The two sides of speaking up for business

Matthew Watson  - Professor of Political Economy and ESRC Professorial Fellow, University of Warwick

But, as ever, there are two sides to the story.  For so many people in Britain, when they hear a ‘businessman’ speaking up for ‘business’, the first image that comes to mind is not that of a benevolent bringer of jobs.  This image might be crucial to the ostensible authority to be found in business executives’ pronouncements.  Yet it has a notable counter-image.

There have been far too many revelations in recent years of global brand businesses exploiting the grey areas between their multi-jurisdictional presences for large parts of the electorate simply to turn a blind eye.  When a ‘businessman’ speaks up for ‘business’, the company’s interest in eroding its tax payments is often a close companion.  The House of Commons Public Accounts Committee has worked hard to unmask thriving and potentially lucrative operations that promote companies’ tax-switching activities.  Under changes introduced by the Coalition government to the rules concerning Controlled Foreign Companies, firms now have far greater scope to establish subsidiaries in tax havens that have nothing but accounting roles.  They charge fees to their own operating companies to transfer profits from the jurisdiction in which they are made to the jurisdiction in which taxes on those profits are to become due.  This, of course, always means transferring profits from a higher-tax to a lower-tax country.

So: how does Pessina stack up on the other side of assumptions about what it means for a ‘businessman’ to be speaking up for ‘business’?

Exhibit #4.  None of the journalists reporting on the story have so far found evidence that he pays any income tax in Britain, which suggests an important inversion of the principle of ‘no taxation without representation’ whenever he is given a newspaper platform from which to air his views.

Exhibit #5.  Recent research has suggested that Alliance Boots has used subsidiaries in tax havens to change the balance between its British cash and debt holdings so as to avoid over £1 billion in taxes.

Exhibit #6.  Alliance Boots also took advantage of changes introduced to corporation tax by Chancellor of the Exchequer, George Osborne, to more than offset the £90 million it paid in tax in Britain in 2014 with a tax credit note of gigantic proportions.  It revolved primarily around a recalculation of its deferred tax bill to reflect future tax bands and not the bands in operation when the profit was made.

What in particular annoys, puzzles and intrigues me in the debate surrounding business-friendly government in Britain is which pieces of evidence are allowed instinctively into the public domain.  Pessina will be one of many people of his kind who will be invited to have a say on their preferred outcome of the May general election on the presumed authority that derives from Exhibits 1, 2 and 3.  But, thankfully, that outcome will eventually be decided not on the basis of who has the most money to defend in the current system, but by people exercising their rights as citizens.  Those rights, as every student of politics knows, come with associated responsibilities.  And it is precisely on the issue of responsibilities, as Exhibits 4, 5 and 6 show only too well, that Pessina and his like consistently fail the British electorate.

Why, then, is he provided with so much voice in the debate?