Huffpost UK Tech uk
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Harry Freedman Headshot

How Multinationals That Don't Pay Corporation Tax Could Help us All

Posted: Updated:

The announcement that Joanna Shields is to leave Facebook to lead Tech City is good news for tech start ups. The government's technology investment group hasn't had the best of publicity since it kicked off in April 2011. It has come under criticism for not publicising its events or services, and there have been concerns over the rising costs of working in the Tech City area.

Joanna's appointment gives Tech City a chance to make fresh start. But it still feels as if there's more that needs to be done.

The trouble is that most start-ups are finding it very hard to get off the ground. Investment money is not available. Banks, as we all know, are not lending. Business angels are reluctant to make investment decisions in the current economic climate. And Venture Capital companies, even if they are prepared to look at start ups, want to see revenues being generated before they will invest.

So the money is not there. And yet if we are to return to a robust economy money needs to invested in start ups. The business cycle demands it. Not every start up will succeed, most will fail. But some of today's start ups will represent the core of the business landscape ten or twenty years hence. Without a healthy through flow of start-ups our economy will remain stagnant.

Tech City's solution to all this is Seedcamp, which it describes as "an early-stage micro seed investment fund and mentoring programme, dedicated to jumpstarting the entrepreneurial community in Europe, by connecting developers and entrepreneurs". In other words, not so much a fund of cash as a place to get advice. Useful for some no doubt. But there are plenty of experienced entrepreneurs out there who need more than advice. They need proper funding. They've got good ideas, they've done their research, they've identified the technology and the market, they just need to get the business off the ground. But they can't. They haven't got the funding they need.

So here's an idea. There are growing complaints about certain multinationals which do good business in the UK but pay little Corporation Tax. These companies argue, with some justification, that they employ loads of people, generate tax revenues through their sales and make a contribution to the economic life of the country. Fair enough. It's unlikely that in the short term the government will close the loopholes which allow these companies to avoid paying Corporation Tax. But why wait for the government?

What if these companies were to invest the equivalent amount of Corporation Tax they are saving, by supporting those start ups which at present cannot raise funding? An investment is not like paying tax, it should, if wise decisions are taken, generate a positive return for them. It would also do wonders for their images, which right now are looking just a little bit tawdry. And of course it would benefit the economy as a whole, leading to benefits for everyone in the long run. It's worth a thought, isn't it?