Kellogg's tax scandal: this is why Tony the No Tax Tiger is not so g-r-r-r-eat
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Let me tell you about last Saturday.
It was the deadline for my quarterly VAT payment, which was in the thousands. I did not have the money and was waiting for invoices to get paid, which is why I had to wait until the last day to pay the bill.
In the event I scraped it together just in time, had my usual bowl of Frosties for breakfast, and logged on - I have to pay it online, no other way is possible - to find the HMRC website was down for "maintenance".
I waited an hour, tried again. Then again. I left it until after lunchtime, tried again. Same error screen. Anxious to avoid a fine, I rang the emergency contact number. I wandered through a long telephone menu to be told the office was shut. I tried again, with different menu options, to be told the same thing. I filled in an online form, drummed my fingers, gnashed my teeth, and at about 4pm HMRC finally came back to life. They accepted the payment and I breathed a sigh of relief.
These are the standard, everyday financial fears of a freelancer, whether journalists, builders, contractors, or taxi drivers - not having enough, not getting paid, not sorting the tax bill. It's why freelances don't take holidays, don't call in sick and don't take parental leave.
Now imagine what would have happened if I was, say, a multinational cereal manufacturer.
(Image: Getty)
Why, then I could have taken the cash shortage from one company and offset it against profits from another branch of my empire to cut my tax liabilities, which would make paying the VAT a lot easier. I could find a way of saying that although I sold £900MILLION of cereals last year, I had not in fact made a penny.
Perhaps like Facebook did in 2014 I could find a way to achieve global profits of $2.9bn yet pay just £4,327 in corporation tax in the UK, or like Apple I could get myself a nice deal with the Irish taxman.
Perhaps like Amazon I could set up complicated international tax structures. Perhaps if I recruited a lot of drivers, decided to call them customers and charge them for the privilege of working for me, I could avoid any VAT liability just like Uber does.
Or perhaps like the UK arm of cereal giant Kellogg I could make a profit of £40MILLION and arrange my losses so that my corporation tax, quite legally, was £0. Perhaps that's where I'm going wrong - I EAT Frosties rather than MAKE them.
Let's not get things out of whack. I pay lower rates of tax than staffers on PAYE, but I also have no guaranteed work, no employment rights, no holiday, pension or sick pay. What I gain from being self-employed I pay a different price for, and that's as it should be.
And companies like Kellogg's provide many jobs - 1,600 in the UK - each of them supporting dozens of other workers in sandwich shops, petrol stations, cleaning firms, clothing outlets, garden centres. There's a massive knock-on gain from having a competitive tax system so that big companies set up in the UK, and they deserve a break because they add so much to the economy.
But they GET a break. It's called corporation tax. It's called multinational, frictionless trade. It's called being able to ring up HMRC and talk to someone with whom you're on first-name terms, rather than get an impenetrable answering service.
It's NOT called 'taking the piss'.
Kellogg's has a complex system of companies in the UK which is hard to understand. Kellogg's Latin America arm is based in Manchester, for example. But while two of them - Kellogg Company of Great Britain and Kellogg Marketing and Sales - made combined profits of £40million in 2016, the others made losses which were transferred into the more successful bits, therefore making the money disappear like a pot of gold at the end of an ever-retreating rainbow.
It's all entirely legal. They have avoided tax, and the only evasion at work is that of the firm's MORAL responsibility to contribute to the society in which it operates. And my word, but Kellogg has its fair share of that.
It gains from a state-educated workforce with state healthcare and, when needed, state subsidies and tax credits for the low-paid. It is able to offset things like the office Christmas party against the tax bill, and to base its parent company in Luxembourg from which cash ultimately flows back to the USA.
It also gets to stop a PM imposing a planned sugar tax by voluntarily offering to cut the amounts of sweet stuff in its cereals, without actually specifying by how much. It gets to finance scientific studies that find sugar-packed cereals can help children stay slim. It gets to sell a Coco Pops snack bar that is 42% sugar because it says so clearly on a label no-one bothers to read.
(Image: Getty)
The question that niggles, though, is this. How can a firm that sells almost a billion pounds worth of cereal manage to make not a single penny in profit, and not go bust? Such a company has to be, at the very least, morally bankrupt.
Other firms, and plenty of international footballers, use licensing rights to move money offshore. The problem is not that Kellogg is worse than anyone else - it's that it is not unusual. It's because HMRC lets it happen.
Yet if every company did what Kellogg does, the UK government would be missing £56bn in tax receipts last year alone - that's enough to properly fund social care and the NHS, or fight the wars of Iraq and Afghanistan, TWICE OVER.
Part of it came from big companies shamed into paying more. Last year Facebook managed to cough up 1,000 times more tax than in 2014, Starbucks paid £6.7m and even Jimmy Carr and Gary Barlow have seen the error of their ways.
(Image: Twitter)
The purpose of a tax system is to ensure that we all - via PAYE, dividends or corporation taxes - pay to get a society we want to operate in. The problem is that WE are having to pay more, and suffer more - queuing in A&E, watching class sizes swell, potholes multiply and Post Offices sold off and closed - because firms like Kellogg, whose ultimate owners do not suffer the same, are finnagling a financial advantage.
And for what? To invest their gains in the UK? To provide us with more jobs? No, just for some rich man to jangle cash in his pockets while ours are emptied to make up the shortfall.
That's the problem with legal tax avoidance - where one person avoids it, the rest of us foot the bill. What's really galling is the effort and expense to which a corporation is prepared to go, to avoid taxes that the rest of us have to go to a lot of effort and expense to pay.
It's just a matter of time until public disgust forces Kellogg to meet its social responsibilities with the same enthusiasm with which it finds legal loopholes. But until it pays some - or indeed ANY - corporation tax, no box of Frosties will darken my kitchen table.