By Rebecca Doodson, Senior Conduct & Compliance Officer at the Association of Accountancy Technicians (AAT)
Allegations of tax avoidance by large companies over the past year have caused outrage from many, not least from small businesses.
This outrage is not necessarily unfounded. BBC Business have reported that Margaret Hodge, Chair of the Public Accounts Committee, said “[HMRC’s] approach was firmer… when pursuing small businesses” and seemed to “lose its nerve” when chasing tax from large multinational companies.
HMRC have “strongly disputed” these claims. However, it still remains that some big businesses haven’t been paying what many consider to be their ‘fair share’ of tax contributions. Amazon paid £3.2 million in tax last year from its main UK subsidiary despite overall UK sales of £4.2 billion. Starbucks reportedly paid £8.6 million in corporation tax in the UK over 14 years and nothing between 2009 and 2013. Whilst this behaviour is not illegal, it seems that large companies can use their clout and resources to avoid doing what’s right, and it has been suggested that this behaviour is unethical.
However, small businesses are fighting back. In September 2013 a coalition of small businesses called Main Street Alliance delivered an open letter to Microsoft urging the company to cease offshore tax dodging. A Bloomberg report identified Microsoft as the top US technology company with the most untaxed overseas profits – $76.4 billion in 2012. The Main Street Alliance letter stated;
“Small businesses … don’t have the resources to hire armies of tax lawyers to dream up creative accounting schemes to avoid our tax responsibility. Frankly, we’re proud to contribute our fair share…
… We’re deeply disappointed that instead of standing with American small businesses …Microsoft has joined in coalitions with other big corporate interests lobbying for a permanent tax amnesty on offshore profits.”
Main Street Alliance isn’t alone in taking on large multinational companies. UK cosmetics company Lush are standing up to Amazon’s “bullying” behaviour by taking Amazon to court for infringing its trademark. Mo and Mark Constantine, founders of Lush, do not allow Amazon to sell their products. However, if the word “lush” is typed into Amazon’s search field, customers are directed to alternative products. Mark Constantine blamed Amazon’s business model for allowing the company to force the hand of small businesses, and stated “the only way it can afford to run it is by not paying tax”.
Constantine claims to have spent half a million pounds on his battle against Amazon, but others are finding ways to put pressure on big business for free. In March 2013, more than 100,000 people signed a petition launched to call on Amazon to “pay their fair share of tax in the UK”. The petition was launched on Change.org by Frances and Keith Smith, who own two small bookshops in Warwick and Kenilworth. Twitter users boycotted singer Gary Barlow’s #AskGaryBarlow Q&A (meant to promote his new album) to criticise him for paying less tax than he should on his earnings, and an online campaign in 2012 used the social media site to encourage customers to boycott Starbucks using the hashtag #boycottStarbucks to show dissent after its tax avoidance practices were publicised in the media.
But do these efforts show positive results for small businesses? Frances Smith believes that keeping these issues in the public eye is key. She told The Guardian “We have to keep banging on about it so the government knows it is important to people, and that there are votes in it.” And the government are taking notice. Tax avoidance and evasion were some of the key topics in the G8 summit this summer, and significant pledges in the final communiqué addressed the problem, such as “tax authorities across the world should automatically share information to fight the scourge of tax evasion.”
Pressure put on Starbucks also brought results. A spokeswoman told BBC News “We listened to our customers … and so decided to forgo certain deductions which would make us liable to pay £10 million in corporation tax this year and a further £10 million in 2014”.
Additionally, whilst the findings of the Public Accounts Committee that HMRC appear to be failing to use their full power to pursue tax owed by big businesses seem discouraging, the very fact that these issues are being investigated and the findings publicised is a step in the right direction.
There are many ways that SMEs can keep the pressure on big businesses to do the right thing, and it appears these techniques are showing results. By bringing to light unethical or unfair practices and joining together to combat them, SMEs have a compelling argument. However, it will only continue to work if SMEs retain the moral (or ethical) high ground. If they resort to the same techniques that big business are accused of – tax avoidance and bullying (for example) – then their main argument and supporter base, the sympathetic public, will be lost alongside their power of leverage.
Rebecca Doodson is the Senior Conduct & Compliance Officer at the Association of Accountancy Technicians (AAT). To read more from Rebecca Doodson on ethical issues please visithttp://www.aat-ethics.org.uk/