close a factory in Honduras and sack all the employees, after the 1,200 workers there formed a union. A boycott of the company’s products took off in the US and subsequently the UK. This initiative cost the company dear, not just in reputation but on the bottom line. After $50 million in lost trade it saw the light, reopened the factory and gave the reinstated workers $2.5 million dollars in compensation. That is what I call people power.

The Government’s additional investment in specialists in HMRC will increase the tax take significantly over the next few years. In the final year it will be £9 billion more than a couple of years ago. In addition, we should name and shame. I disagree with one of my colleagues who said earlier that we need to be careful about going down that road. I agree with those Opposition Members who said that we need to name and shame and harness the power of the public. The public are ready for that and they have the power. I believe fundamentally that tax avoidance is immoral. It may not be against the law, but it is wrong.