Taxing matters

(Should've posted this before xmas!)


This week heading rapidly into the festive season it felt like the entire European media establishment was salivating over gifts; more precisely the gift promised by Starbucks to the UK treasury over the next two years (£20bn in goodwill tax). For any North American readers not familiar with the current climate in the Euro-area (Outside of the headlines proclaiming economic doom), it can be summarised as “Big multi-national business is out to pay as little tax as legally possible, they should be shamed into paying more than the owe”. The Swiss government is attempting to organise agreements with major nations over the secretive banking policies it adopts, to avoid losing its appeal in that regard. Amazon and Google are defending the ramparts against its policy of locating it European headquarters in Luxembourg, and thus avoiding (legally!) corporation taxes in multiple jurisdictions.

Before going any further, I should state I am not a tax expert. However it is my understanding that these companies are operating in accordance with the law (phew!), and that any government (especially a EU member country) would find it legally impossible to legislate and close these gaps in the tax code. The most interesting aspect of this debate (albeit rather one sided) is that despite no laws being broken, and no prospect of legislation being successfully implemented, there has been a successful campaign against Starbucks, shaming them into paying more tax on moral grounds. Drawing into view the prospect that other causes or companies may fall foul of this new austerity induced climate of what is acceptable conduct. How can businesses navigate this new terrain, where acceptable conduct is not defined by law makers or lobbyists, but by the people and their influence groups?

Before the festive break I also had the opportunity to attend the British Chamber of Commerce Christmas lunch. Pierre Gramegna (Director General of the Luxembourg Chamber of Commerce, ably stepping in for the British Ambassador) was keen to point out the importance of high technology companies in the future of the country's economy, indeed stating that Luxembourg had the second best IT infrastructure in the world after South Korea. It wasn't all fanfare, with warnings of complacency peppering his pitch to the chamber. Stressing the importance, to a small country such as Luxembourg, of remaining competitive in the face of bleak economic times. As a result he and the Chamber he administers have been highly critical of the measures taken in the latest draft of the annual budget, urging the government to drop some projects that make no economic sense, and think seriously about some of the social programmes on the books. This in spite of the slated increases in across the board income tax for 2013.