CRICKHOWELL, Wales — At the foot of Wales’ Black Mountains lies Crickhowell, a small town that has been around for hundreds of years, but one that soon might not be in Wales at all — at least for tax purposes.
Some of Crickhowell’s independent businesses have set up a tax scheme similar to those employed by large multi-national companies that limit what they pay in corporate tax to Britain by using overseas tax regimes.
Companies, including Google, coffee chain Starbucks and Internet retailer Amazon, have paid minimal corporate tax in Britain by shifting revenue to low-tax jurisdictions, for example by using a system of internal payments.
Like many small businesses, the Crickhowell firms say the big corporations have an unfair advantage using legal loopholes to minimize their tax burden by clever accounting.
“It’s to make tax fair. That’s it. It’s simple. We just want a level playing field with the big corporations. We want them to pay their tax, too,” Samantha Devos, proprietor of the Number 18 cafe, told Reuters of the firms’ plan.
They say they have worked with lawyers to ensure their scheme — not yet live — would be legal and want to spread it to 500 high streets to create a network of “Fair Tax Towns” to protest to the government with the threat of lost revenue.
While they will not give away any specifics of the plan, it involves “offshoring” parts of their businesses — just like the corporations — to take advantage of lower tax jurisdictions.
The local baker, optometrist, an outdoor adventure shop owner and Devos were among those who traveled to both the Isle of Man and Amsterdam to talk to tax lawyers and experts on setting up the scheme.
“People do not want people avoiding tax. They don’t want us avoiding it, they don’t want the big businesses avoiding it. In fact, nothing could be further from the truth, that’s not our intention at all,” said Devos’ husband Steve Lewis, managing director of Black Mountain Ventures, a parent company for smaller businesses, including the coffee shop.
“But we do have to have a credible threat. We do have to have a scheme that if you did launch it could result in that.”
Their plan was part of a documentary by the BBC and Renegade Pictures, which approached some of those in the town after they had successfully fought off a supermarket from opening there.
Some tax experts have said Crickhowell’s scheme would not work, while others have argued that it solves nothing to avoid tax themselves, equating them with precisely the companies that Lewis and his colleagues are protesting against.
Tax avoidance has become a hot political topic in Britain, as elsewhere, as the country tries to pay off its large budget deficit, still one of the biggest among advanced economies.
British lawmakers said earlier in November that authorities must start reporting the full scale of aggressive legal tax avoidance and prosecute more people for evading tax by illegally moving money offshore.
The government’s tax agency, HMRC, put the figure for uncollected tax at 34 billion pounds in the 2012-13 financial year. Parliament’s public account committee says that fails to take into account aggressive tax avoidance schemes that while legal, run counter to the spirit of the law.
Irena Kovaleva, a Russian who has been living in Wales for the past 15 years and owns the optometrist, said discovering the scale of the avoidance of the corporations through the documentary filming was a surprise.
“The numbers are huge, and it’s actually hard to take on how big the whole numbers are,” she said.
The HMRC said the government was clear multinationals must pay their fair share of tax and it had introduced new legislation to prevent them from diverting their U.K. profits from the U.K. tax system, as well as investing additional funding to tackle abuse by multinationals.
“HMRC enforces the tax rules fairly across the board irrespective of the size or structure of the business, and we are always happy to give advice and support to taxpayers who want to play by the rules,” it said in a statement.
Crickhowell’s argument is that they do play by the rules when others do not. They say tax avoidance puts them at a competitive disadvantage and means more reliance on small businesses for revenue to fill Britain’s coffers.
“There are services that can be anywhere, and one can argue they can have their intellectual property, they can have their call centers offshore and it doesn’t matter,” Lewis said.
“But you can’t buy a cup of coffee offshore. You buy a cup of coffee on this high street, and therefore you should pay your tax on this high street.”