David Cameron claimed today, when speaking about tax avoidance, that:
"With the large companies, that have the fancy corporate lawyers and the rest of it, I think we need a tougher approach.
"One of the things that we are going to be looking at this year is whether there should be a general anti-avoidance power that HMRC can use, particularly with very wealthy individuals and with the bigger companies, to make sure they pay their fair share."
He said the government was doing its bit to cut the rate of corporation tax - and businesses should recognise they "should pay that rate of tax rather than try to avoid it".
Well of course I agree. But he either has no clue what he's talking about or he's ignoring the fact that his government is one of the biggest supporters of large corporate tax avoidance there's ever been. As I explained in a report I wrote for the TUC last May, In December 2010 George Osborne announced the biggest tax loophole ever deliberately introduced for large companies by a UK government when he announced that any UK company moving its treasury function out of the UK to a tax haven would have its tax bill on that treasury operation cut to 5.75%. The cost is estimated to be more than £800 million a year, and it was all designed to be a direct shot in the arm for the Crown Dependencies and Cayman.
And Osborne has also abandoned residence based tax - creating vast numbers of new loopholes for multinational corporations.
Cameron has to walk his talk on this issue before we believe him on this issue. Right now no one should. He's simply not telling the truth.
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[…] already mentioned the derisory fine dished out to PWC that’s in the news this morning. Then I noticed this in […]
here is a link to the newsnight programme with the tax discussion about half way through (togethe rwith RM’s rather fleeting contribution)
http://www.bbc.co.uk/iplayer/episode/b019ch5b/Newsnight_05_01_2012/
As RM notes elsewhere, there are only 2000 HMRC tax trained individuals to deal with all tax payers in the country…………what is the solution to this, HMRC cant recruit from industry as they cant pay enough to compete. Outsource some of HMRC’s functions to one of the firms on a contingent fee basis? is this really a solution? its seems to be the only realistic one?
No, let’s pay some realistic salaries to get the best people in HMRC
can you imagine the outrage of someone joining HMRC and being paid even something as “low” as £100k?
how much would it take to get a tax partner from a big firm? £500-£800k if you look at the big 4’s average profit per partner…………just isnt going to happen is it.
Oh yes it is
It has
And we don’t need partners ….
“and we don’t need partners”
This is true. Partners in the big firms don’t earn the sums they earn because they are technical geniuses capable of coming up with all the schemes themselves. They have huge teams of people to do that.. who are not paid that kind of money, and are the type that HMRC perhaps need more of. Partner earnings are for business generation, which involves a different skillset, and not one that HMRC needs. When I worked for a Big 4 firm, the partners were damn smart, but they weren’t the smartest guys in the room.
i disagree with the comments about partners, but lets ignore them for the purposes of this discussion as they are clouding the discussion. what i would say is that there are partners in the big 4 who are not “client partners” they are technical partners and are the people that come up with the clever tax planning schemes which the client partners then sell – these are the guys HMRC should recruit, but they wont be able to afford them.
These “teams of people” you talk about are still highly remunerated – and I am talking about £150k plus per person here. Given the outrage in the press when they find out that the head of a council is on more than £100k, to recruit relatively large numbers (compared to the 2000 tax specialists RM talked about in another post) of people earning this type of money into HMRC will cause outrage.
the fact that these people then would collect sums to the Treasury far in excess of their salary will obviously be ignored as its quite obvious that the govt divorces the cost question from the benefit question (if they didnt, then there would already be more than 2000 tax specialists in HMRC)
So we have to change the attitude
The times are changing
Maybe you hadn’t noticed
im not sure they are richard:
http://www.dailymail.co.uk/news/article-2066142/Outrage-council-boss-said-salary-tiny-compared-private-sector.html
http://www.thisislondon.co.uk/news/article-23373106-revealed-public-sector-fat-cats-who-earn-more-than-150000-per-year.do
we are talking here about recruiting hundreds of people who earn £100k plus….at a time when spending on the NHS is under pressure this will be a field day for the headline writers – again they will completely divorce cost from benefit and wont realise that someone being paid £100k a year might generate several millions of “additional” tax.
And so, as I say, we have to change our attitude to tax
What you’re saying is you don’t want that to happen so the tax can never be coillected
That’s the headline writer’s aim as well
You’re wrong
So are they
I have never said I dont want it to happen – you are assuming.
I was trying to argue in favour of it, but I’m trying to recognise the difficulty of doing it because the headline writers wont see the potential upside, they will just focus on the cost.
i agree, attitudes need to be changed.
You’ve written so many blogs about tax avoidance today I didn’t quite know where to post this. As I was scanned the morning papers today I came across this rather depressing, albeit funny for an instant, piece of news.
http://www.telegraph.co.uk/finance/financialcrisis/8995142/Italian-ski-resort-lays-bare-tax-evasion.html
I guess the Italians have plenty of tax problems of their own!
I also read that the Italians are planning a ‘luxury’ tax for all yachts in Italian waters. ‘Yachts’ over 64 metres in length will be charged 703 Euros per day. Whilst I can understand their financial problems, surely they understand that yachts of that size will spend more than 703 euros a day, when the owners are on board and driving them away will see huge amounts of revenue disappearing as well as all the jobs and local businesses that support this industry.
I am not for one minute supporting rich yacht owners but look at this from purely a financial aspect. Keep up the good work.
If tax avoidance is not paying the tax that parliament intended, then how can taking advantage of a tax treatment expressly made available by parliament be tax avoidance? This really is no more ‘avoidance’ than me putting money in an ISA or you paying yourself with dividends… we’re doing exactly what parliament thinks we should be able to do.
Feel free to choose a word to describe taking advantage of a tax rule you don’t agree with.. but if doing so directly accords with the intentions of parliament, then don’t use ‘avoidance’ because that’s getting people even more confused than they already are (witness all the people telling me that ‘rich companies and corporations are evading £100bn of tax every year).
There is no inconsistency in this case between the events you undertake and the intention of parliament so it works
It is the inconsistency that would trigger a GAAR or general anti-avoidance principle
99% of people would be unaffected
Those that were would know it – their intention would identify them from the outset
.. and I understand that. I have grave concerns about how a GAAR would be applied in practice, but the theory of it makes some sense.
But my point was rather that you labelled the 5.75% scheme as ‘avoidance’ when, even by your own definition of that term, I can’t see how it is.
Like the Irish system it is state sponsored abuse
It is legal – but repugnant
you might levy that charge against any number of tax reliefs though – SSE for example, ISA’s, 100% capital allowances, R&D credits, branch profit tax exemption, dividend exemption, interest being tax deductible, individuals getting interest relief to buy shares……..i could go on, where do you draw the line?
By re-drawing the tax system
The world has changed
Tax needs to do so as well
i dont disagree – but how long did it take for the “tax simplification” project to happen? and that wasnt even re-writing tax law, it was just trying to make it more understandable
no doubt you have seen the size of the CCH/Butterworths these days !?!?
And if w had a party with the right will we could do it in a year…..it’s all about will
but we dont – none of the parties have the will do they