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Miliband Talks the Talk on Tax Avoidance - But Can Anyone Walk the Walk

Posted: 23/05/2013 00:00

Ed Miliband went to a Google event on Wednesday to talk about tax avoidance. He didn't go there in a softly-softly way; he instead tried to heavily publicise his appearance at the 'Google Big Tent'. He published the text of his speech beforehand in the Guardian, and he wrote another article for this site attacking David Cameron on the subject too. He criticised the Prime Minister for not raising the issue of Google's tax avoidance with Eric Schmidt, the firm's executive chairman, when they met at the Business Advisory Council this week. Miliband may look like a bit of a wally sometimes (a lot of the time, actually) but he does have some guts to take a jab at Google during their own event. It was rather similar to his decision to be the first major party leader to break with the general political consensus of kowtowing to the Murdochs. We know Miliband likes to think of himself as taking a hammer to the established order, and he does, to some extent, have some form in this area.

If you're going to take a pop at the big guns, then, politically, talking about tax avoidance makes good sense. In bad economic times, the people of this country are seeing living standards and wages fall, while the cost of living goes up and services are cut. Ordinary workers can't avoid tax, but big corporations can, and do. 'Why is it one rule for them and another rule for us?', people reason, and rightly so. All the parties know that there is political capital to be garnered by talking about tax avoidance. This is a big issue, especially for Labour, who got too close to big business, and the Conservatives, who've always been too close to big business. Politicians have to make it clear to big corporations that they can't expect to come to the UK, get a never-ending party, then take no part in cleaning up after themselves. That isn't fair on ordinary taxpayers, who work hard for these companies, who provide services within the country for these companies to use, and whose taxes fund the British infrastructure upon which these companies depend.

The problem for Miliband, and indeed anyone else looking to crack down on corporate tax avoidance, is that the world has changed. Miliband's rhetoric on the subject feels honest and sincere - I don't believe he's lying when he says he wants companies to pay their fair share - but it also feels insubstantial, as if it is just rhetoric, and nothing more. On this issue, the politicians are chasing the rampant forces of capitalism, and they appear powerless at the foot of the economic tornado. You could argue, with some success, that Mr. Schmidt at the top of the Google pyramid is more powerful in today's world than Mr. Cameron in Downing Street, and any amount of pleading and imploring from legislators to please pay your taxes falls on deaf ears. These corporations have more freedom economically than ever before, in a world where finance is open, where accounting can be channelled across continents to hide profits and revenue, and where the numbers a company issues can be interpreted in half a dozen different ways. The world has changed. The politicians didn't react when the champagne was flowing - preferring to merely reap the benefits of the boom - and, now that the roof has caved in and the public are looking with anger at the arrangements that benefit big business, politics is a step behind a corporate philosophy that did adapt to the globalisation of commerce at the right time.

There are many who argue that, with corporate tax avoidance increasingly looking like a global problem, the only solution must be a global solution, with all governments coming together to try and close the net on the tax-dodging companies. This is an admirable idea, but it clearly is not workable. Countries with large financial sectors like the UK, the USA and Germany will be compromised by the interests of the City of London, Wall Street and Frankfurt. Developing nations in the east won't want restrictions placed on their national firms that are beginning to gain a foothold worldwide. Why should they be forced into restricting their own economies and companies when the west has let theirs run riot for the past century? Isn't that having your cake and eating it? Furthermore, from a practical standpoint, when have the world's governments ever collectively agreed on anything? It's almost guaranteed that there would be a few opportunist countries who would choose to opt out of any deal in the hope of gaining a windfall of inward investment. In a world where capital moves more freely than at any time in human existence and where companies are less physical and more virtual, this is a real and dangerous possibility for anyone looking to legislate against the corporation.

Miliband talks the talk, then, but the evidence is all against him. Cameron's relative capitulation on tax avoidance is proof that, despite the best of intentions, a battle between government and the corporation is likely to have only one winner. Today's aspiring corporate-tax-loophole-closer still faces the Catch-22 question - do you crack down on the companies and send them overseas, or leave them free to do as they wish?

 
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