In a few weeks’ time, when British hospitals become overwhelmed by coronavirus cases, one group should feel a particular sense of shame: tax avoiders. In Italy, the recriminations have already started. In an article in La Repubblica last week entitled “The things I am learning”, Fabio Fazio, a leading TV journalist, wrote: “It has become evident that those who do not pay their taxes are not only guilty of a crime, but of murder: if the beds and the respirators are not there they are partly to blame.”
That particular lesson was quoted in full by none other than the pope in an interview with the same paper.
As the shutdown of the global economy threatens to cripple entire industries, there is no doubt some companies that for years decided paying taxes was not for them are suddenly waking up to the importance of the welfare state.
One of the first to seek a government bailout has been the cruise ship industry in the US. For decades, its ships have flown the colours of Panama, Liberia and other flags of convenience to skirt minimum wage laws as well as get out of paying taxes. Some companies have achieved corporate tax rates that even Google would envy.
In the UK, the airline industry quickly followed suit, with Virgin Atlantic, a company owned by a tax exile, writing to the government to say the entire industry may need support to the tune of £7.5bn. This letter came in the week that easyJet paid a dividend of £60m to its founder, Stelios Haji-Ioannou – tax resident in Monaco. Any support to the airline industry will no doubt flow through to aircraft leasing companies based in low-tax Ireland.
So far, the government has chosen to implement a programme of broad, sector-wide support programmes rather than grant bailouts to individual industries. But the comprehensive nature of the government response to the crisis means that, inevitably, money will end up in the hands of people who refused to pay into the system when they had the means to do so. That is an injustice many ordinary taxpayers will find hard to swallow. Given the extraordinary nature of this crisis, swallow it we must, but the important thing is to ensure we stop this from happening again.
One idea, floated by the former Guardian editor Alan Rusbridger, is to require any company receiving state support to agree to scrap any artificial tax avoidance arrangements. As a starting point that is a good one, but ensuring that we emerge from the crisis with a more robust tax system to fund the recovery requires more structural change.
The coronavirus outbreak will not bring about the end of the world, but it may well bring about the end of the world as we know it. Within business there will be winners as well as losers.
Some of the winners are already starting to become apparent, and many of them have a well-known history of tax avoidance. Amazon in the US is looking to hire 100,000 workers to cope with the extra demand for its home delivery service.
Netflix, YouTube and Amazon Prime Video have seen such a surge in demand that they have had to downgrade their streaming services in the EU to help the internet cope.
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The shift to home working and months of self-isolation for large parts of the population will only help to accelerate the digitisation of our economy. In those circumstances, the reform of digital taxation becomes even more urgent.
In addition, we will also need a wide and comprehensive review of tax reliefs. Research by my organisation, Tax Watch UK, has found that some video games companies, another sector that should do well from the crisis, are receiving vast amounts of public subsidy despite paying nothing in tax and making hugely profitable games.
Owners of infrastructure companies such as Heathrow airport, which may well need support over the coming months, have for years implemented complex debt structures that take advantage of generous tax exemptions, and faced minimal tax bills despite making substantial operating profits.
Whatever happens over the next few months, the sheer scale of the government’s intervention to support the economy through this difficult time will leave a substantial bill to pay. If one industry should be put out of business in this crisis it is the tax avoidance industry. After all, if those who stand to benefit from this crisis – either through government support or by increased market share – cannot contribute to the recovery, then who will?
• George Turner is director of the thinktank Tax Watch UK
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