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British Parliament's straight shooter taking on big business

Margaret Hodge has become well-known in Britain for taking on the likes of Google for creative accounting methods. It's 'the wrong side of ethics,' she says.

November 03, 2013|By Henry Chu
  • "The race to the bottom on tax rates is not the way you sustain inward investment in your economy," says Margaret Hodge, pictured in 2010 when she was Britain's tourism minister.
"The race to the bottom on tax rates is not the way you sustain inward… (Dominic Lipinski / PA Wire )

LONDON — She's been called the scourge of big business, and some other choice appellations.

Margaret Hodge, a senior member of the British Parliament, has become well-known here for taking on the likes of Google, Starbucks and Amazon in her crusade against companies that use creative accounting methods to minimize their tax bills.

As head of Parliament's high-profile Public Accounts Committee, she has presided over hearings in Britain similar to the ones in Congress this year, at which big-name executives have been forced to defend the way they set up elaborate schemes to move money around and thereby avoid taxes — all of it within the law.

Hodge's blunt language in raking the companies over the coals and, some say, her theatrics have made her a colorful and oft-quoted figure.

"We're not accusing you of being illegal. We're accusing you of being immoral," she told a Google executive called before her panel.

In another widely publicized exchange, Hodge accused the Internet giant of flouting its own motto of "Don't be evil," declaring: "I think that you do do evil, in that you use smoke and mirrors to avoid paying tax."

The daughter of a wealthy steel magnate, Hodge, 69, has served as a Labor Party member of Parliament since 1994, representing a deprived area of London. She spoke to The Times in her office overlooking the Thames.

Is trying to lower your tax bill, whether you're a person or a corporation, by itself unethical?

You have to have common-sense judgment on where the boundary lies between acceptable and sensible tax planning and unacceptable and immoral tax avoidance. We all buy into a contract with society … in which you agree through democracy to give from your means to the common purse, for the common good. We all have a duty to do that, whether you're a corporation or whether you're a high-worth individual....

Avoiding tax appears, in some instances, among some corporations, to have become a new profit center. Deliberately seeking out loopholes to avoid tax by using the law in a way that Parliament never intended seems to me the wrong side of ethics.

The companies called before your committee have mostly been American ones, such as Google, Amazon and Starbucks. Are you singling out American companies, or do you feel that American companies are particularly egregious offenders?

It wasn't deliberate. We could've gone after lots [of others]. They're global....

All my committee can do is shine a light on these issues, spark a public debate, raise the issues, and I think we've done that effectively around the tax-avoidance issue. But we don't have any powers. We're not part of the executive; we're part of the legislature.

You've accused Google of being immoral and doing evil. Do you still think that's the case?

It was their own motto; I turned their motto on themselves. So it wasn't that I was actually thinking, "I'm going to call you evil." I think they are not true to their motto.

Are you worried that more aggressive tax collection will scare off businesses, and therefore jobs, from Britain during such a tough economic time?

This is not an anti-business agenda; this is a pro-fairness agenda…. I want Britain to be truly competitive, and I want there to be a level playing field for competition, not one where tax avoiders have a price advantage because they avoid paying their rightful contribution based on their profits.

If you have a situation where John Lewis [a well-known British department store] can't avoid [taxes] because they're a UK-based company with UK jobs, or your small corner coffee shop or your community-based bookshop can't compete because they can't exploit in an aggressive way the tax rules to avoid paying tax and therefore cut their prices, actually you're damaging competition, you're damaging British industry, and you're damaging British jobs....

The race to the bottom on tax rates is not the way you sustain inward investment in your economy.

Exploiting tax loopholes is possible only because the tax code is full of them and incredibly complicated. Isn't the onus on lawmakers to solve that rather than the companies?

Partly, but I don't know how people would feel if we removed every tax [break]....

There's an onus on us, and the first onus is [to] simplify. But it is difficult. If you want to do something for the economy, what's better: Use tax relief or a grant regime? A grant regime involves government choosing winners, and government's not good at that. Tax relief opens you to avoidance abuse, and that's bad. It's a right difficult policy issue, and I understand that, but I think we need to expose it to greater public debate.

Why has the issue of tax avoidance become such a hot topic now, when presumably such practices have been going on for years?

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