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.
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?
Hard times. People are struggling. Public expenditure is being cut; public services are being cut. Most people pay their tax dutifully and can't even think about avoiding tax, so that makes them particularly angry....
The tax gap has gone up in the UK: 35 billion pounds [uncollected].... You're talking megabucks. You can get that money in and keep teachers' jobs and nurses' jobs. That matters to people. And I think it just offends people's sense of fairness.
Have governments been too easy on big corporations and on cutting tax deals, including when your own party was in power?
Yup. I think we've been frightened of companies. We went for the short-term sweetheart deal because that got a bit of money in rather than ensuring that everyone pays whatever is due.
If I were a multinational business, I'd walk into Downing Street and say, "You be tough on me and I'll leave." The reality is that they won't. Just imagine if Google got out of the UK market, and that allowed a competitor to develop....
I know that capital is very promiscuous, but I don't think they'll up sticks and move around the world every time a tax rate changes.
Your parliamentary committee and congressional committees in the U.S. have had high-profile hearings on tax avoidance. But have you actually achieved any changes?
We've brought more transparency to the world, haven't we? We haven't conquered the Googles of this world, but I think we will.... They may feel at the moment they're untouchable, but look at other Internet [companies]. Just think Microsoft. Where are they now, and where were they 10 to 15 years ago? You're not there forever.
Reputation matters. I stopped using Amazon because of their tax policies.
Do you use Google?
I have to at the moment. It's impossible not to. I'd love not to.
People have described you as a highly theatrical performer in Parliament; someone's even called you an actress. Do you mind or agree with that assessment?
I always think politicians are failed actors and actresses. There's an element of truth in that....
My job is to give voice to the ordinary taxpayer. If you want to connect politics back with people, you've got to be not where we are in our Westminster village; you've got to be where they are. So the language I use, the directness of my questions — it's not theatrical, but if there's any deliberate intent behind it, it's to really think you're there representing the ordinary taxpayer.
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