Tax debate should focus on what business contributes to the country says Deloitte expert
ONE of the UK’s leading tax experts says that rather than politicians and the media vilifying companies like Starbucks for paying no corporation tax in the UK, the focus should be on their total economic contribution to the country.
Bill Dodwell, head of tax policy at Deloitte, who advises major corporates including Starbucks on tax matters, made headlines earlier this year when he defended the coffee chain when grilled by politicians in Parliament and James Naughtie on the BBC Radio 4 Today programme.
Mr Dodwell said that Starbucks may not pay any corporation tax, but its contribution in terms of national insurance and business rates to the government’s coffers is substantial.
“We should look at the total economic contribution a business makes – the total business tax they pay, but also rates, apprenticeships etc,” he said.
Business bears 30% of the total tax paid in the UK – £165bn out of £570bn – made up of corporation tax, business rates, employers’ national insurance, VAT which can’t be recovered and environmental and other taxes.
He points to the recent example of power company RWE nPower being criticised for not paying corporation tax, but it is investing in several new power stations.
“We should look at the value that business brings. The coalition government is encouraging businesses to come to this country. It is important not to demonise corporates so they look at basing themselves in other tax jurisdictions.
“Public sector employment has reduced, private sector employment has grown and is incentivised by low corporate tax.
“The UK has a lot to offer as a base for business. If there is one hope it is that the public focus on what is the best for the country.
“Anything that reduces unemployment, is frankly, the most important thing, so encouraging more jobs and investment is really critical.”
Mr Dodwell said that tax is now making headlines in a way it never has before in his career, which began with Arthur Andersen in 1978.
“It is unusual for tax to be making headlines. Through my career tax has never made headlines in the way it has for the last few months. There is great media and political interest in the tax system.”
He welcomes the attention and hopes it will improve knowledge of how both business and the taxation system work.
“It is important that we look at it, there are too many misunderstandings about how business operates.”
Mr Dodwell says his appearance on the BBC’s Today programme would have been better if he had been interviewed by a journalist who understood business and tax rather than presenter Jim Naughtie.
He says the argument is more “nuanced” and about the country not having the right tax structures rather than individual companies’ tax activities.
“Tax is a cost to a business and if they can get it down they will.
“One or two companies and individuals have made choices perhaps they regret. The companies I work with have never sought to push the boundaries.”
“We have less trust in business. I don’t think that is right. A demand for greater transparency and involvement is clear, we want to want to know more stuff.
“HMRC needs to put more information in the public domain. I think it would be helpful if politicians found out a bit more and also businesses talked more about tax,” he said.
While Mr Dodwell cannot talk about individual clients, he made headlines when he went before the Public Accounts Committee in the House of Commons earlier this year, chaired by vociferous MP Margaret Hodge.
Of Hodge, he says, “I don’t think all her interventions have been right. It’s right for our politicians to look at cases but also to look in the mirror and say: ‘Have we made the law right?’
“She is also right to ask HMRC about its governance of the management of tax. I think HMRC have made great steps to improve and should be given great credit for that. A decade ago they were behind hand.”