Behind the multinationals' tax scandal, the parasitism of british capital

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Workers' Fight workplace bulletin editorials
13 November 2012

Foreign multinationals are again under the spotlight. Starbucks, Google and Amazon have been singled out for having paid just 0% to 2.5% of their profits in taxes, in 2011!

The issue being in the news, Osborne felt he had to re-state his "determination to fight tax evasion". But only to immediately let the cat out of the bag, by adding that he also wanted "competitive taxes that say Britain is open for business."

Whatever politicians may say, their aim has always been to make Britain "attractive" to foreign capital, in order to provide more business for big British firms. This was how the City grew.

In this respect, Labour, which is now trying to be seen as leading the offensive against these big tax dodgers, had exactly the same policy when it was in office. No-one can forget that the lenient tax regime enjoyed by companies today was introduced while Labour was in office!

How about home-grown tax dodgers?

Business Secretary Vince Cable joined the fray, saying: "At times of hardship, when tens of thousands of British companies are paying their basic tax, to discover that leading multinationals are getting away with this, is not acceptable."

There may well be tens of thousands of British companies paying all the taxes they owe, but they're probably too small to afford the services of the tax lawyers which big companies use.

However, contrary to what Cable implied, not all tax dodgers are foreign and it turns out that some very big ones are British.

Wasn't Barclays exposed, not so long ago, for using offshore subsidiaries to avoid paying taxes? And, besides, have either Labour or the ConDems ever done anything to put an end to the use of the very British tax havens, like Jersey and other nearby islands, by British companies?

In fact, just as Cable was making his statement, his Lib Dem colleague, Bermondsey MP, Simon Hughes, was unearthing another, also very British - and very big - tax scandal, involving the water utilities.

Over the past years, according to a report commissioned by Hughes, the three largest water companies - Thames Water, Anglian Water and Yorkshire Water - have been paying taxes at a rate comparable to Starbucks and Co - i.e. close to zilch, on annual profits worth hundreds of millions!

But then comes the real twist and what actually brought Hughes to expose this scandal. For years, these companies have been talking about a 24-mile long "super-sewer" for London, which is now expected to cost £4bn. But instead of funding it themselves with their huge profits, they expect the state to underwrite the project - and pick up the bill in case of trouble - the same state to which they fail to pay their taxes!!

Capitalist plunder in action

The same report discovered something very mysterious: all these water companies seemed to be heavily indebted and have weak finances. So where had their huge profits gone?

The answer lies in one word - dividends. In the last tax year, for instance, Thames Water paid no tax (in fact, it received cash from the taxman!), but it paid £279m in dividends. Altogether, since 2009, these water companies paid out £3.3bn in dividends - over 3/4 of the super-sewer's cost!

In short, the profits accumulated by these companies went to their shareholders - virtually every pound, including what should have been paid in tax. There was never any question for them of planning for the future, by setting aside part of their profits for necessary investment that had been known long in advance. No, because they always expected that their state would be there, ready to help out when they needed it.

Not that such parasitism on the state is new, of course. Weren't these companies born out of the very same parasitism, when privatisation allowed the transfer of infrastructure which had been built entirely on state funds, to private shareholders?

But this example does tell us two things about how to face up to the catastrophes caused by this crisis-ridden capitalist system. One is that the capitalists will never do anything that might benefit society if it dents their profits - that is, unless they are forced to do so, by the balance of social forces. And the other is that, no matter how much they cry poverty, the capitalist class - collectively - has accumulated so much wealth (legally or illegally) out of our labour, that there's more than enough under their control to address the immediate problems faced by society as a whole.

The real issue for the working class is to build the right balance of social forces to get hold of this wealth so that it can be used for the benefit of all!