Cashing in on coronavirus is a bad look. Supermarkets have seen a surge of as much as 50% in sales, reports Pensions & Investment Research Consultants (PIRC), which scrutinises companies’ good governance. Yet supermarkets have been gifted millions in a business rates holiday windfall that they need least.
David Potts, the CEO of Morrisons, and Trevor Strain, its chief operating officer, are set to take a 24% pension contribution, in direct opposition to a corporate governance code that says their rates should be aligned with those of their workers. Morrisons staff – the ones putting their lives on the frontline - are only getting 5%. Let’s hope someone at the company’s AGM next week voices a modicum of protest.
Meanwhile Tesco is expected to clock up £300m extra profit thanks to Covid-19. Its CEO is taking an extra 25% cash payment on his £1.25m salary, holding out for a performance-related bonus, while Tesco frontline staff get just a 7% contribution to their workplace scheme. Tesco recently paid out £635m in dividends to shareholders while receiving a similar sized tax-break from the government’s emergency coronavirus support package.
And the phenomenal share option taken by Ocado’s top executives amounts to £88m – while the pay ratio from boardroom to average staff wage is a staggering 2,605%, says the High Pay Centre. It’s worth noting, wryly, that Ocado’s top three executives take 1% of the company’s value, but are met with rather less public outcry than when John McDonnell proposed companies should put 1% of their value into a fund for their entire workforce.
While supermarket workers are rightly praised for heroism, putting their lives on the line during this pandemic, a public affection for their company’s brand may wane when people hear that those same companies are awash with cash. Shoppers notice price rises and the absence of three-for-two special offers as they count pennies out of shrunken incomes. Why let off supermarkets from paying business rates when the state, as the country heads into a dark recession, will need all the tax it can raise?
Yesterday, the Bank of England published the list of large companies using coronavirus corporate financing facility loans. There are conditions attached: the money must not be paid out in dividends, or be used for share buy-backs or executive pay rises. But these are modest terms: in a recent letter to the chancellor, Margaret Hodge, chair of the all party parliamentary group on responsible tax, calls for far bolder action “to stop these bailout schemes from being abused by shameless companies”.
HM Revenue & Customs rates companies according to their level of risk on tax non-compliance: high-risk companies should be denied bailouts, Hodge says. Companies avoiding tax by exporting profits via intra-company loans to low-tax countries should be barred. Expect this list to be thoroughly scrutinised to shame those using legal but indecent schemes to cut their tax bills, by invaluable campaign groups and thinktanks such as TaxWatch, Tax Justice UK, PIRC and the High Pay Centre.
The chancellor will need to raise taxes one way or another. This crisis should prompt the Treasury to get serious about collecting all taxes avoided and evaded. The Treasury says it loses £35bn in the “tax gap”, defrauded by cheats. Now, as their profits boom in lockdown, we should be clamping down on all the tech companies that log UK profits in havens or low-tax countries.
Time, too, to shut down personal service companies used by many to disguise their income as lower taxed dividends and capital gains. In a paper for the Institute of Fiscal Studies, Dr Arun Advani finds an astounding 40% of lawyers, including partners in top firms, pay themselves this way. Time also to return to the one wise act of Margaret Thatcher’s chancellor, Nigel Lawson: he made all income taxable at the same rate whether from earnings, dividends or capital. Time to finally stamp out this non-dom tax-avoiding nonsense.
HMRC should also make a strong plea to restore its depleted forces. One of the most perverse austerity cuts was in its workforce, which was cut by thousands of inspectors. It had to close many offices, losing local knowledge (there are now no offices west of Bristol). Random audits by tax inspectors, checks that are proven to improve peoples’ behaviour thereafter, have fallen by a third since their peak in 2002. With no local offices to give free advice, people are being pushed into the arms of unscrupulous accountants peddling tax-avoidance plans. Even now, those returning to work in the NHS are being targeted by tax-cheat advisers with clever ways to disguise most income as loans. HMRC’s warnings on its website are likely to reach many fewer than this scheme’s pluggers on social media.
There are hopes that the chancellor, Rishi Sunak, will get tough on tax evasion. He has hinted that he would abolish the lower national insurance rate paid by the self-employed: when Theresa May suggested the same, all hell broke loose, but these are very different times. Now is the time to sweep away all loopholes and scams, in the name of this emergency. Some small-time cash-in-hand merchants will have found the down side of failing to pay tax: with no tax records they can’t draw any compensation.
But the real serves-them-right pleasure is the absurd sight of the private equity vultures now complaining they are excluded from bailouts because they register losses, as loading up with debt is their tax avoiding mechanism. Public sentiment has always strongly favoured clamping down on tax cheats and making the richest pay their fair share. Any companies profiteering from coronavirus will get short shrift: no better time for the Treasury to abolish avoidance and take in all the money that is due.
•Polly Toynbee is a Guardian columnist
