Activists Pursue Corporate Tax Dodgers in U.K.

UK Uncut helps galvanize public opposition to tax avoidance.

UK Uncut has no offices and no formal leader, and key members often plot strategy over midnight pints of ale in London pubs.

Yet, with more than 60,000 Twitter followers and a sprawling network of college-educated volunteers, the Occupy Wall Street-style group has helped galvanize public opposition to corporate tax avoidance. It has demonstrated inside Starbucks Corp. coffee shops, sued Britain’s tax collection agency over a deal with Goldman Sachs Group Inc. and shut down London’s Westminster Bridge. It plans to target this month’s summit of the Group of Eight, the world’s eight wealthiest countries.

“Everywhere that’s facing austerity there’s been anger about the apparent unfairness of some companies or individuals not paying taxes,” said Alex Cobham, a research fellow at the Center for Global Development in London and the author of several studies on tax avoidance. “The difference in the U.K. is that UK Uncut crystallized it and put what people were feeling onto the front pages.”

UK Uncut and its offshoots in France, Ireland and the U.S. tap into public discontent with multinational companies that dodge taxes by shifting profits to subsidiaries in offshore havens. Corporate profit shifting costs the U.S. and Europe at least $100 billion a year in lost taxes, according to Kim Clausing, an economist at Reed College in Portland, Oregon.

Soaring unemployment along with public service cuts in Europe and lagging median incomes in the U.S. have elevated corporate tax avoidance from an obscure academic debate to a populist rallying cry. At a Congressional hearing last month, senators berated Apple Inc. Chief Executive Officer Tim Cook for the company’s practice of attributing tens of billions of dollars in profits to an Irish subsidiary, managed in the U.S., that didn’t declare tax residency in either country.

In Germany, responding to pressure from the Socialist and Green parties, Finance Minister Wolfgang Schaeuble recently called for a global minimum tax for corporations.

In the Netherlands, Dutch Parliament Member Arnold Merkies recently led a mock “tax paradise” bus tour of several Dutch companies that help multinational corporations avoid taxes, an event inspired by UK Uncut’s actions, he said. The festivities offered tropical drinks and music, equating the Netherlands with island tax havens.

 

Singing Flashmob

Nowhere is the backlash more pronounced than in the U.K. A flashmob in Apple’s Regent Street store last week sang Irish songs and waved “Take a tax holiday in Ireland” signs to mock the company’s use of Irish subsidiaries to avoid taxes. Prime Minister David Cameron and Chancellor of the Exchequer George Osborne, both Conservatives, have repeatedly assailed tax dodging. Not to be outdone, their rival, Labour Party leader Ed Miliband, last month laid out a five-point plan to combat avoidance. Members of parliament have assailed executives of Google Inc., Amazon.com Inc., Starbucks and the big accounting firms in three hearings since November.

UK Uncut has “played an important role in articulating some of the anger people feel,” said Parliament Member Margaret Hodge, who last month led her third committee hearing since November on corporate tax dodging, in which she accused Google of being “evil” for avoiding U.K. taxes.

UK Uncut does have detractors. “They are contributing but in a way that’s polarizing the debate and demonizing business,” said Judith Freedman, a professor of tax law at Oxford University and the director of legal research for the University’s Center for Business Taxation. “And they are highly selective in their targets, which is invidious.”

A February poll commissioned by Christian Aid, a church- based nonprofit relief agency in the U.K. and Ireland, found that 66 percent of Britons believe tax avoidance to be “morally wrong” -- up 10 percentage points from when people were asked the question six months earlier.

Reflecting the issue’s visibility, Thom Yorke, the lead singer for one of the world’s top-selling rock bands, Radiohead, has scored part of the soundtrack for a documentary about tax dodging that is scheduled to premiere in London this month.

UK Uncut started in October 2010, predating Occupy Wall Street by about a year. While the groups have employed similar tactics, UK Uncut has had staying power and a narrower focus, denouncing tax avoidance and cuts in public spending for social programs. Its activists regularly express their views on mainstream television programs such as the BBC’s Newsnight.

Many of its volunteers hold day jobs in social services, including spokeswoman Anna Walker, who works for a nonprofit advocacy group for people with mental illness.

 

‘Simple Juxtaposition’

“We know 25 billion pounds is being avoided by big companies, individuals, banks,” Walker said as she drank a tall glass of cider at the noisy Old Queen’s Head pub on a hip stretch of London’s Islington borough. “So why are” government officials “targeting single mothers, school playing fields and the National Health Service?”

A Treasury spokesperson declined to comment directly on UK Uncut and said the government has invested about 1 billion pounds ($1.6 billion) to tackle tax avoidance, evasion and fraud.

Walker and her friends cofounded UK Uncut after reading news accounts about a dispute between wireless carrier Vodafone Group Plc and the U.K.’s tax agency, Her Majesty’s Revenue and Customs, over more than 1 billion pounds in taxes allegedly owed after the company’s takeover of a German mobile-phone operator. At the time, the U.K. government was proposing billions of pounds in public-spending cuts.

“It was a very simple juxtaposition,” said Walker. That led to the first demonstration -- about 60 people doing a sit-in at an Oxford Street retail store of Vodafone’s.

A spokesman for Vodafone said the protests were “totally unwarranted” and “ignored all of the salient facts” of a tax settlement between the U.K. government and the company. The country’s National Audit Office, which audits government agencies, concluded that the settlement was “good” from the perspective of U.K. taxpayers and “represented fair value for the wider taxpaying community,” the spokesman said.

In November 2012, Starbucks was criticized at a parliamentary hearing for shifting profits to havens and not paying U.K. income taxes for three years. Afterward, Starbucks said it would voluntarily pay 20 million pounds in U.K. taxes over the next two years.

Nevertheless, in December 2012, UK Uncut activists occupied Starbucks outlets in England, Wales, Scotland and Northern Ireland. Blaming tax avoidance for cuts in children’s services, the demonstrators turned the coffee shops into faux-day-care facilities, even offering face painting for kids, until store managers and the police kicked them out. A Starbucks spokesman declined to comment on the protests.

 

Families Pay

UK Uncut’s legal action against Britain’s tax collection agency came courtesy of Rosie Rogers, a volunteer who used to work as a paralegal. Cuts to the country’s National Health Service eliminated her mother’s job. Her severely autistic brother lives in a group home, where she expects caregiving will be reduced, she said.

“Why is my family being forced to pay for a crisis that wasn’t caused by us?” said Rogers.

At her suggestion, UK Uncut Legal Action, a sister organization, hired the law firm where she once worked. Raising 20,000 pounds in small donations for court fees, the group challenged a decision by British tax authorities to let Goldman out of millions of pounds in interest stemming from the investment bank’s use of a British Virgin Islands subsidiary.

A spokeswoman for Goldman Sachs declined to comment. Although UK Uncut lost the case, it succeeded in exposing an e- mail in which the tax agency’s top official, Dave Hartnett, explained that he didn’t seek the payments from Goldman for fear that the investment bank would have walked away from the negotiating table.

“The risks here are major embarrassment” to Chancellor Osborne, Hartnett wrote.

While ruling in May that the Goldman deal was legal, High Court Judge Andrew Nicol rebuked the tax agency for taking the potential impact on Osborne into account. It “was not a glorious episode in the history” of the agency, he wrote.

 

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