Cheap food = tax dodging?

10 July 2014

tax-imageWe all know that inflation has been outpacing earnings increases for years, and is only now getting back to levels targeted by the Bank of England. This means that the pressure on cost of living has been immense for many people, many of whom may have turned to discount supermarkets such as Lidl and Aldi in order to make ends meet. And this has had a knock on effect of driving down food prices across the supermarket sector, which is almost certainly A Good Thing.

But does discount shopping come at a price?

New figures released today show that suggest that food price inflation is standing at record low levels. But some are suggesting that, like Amazon, the way discounters are managing to undercut the market starts with tax avoidance, potentially adding a moral cost to the discount

George Bull from accountants Baker Tilly cites Lidl as an example. Most of Lidl UK's stock, management and administrative support arises from its German parent which means that Lidl’s UK tax liability is low owing to all the costs being sent back over to Germany. While Lidl is providing jobs and cheap food in the UK, it is therefore contributing little to the UK tax pot. More worryingly, Bull suggests that the big UK retailers might be eyeing up the smaller discounters – for example, Sainsbury's is reported to be taking to take a half share in a new Netto chain with the Danish parent – meaning more money is diverted away from the UK treasury.

But does that matter so long as the cash is, instead, staying in UK consumers' pockets? After all, we will eventually spend that money and boost the UK economy further. Or is corporate tax avoidance always wrong, even if, as in the case of Lidl, it was a legitimate foreign company long before it ever landed here.

Or does anyone even care anymore so long as prices are kept low? Is anyone still boycotting Amazon and Starbucks now they are no longer in the news?

TOPICS:   Economy   Tax


  • jaffacake
    Tax evasion, also known as tax dodging, is illegal. Tax avoidance is not, in fact many would regard it as sensible. If a supermarket pays more tax, food prices will rise - do we seriously want that? Do you think all tax money received by our government is spent wisely? If HMRC doesn't like what Lidl are doing, they should change the laws, which Lidl are clearly following.
  • LD
    Well--ll they will go and joint the EU won't they? The people say Referendum Now!
  • Mick T.
    There's a significant difference between registering a company in a tax haven like Luxembourg that does most of its business in other countries and a large company like Lidl centralising its operations in its major base of operations/home country. It's been happening for years, you may as well cry about all the foreign firms that own stores on the high street, all those profits disappear abroad and don't get spent in this country, what's the bigger loss to the UK economy? Sounds like a load of hot air from the supermarkets that are getting their profit margins battered by the discounters.

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