Starbucks, Google, Facebook, Vodaphone, Barclays and other multinationals pay no or very little corporation tax on the profits of their enterprises in the United Kingdom. This is because they do not make profits in the United Kingdom, for corporation tax is paid on the profits of corporations. Nevertheless they turnover billions of pounds in the United Kingdom but make technical losses here and therefore have no corporation tax liabilities.
Of course multinationals do contribute to the UK exchequer by the VAT and the employees payroll taxes that are generated as a result of their activities. VAT is not paid by traders – they merely collect the VAT that they are obliged to charge. Employees pay their own tax out of their own wages and their employers pay national insurance on the employees’ wages. Small businesses also make those contributions but have to pay corporation tax on profits or in the case of unincorporated businesses income tax on their profits.
Clearly multinationals find it profitable to trade in the United Kingdom but by virtue of their being multinationals can make money in the United Kingdom but not profits. It is a distinction without difference. It enables multinationals to undercut small businesses because they do not have to pay tax on income and they can use the money (and do use the money) to drive small businesses out of business.
I would love the opportunity to run my businesses without paying corporation tax or income tax on profits. It is odd that multinationals do have this opportunity and odder still that the government is not doing anything about it, save for trying to fill up the loopholes but in that they are creating more loopholes with the material they use for filler. Perhaps the next time you feel like popping into Starbucks or using Google you should think about that.
We have to accept that inn this world multinationals can and do shop around for beneficial tax loopholes to avoid paying tax on the profits they undoubtedly make here. The solution must be to tax these corporations on their turnover as well as on the profits. A 2% turnover tax (which can be credited against corporation tax) should end the exploitation of the tax system rather nicely.