The man from Del Monte

In the most yawn inducing revelation for a good while, the Guardian has today exposed the global banana companies as tax avoiders. The notion of multi-nationals avoiding tax is hardly new, even to the most earnest of the Grauniad faithful who are probably too busy knitting their latest pair of eco-friendly sandals to pay regular attention to the financial press.

So, shock, horror, the likes of Fresh Del Monte use elaborate multi jurisdictional structures to reduce or minimise their taxes. The companies claim (not unexpectedly but, also, probably sincerely) that they are acting within the law. The right to challenge the veracity of such claims lies with the relevant governments and their taxing authorities. The right to change the law is within the gift of the same governments.

Therefore, the first question is why do governments not make such a challenge ? The second question is why do the lobbyists behind such revelations as this one, and the hundred plus similar exposes which have preceded it in recent years, do such a lousy job at asking the first question ?

It's all very well pointing the finger of blame at the corporates but it seems somewhat mis-directed. After all, in the UK, if not elsewhere also, people will be predictably indignant at those horrid multi-nationals when it comes to the talking but, when it comes to the walking, they will still buy their bananas at Tesco, whilst also expressing their concern about global warming just so long as they can still use the Range Rover Sport for the school run. We expect the PR man from Del Monte is not going to lose any sleep.

Governments in most developed countries (the exception, on recent form, being the UK) are far from stupid when it comes to these things and, further, have the benefit of armies of highly educated civil servants and advisers at their disposal. It is not too unreasonable, therefore, to assume that, firstly, the interested government (in this particular instance, the USA) knows what is going on, and, secondly, that the actions complained of are considered to be lawful and, thirdly, that the government is content; after all, if a government felt otherwise it could challenge the claims of legitimacy in its courts or exercise its powers to change the law and bring about a different result.

If this assumption is correct, then, perhaps, the answer is needed to the question of why governments do not mind when the better off pay so little tax ? There is an argument to say that it is because governments are concerned not just with the headline tax-take but, also, with other economic, and political, matters such as investment, employment and patronage, and all the more so in a globalised economy where jurisdictions have to compete for mobile money and its influence. Whether this argument is correct will be examined when we see how much, if any, foreign money flows out of the UK when the recent PBR proposals for the changes to the taxation of non UK domiciliaries are enacted. If the answer is the economic catastrophe predicted by some, then would it not have been better to establish that answer by asking the right question of the government beforehand ?