Apple has been told by the European Commission to pay €13bn (£11bn) in taxes to the Irish government. The tax is for earnings made across the EU and it is the Irish government that is the intended recipient as Apple states that its European operations are headquartered in Dublin.
Given that a sizeable chunk of the tax that is due is from profits generated in the UK, this begs the question of how much of that £11bn should be on its way to the UK Treasury?
Apple, like a number of other high profile large corporations has been paying very little tax and its effective rate is said by the European Commission to be 0.005 per cent.
I speak to many small business owners who pay a significantly higher rate of tax. They pay on time. If they are late, then HMRC chases them and surcharges them. It sometimes prosecutes them. But for Apple or Starbucks or Amazon or Google, HMRC doesn’t try to prosecute or surcharge, it does a deal with them, as it appears does the Irish government.
Truly, tax has become optional for some of the biggest corporations – or it had until the European Commission intervened. Remarkably, the Dublin government doesn’t want Apple to pay up and is challenging the ruling.
We have yet to hear from the UK Government, which is a bit odd, because you might have thought they would welcome a windfall, which must be hundreds of millions of pounds. Hundreds of millions of pounds to help plug the deficit in our NHS or to invest in the extra teachers needed in our schools or to help set up a fully functioning Small Business Administration so our small firms can have the support and advice they need to succeed and grow to create jobs and help the wider economy. And if the biggest companies don’t pay enough tax, while everyone else does, they are gaining a competitive advantage, indeed an unfair competitive advantage. Because that advantage means they can get away with undercutting responsible businesses who want to pay their taxes and who want to contribute their fare share.
Every business that generates a profit does so as part of society. That society includes a public realm and public services. And the staff who work at the biggest firms, just like everyone else, need our NHS and schools and roads and railways and waste collection. All of which has to be paid for. It’s actually shortsighted of those businesses who avoid tax, who avoid paying their fair share because a declining public sector hits their staff and it hits them as businesses too.
If some of the biggest companies have an unfair advantage as a result of the taxes paid by everyone else, but not by them, then something is seriously wrong.
Our corporation tax is going to be four per cent below the G20 average, even if the new chancellor, Philip Hammond cancels his predecessor’s planned cut which would take it six per cent below the average. So much for low tax rates encouraging the biggest firms to cough up as low tax rates have not done anything to ensure some of the big firms pay their taxes.
It is about time this changed. There should be a level playing field where businesses and individuals pay their fair share of tax. This is for the good of business, the economy and public services. That’s why the Government should be pressing the European Commission to insist on the Apple tax being paid and it should be taking steps to make sure that tax is paid here.
Caroline Flint’s excellent amendment to the Finance Bill was agreed last week to allow in country reporting. But allowing in country reporting is only a first step. The next step is for the Government to use the powers the Flint amendment deliver
A further step is then required to ensure tax collection in country for those businesses for whom corporation tax is currently optional. This matters, not just for the many small businesses who pay their fair share. Not just for the majority of medium sized and larger businesses who understand their responsibilities and pay what they should either. Ensuring that all businesses both report what they earn from their activities in this country and pay their fair share of contributions towards our country’s common good is important for the long term success of this country. It’s what most people rightly expect. And the majority of people in this country also expect our Government to make sure the Apple tax money is paid – and that we receive our share.
Bill Esterson is shadow minister for business, energy and industrial strategy.