If you are in the UK shopping at Boots the Chemist you are likely a woman (around 70% – 80% of Boots’ customers are female). Baby products, domestic healthcare products, beauty products: these are all targeted at women, in the roles that we are expected to adopt as mothers, domestic goddesses and sex objects. A small number of the products are VAT-free but most of them are not, which means that (however low our income) tax is collected from us by virtue of the money we spend on them. VAT is, in theory, not applicable to essentials, but many of these so-called non-essentials are hardly luxuries. Few UK mothers would want to be without things like sticking plasters and baby wipes. Few UK women would view tampons as a frivolous ‘luxury’: does the government expect us to use rags instead? The price you pay for these things is marked up by 20% (although VAT on sanitary products was cut to 5% in 2001, in line with EU regulations, after years of campaigning for a zero rate) – whether you are the daughter of an oligarch or a single mother in a minimum wage zero-hours job. 20% added to the price of a cheap eyeliner or some sticking plasters may not be much, but with millions of these transactions taking place every day, the amounts add up.
You would probably expect some of your spending in Boots also to represent Boots’s profit margin, and you would be right: Boots is a highly profitable business. And you would also probably expect that profit margin to be properly taxed, so that Boots’ business bears its fair share of society’s costs (benefiting as it does from the UK’s infrastructure and healthy educated workforce, for example). In this you would be wrong. In fact Boots’ profits are heavily subsidized out of public money; out of the money you pay in tax. How does this work? It works because Boots was bought out in 2007 via an offshore structure using borrowed money, and Boots gets a UK tax deduction for the interest paid on that borrowed money. What used to be UK taxable profits became a financial flow leaving the UK untaxed, by virtue of nothing more constructive and socially useful than Boots getting a new owner.
The UK government likes to think of this kind of thing as “investment” and that is why these transactions benefit from generous tax breaks, but in fact it is the opposite of investment into the UK – it is moving profitability offshore, out of any country’s tax net. The state wants to attract big money but the only thing it has to offer in exchange is skewing its tax system in favour of that big money, thereby defeating the purpose of attracting the money to the UK in the first place.
Deliberate shortfalls in the tax system have to be made up from elsewhere, and that is where the VAT paid by shoppers at Boots come in. The whole system is in effect a massive forcible transfer of wealth from millions of not-so-well-off women in the UK to the billionaires who run the private equity firm that bought Boots out. Those billionaires make a profit out of you, and at the same time the state takes extra money from you in order to provide them a little extra sweetener as a reward for profiting from you, even though they are already vastly wealthier than you. And neither of them looks like they ever felt the need to wear make-up to a job interview.
These men and their investment partners are in the process of exiting their position in Boots, and while we bid them a hearty good riddance, the tax break they have been benefiting from will continue to benefit Boots’ new owners (Walgreens), who appear to be buying it as part of a structured transaction to avoid gigantic amounts of US tax.