Chuka Umunna, Labour MP for Streatham and shadow business secretary, has called for companies to publish exactly how much they pay in corporation tax as part of a revision of accounting rules.
His justification for proposing such a measure was the behaviour of a few major companies that was damaging the reputation of businesses and eroding society's confidence in big businesses.
Umunna was reported in The Telegraph as saying, “The perception of UK companies has become characterized by the more extreme examples which is grossly unfair on the overwhelmingly majority of businesses in this country who are making a huge contribution to the exchequer” and “To put it in context…..in the tax year 2010/11, business paid £163 billion in tax. That is equivalent to the defence, education and transport budgets for this financial year.”
The MP's comments have attracted criticism from members of the Adam Smith Institute in London as being way off the mark and embarrassing. According to Tim Worstall, a senior fellow at the institute, Umunna is “wrong in detail and wrong in theory as well. In detail, he's produced the most appalling mishmash of a number in that £163 billion.”
Has Umunna really captured the public attitude towards perceived corporate tax avoidance or is he simply making political play of something that he has failed to fully understand? He may well have been motivated by last week’s news that Vodafone paid no corporation tax in the UK last year despite its UK arm generating £1.3 billion before tax, and recent shareholder revolts over 'fat cat' executive pay. Also, UK Uncut, the tax avoidance protest group, was granted permission to challenge HMRC in the High Court over a “sweetheart” deal with Goldman Sachs despite the National Audit Office giving it their seal of approval.
The recent hysteria created by the media's simplistic reporting of tax stories and their failure to understand the real issues is a significant contributory factor in swaying the opinions of MP's and the public at large. Whilst the media have a role to play in bringing tax irregularities to the attention of the masses this needs to be tempered by balanced reporting so as to enable people to reach an informed opinion. That, however, would not make for interesting reading!
OK heis an MP – so turn on cynisism as to motive. Obviously a simplistic proposal as it ignores the whole trading position and other tax contributions. Having made both my previous points you can see where he is coming from in terms of those that have found aggressive ways of minimising tax.