One of Britain’s leading businessmen warned David Cameron to stop “moralising” over the tax affairs of large companies and get on with changing the rules.
Joining some of the UK’s top bosses at a meeting of the Prime Minister’s business advisory council in Downing Street on Monday, CBI president Sir Roger Carr said politically motivated attacks on businesses’ tax arrangements could have damaging “unintended consequences” for Britain.
Sir Roger, who is reportedly being lined up to join UK defence giant BAE Systems as chairman, said: “As politicians pursue fairness, it is important that any criticisms are grounded in fact and hasty solutions or political point-scoring do not trigger long term unintended consequences.”
Mr Cameron should “avoid the moral debate”, he said. “Tax avoidance can not be about morality... Tax should not be viewed as a down payment on social acceptability. Tax should be calculated in keeping with the law of the land.”
Politicians on the Public Accounts Committee (PAC) have led the charge against the low rates of UK corporation tax paid by multinationals, branding them “immoral”. Last week, PAC chairman Margaret Hodge accused Google of being “evil”. The public outcry has been caused by international laws that allow companies to move profits to lower tax jurisdictions.
The UK is leading attempts to crack down on so-called “base erosion” and “profit shifting” under its G8 presidency this year. Global agreement is vital if the UK is not to deter businesses from coming to the UK. Sir Roger said: “Fix the rules internationally, not unilaterally – independent action can cost competitiveness and cause confusion.”
However, he stressed that the CBI did “not condone abusive tax avoidance” and that management should use judgment to decide what is acceptable. “The tax test is simple for all businesses – if management practice was revealed on the front page of a daily tabloid, would we be ashamed, concerned, regretful, would our brand be damaged?”
Sir Roger added that business was a huge contributor to the country’s tax revenues. “The tax contribution from business last year was £161bn – 30pc of all tax receipts,” he said .
He added that corporate reputation was “the best weapon in the armoury in fighting the tax battle” and that demanding transparency over businesses’ affairs was a powerful tool. “Reputation, once lost, is difficult, sometimes impossible, to recover,” Sir Roger said.
Google, which has come under scrutiny alongside Starbucks and Amazon, was represented at the Downing Street meeting by chief executive Eric Schmidt. However, the Prime Minister’s official spokesman said concerns about Google’s tax arrangements would not be raised.
“We don’t talk about individuals’ or individual companies’ tax affairs,” he said.