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Large scale investors skittish over tax avoidance row

The ongoing tax avoidance row in the UK between the Government and multinationals may be making large-scale investors quite skittish about their choices.

When it comes to finding ways out of being responsible for paying their debt to the taxman, multinationals are supremely adept and weaseling out of paying appropriate levels of corporation tax. Companies like Starbucks, Apple and Amazon are harder to pin down than a hog coated in an oh-so delightful mixture of mud and grease, and aggressive tax avoidance schemes have become commonplace; this has led to Her Majesty’s Revenue & Customs to push harder to collect unpaid taxes from small business owners and self-employed Brits like freelancers and contractors who lack the ability to employ a cadre of crafty accountants to find legal loopholes to jump through and deny the Treasury its due.

However, the winds of change are blowing; it turns out that some large-scale investors may be increasingly reticent to back large companies that have a reputation for not paying their fair share. Investment advisers say that while backing a company using an aggressive tax avoidance scheme might be lucrative in the shorter term, when it comes to the long game it could end up being a losing proposition.

It turns out that there truly is such a thing as bad publicity. There’s nothing worse for a company than being known as one that uses grey-area practices to avoid paying its fair share of corporation tax. This can lead to consumer backlash that can impact profitability; the knock-on effect could easily be a reduction in the return on investment for anyone who has sunk vast amounts of cash into one of these companies. This is the last thing that investment companies want or need, as the reputation of a company can often be quite difficult to rehabilitate in the face of consumer ire and disapproval.

For what it’s worth, I can’t agree more that investors need to be wary about which horse they choose to back in today’s economic landscape. Nobody likes to think that they’re giving money to a cheat, whether they’re a consumer or an investor, and I truly believe that the tide may be turning against multinationals that like to play fast and loose with the rules when it comes to paying their fair share. The average Brit doesn’t have much recourse when it comes to avoiding his or her tax burden, so why should these multinationals get away with murder? It just doesn’t seem very fair to me.

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