Paying NIC is no substitute for corporation tax

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I'm bored by the argument created by PWC and rolled out on BBC news last night by the CBI and even by HMRC that if a company pays national insurance because it employs people in the UK it's OK for it not to pay corporation on the profits those employees then generate for it in this country.

This is not true. It's akin to arguing that if you've paid your road tax in the UK then you do not need to pay for car insurance. Except that both are legally required if you want to drive a car on the road. It's not an option to have one but not the other.

Now, I accept that there's nothing wrong with seeking a good deal on your insurance. That's fair. But then I also say that tax compliance does not require you to pay more tax than is required, so long as that tax you do pay is paid in the right place and at the right time in accordance with the spirit of the law, something which we know is recognisable. .

So let's also be clear. Complying with the law in this way is not the same thing as avoiding it. And as almost all commentators on yesterday's story on UK companies not paying tax agreed, it's the fact that these companies are multinational that lets them avoid tax in the UK. That's because they use their multinational status to get round the law, which is exactly what avoidance means in this case.

In that case let's push that car analogy a bit further. Let's suppose it were possible for multinational companies but not companies solely operating in this country to pay their car insurance to a foreign tax haven government who then provided a certificate of insurance in exchange for a nominal sum even if they had no means of settling any resulting claim. If those companies did this they would appear to comply with the law by having the right paperwork but the economic reality would be that they would be abusing the whole of society by driving uninsured as a result. What would the CBI say to that? If they're to be consistent they'd have to say this was OK, because that's exactly the sort of behaviour they're endorsing on tax. That's because the companies they excuse from paying corporation tax have in fact in very many cases shifted their profits elsewhere, got a certificate from their auditors to say that's OK and the UK then gets nothing from those locations where those profits are declared when the next round of tax bills goes out.

Some without any shred of ethical conscience in the companies in question might say that's OK but why should the rest of us put up with such blatant abuse? And why is the UK Treasury endorsing it?

Let's stop once and for all accepting this absurd argument that paying national insurance in the UK is a substitute for paying corporation tax. It isn't, and it never will be. And only those practiced in the art of fiddling could ever believe it was.