Those of us who have kept earning through the last five years have noticed a reduction in the purchasing power of our wages, in the main. Taking a dive in spending power might seem trivial compared to not having a job, and I'd agree, but it is still unpleasant. It is also galling to many that there is still an apparent strata of society that seems largely unaffected by the economic downturn - there's a significant amount of people who appear to be able to spend money like there's no tomorrow. Senior bankers appear to be in this group.
Of course, whether you have experienced a pay cut, job loss, or just an erosion of your spending power, or even if you are one of the lucky few who are relatively unaffected by the economic situation, the impact of the current financial situation will not have passed you by. However all of us are likely to be affected by the cuts in public spending to some degree.
Now this isn't a political rail against any particular party; this blog is read across the globe in both hemispheres in countries that have widely differing political systems so that would be a pointless exercise. And I fully accept that some readers believe whole-heartedly in the cuts to public sector spending while others will think it needs to be balanced and another group will insist that any cut is a bad one.
Now I'm a bit of a pragmatist by nature. I recognise that we are always going to have a public sector of some size and consequently there are always going to be taxes needed to fund them. Plus, apart from the extreme right wing in this country (at least) I guess we all want roads, schools, hospitals and all the other embodiments of a public infrastructure. In the UK at the moment the drive is to reduce the public sector while maintaining the tax burden to reduce the deficit, mainly because that's the only obvious route to doing it other than raising taxes.
Like many other countries the UK is now taking a firmer stance against those who choose to not pay the right amount of tax, however this isn't always an easy task. It is for those of us who are normal wage earners, but for the well heeled and large corporations with the cash to pay smart people to scrutinise the tax laws there are many ways to avoid paying too much.
This has caused a bit of a furore in the UK recently as it seems many of the global tech companies such as Amazon and Google are paying little or no tax in the UK and global coffee house Starbucks has managed to avoid making any profit, in a technical sense, for a decade, consequently not paying any tax.
Actually, despite the public outrage about the Starbucks side of the picture, they did pass on a sizeable amount of tax in the form of VAT and staff Paye-As-You-Earn (PAYE) income tax. What they did do was reduce their Corporation Tax liability by legally shifting money around Europe and leasing their own logo from the US. As far as I know, and I'm not an accountant or a lawyer, they didn't break any laws, they just exploited gaps in the legislation of the country.
The same goes for Amazon and Google. They employ a lot of people in the UK, who all pay income tax. A lot of the goods we buy from them are subject to VAT, so that feeds back into the public coffers too. But they do seem to have spent a lot of effort in reducing their tax burden. But I'm guessing they quite like having roads to drive on and hospitals for their employees.
Anyway, there's been a bit of a stink about the tax avoidance tactics of these three companies. I'm sure they're not unique but it would appear that they are amongst the most effective at the avoidance thing. As a result of a newspaper campaign backed by outraged politicians, who quite recently spent a lot of their inventiveness in fabricating expense claims that bled the taxpayer pretty well dry, the three companies are getting a lot of public scrutiny as 2012 draws to a close.
Predictably Starbucks caved in first - avoiding buying a latte in Starbucks is a lot easier than avoiding using Google to search for an alternative coffee house in the area or using someone other than Amazon to do your on-line Christmas shopping. But Google have also felt the pinch as advertisers have decided that associating with them might damage their corporate image. Amazon may come out of all this unscathed and virtually untaxed - they hold that much sway in the public shopping mind that it's difficult to imagine any other business ousting them right now.
But the real issue is the tax rules. None of these companies, as far as I'm aware, did anything illegal. Sure, they may have been inventive, wilful even. Morally challenged probably doesn't even come close. But law breakers? Almost certainly not.
Simplify the tax rules, then make it clear - you trade in this country, you pay the taxes due. If any Government gets that wrong and makes it too unprofitable for the likes of Amazon, Google or Starbucks to trade here then they'll do what any rational commercial enterprise would do - they would turn their backs on the country and millions of vote bearing, coffee drinking, Google searching and Amazon buying people would ensure the Government got it right pretty quickly.
Sorting the tax rules out should be a priority, although I don't see any move from my armchair, just lots of outraged politicians attempting to bully Amazon (good luck there guys). However, getting the tax laws is likely to be a big job, will take time to get right. So I guess a bit of moral pressure on these three and any others that are legally avoiding tax will have to continue.
In the meantime, why not avoid paying any tax - or indeed any money - at all by 'buying' my second novel, The Journeymen for free using the special code in this posting. Offer good until January 1st 2013, don't ask exactly when, it's in Pacific time zone. Best you get your copy from Smashwords earlier than later.
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