Cooking the Books: Who Gains From ‘Tax Justice’? (2013)

The Cooking the Books Column from the January 2013 issue of the Socialist Standard

The Tax Justice Network lobbies and petitions. UK Uncut takes direct action. Both to try to get tax-dodging companies to pay more taxes to the British government. Surely this can only be good? If they pay more taxes we can pay less. Or the government could use the extra money to provide better services or at least not to cut them so much.

You have to be naïve to think that. If you believe the media, ‘we’, ‘the taxpayers’ and ‘the government’ are one and the same. Because the government has a majority shareholding in RBS and Lloyds we are told that these banks belong to us, the taxpayers. This is as silly as saying in the past that the railways and the coal mines belonged to us because they were nationalised.

Most people do pay some taxes directly or indirectly but, insofar as taxes enter into the cost of reproducing people’s working skills, they are passed on to employers, who have to pay wages that cover this cost. But even if taxes on workers were not passed on to employers it would not follow that we as taxpayers would have the same interest as the government. You could equally argue, as some do, that the government was robbing us through taxes of the fruits of our labour and is therefore our enemy.

The government is in fact our enemy but not for that reason. It is our enemy because it looks after the interest of the capitalist class whose interest is opposed to ours.

As the burden of taxations ultimately falls on the employing class and other property-owners, ending tax havens and closing tax loopholes would benefit only them while making no difference to us.

Some capitalist firms want tax loopholes closed for another reason –because these put companies that are in a position to take advantage of them in a stronger competitive position vis-à-vis those that aren’t.

The Times (15 November) reported that ‘John Lewis says it could be put out of business if foreign multinationals such as Amazon are allowed to continue paying tiny amounts of tax in Britain.’ John Lewis’s managing director, Andy Street, had told Sky News:

‘If you actually improve your business by investing, what that means is you have got less money to invest if you’re giving 27 per cent of your profits to the Exchequer than … if you’re domiciled in a tax haven and you’ve got much more. So they will out-invest and ultimately out-trade us …’

There is some substance to this argument. Capitalist firms provide a privileged, unearned income for their owners, but to be able to continue doing this they must stay in business and for this, as Street pointed out, they have to invest a part of their profits (the larger part in fact) in cost-cutting innovations to beat or keep up with their competitors. If a competitor pays less tax that means it has more profits and so can invest more in cost-cutting innovations. It has a competitive advantage over home-based firms which can’t get out of paying taxes.

No wonder home-based firms like John Lewis are complaining about there not being a level playing field and are calling for something to be done about it. The sad thing is that the no doubt sincere activists in the Tax Justice Network and UK Uncut are in effect, albeit unwittingly, campaigning on behalf of one section of the capitalist class (home-based ones) against another section (multinational ones).