On the last day of the G8 summit in Northern Ireland, a number of major world leaders agreed on new measures meant to ensure tax compliance by individuals and companies. The focus on tax evasion was a major part of the agenda set by British Prime Minister David Cameron: tax, trade, and transparency, or the three Ts.
According to members of the G8, in the future, those who attempt to avoid taxes by setting up shell companies or sheltering funds offshore will have to answer to taxing authorities.
Archbishop of York John Sentamu went even further, suggesting that those who avoid paying tax would have to answer to an even higher power: God. Sentamu offered a statement to the BBC about tax avoidance, saying:
It is sinful, simply because Jesus was very clear; pay to Caesar what belongs to Caesar and to God what belongs to God.
The Archbishop, who ranks second only to the Archbishop of Canterbury within the Church of England, defined tax avoidance as a “moral issue” and accused those individuals and businesses who were not paying their full tax liabilities of “not only robbing the poor of what they could be getting, they are actually robbing God.”
The archbishop stopped short of naming names, but it was clear that much of his statement was directed at high profile companies who have made news lately for their tax avoidance (or tax savings, depending on who you talk to) strategies.
Starbucks was the target of public outrage last year when it was revealed that since 1998, the company only paid a total of £8.6m ($11.5 million US) in corporate income taxes. Initially, the company cried poor, citing that it had only made a profit in one of those years. Later, the company admitted to shifting royalty and other intellectual property income to the tax-favored Netherlands. Kris Engskov, Managing Director for Starbucks in Britain and Ireland, eventually announced that the coffee retailer would pay more in tax than it “has” to in order to appease angry consumers.
Apple, under fire in the U.S. for its controversial domestic tax strategies, has been criticized for its foreign tax planning, too. The computer giant paid just a 1.9% corporation tax on profits outside the US last year. That’s down from a rate of 2.5% the previous year. In Europe, Apple admitted to lowering its tax rate by channeling funds (65% of its global income) to an Irish subsidiary: the corporate tax rate in Ireland is about half that of Britain. Ireland is just the first stop in Apple’s tax planning: funds are later routed to the Netherlands and the Caribbean. In response to criticisms over the practices, Apple released a statement claiming, “Apple has conducted all of its business with the highest of ethical standards.”
Neither company has raised the ire of the public like Google. The company is said to have generated $18 billion in revenue from the U.K. over a five year period beginning 2006 and paid only $16 million in corporate taxes. That works out to an astonishing .09% tax rate – less than a tenth of a percent. Like Apple, the company uses a “highly contrived” and controversial subsidiary in Ireland – and eventually to a Dutch subsidiary – in order to lessen its tax burden. Also like Apple, the company denies any wrongdoing, saying, “As we’ve always said, Google complies with all the tax rules in the UK and it is the politicians who make those rules.”
Starbucks, Apple, and Google join the ranks of other companies – like online retailer Amazon – under fire for controversial (though apparently legal) tax practices. Archbishop Sentamu says that needs to stop. He says that tax avoidance and lower tax revenues result in unfair consequences like poverty and disease:
They (companies) should have a conscience which says that a child is dying tonight because of some of their actions.
