The FT reports this morning that it has seen draft measures being considered by the EU designed to tackle tax avoidance. So have I. And amongst them is a demand for a general anti-avoidance rule to be built into all EU countries tax law. Since it is something I have been demanding for many years I am delighted to see it.
What is also welcome is that their draft makes clear that they are looking at a general rule. It reads like this:
Now it so happens that there is a rule that does something very like this before parliament right now: it is Michael Meacher's General Anti-Tax Avoidance Principle Bill, which, as is widely known, I wrote.
There is also the proposal for a general anti-abuse rule being promoted by the government, which does no such thing and which is intended only to stop the most absurd of pre-packaged schemes largely targeted at people like Jimmy Carr.
The EU rule is aimed at the likes of Google and Amazon: it could be used against them. So could Meacher's Bill. That's what I intended.
The government's Bill would go nowhere near such abuse. That says two things. First, the government is not serious about tax avoidance. Second, and more worryingly, it is the abuser's friend as a result, providing them with cover for their behaviour by letting them say, yet again, it falls within the law.
There is a fault line here, and one which the public need to know about.
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Richard
If a rule like this was introduced in the UK and say Starbucks fell foul of it in moving profits to the Netherlands at a lower rate, would they then be levied full UK tax on the amount in the avoidance scheme or would they get a offset for the amount paid in the Netherlands. Because if there was no offset for the Netherlands tax, I am assuming all these sort of arrangements would be reversed. But then it could leave those countries that specialise in these things (Netherlands, Ireland etc) a lot worse off tax wise? Of course as the UK we shouldn’t really care if they are worse off from it, but the EU might.
We’d charge here – they’d have to claim credit in Netherlands
That’s the way these things work
Once again your knowledge and understanding of the UK tax system is shown to be lacking. Or alternatively you intend to mislead.
If profits are taxed outside the UK and more or less the same profits are to be taxed in the UK then at present the UK tax system gives a credit for the tax paid overseas on those profits. The credit is given in the UK, section 8 and the following sections of TIOPA 2010.
Even if in your in your capacity as would be law maker, (you really should learn to draft legislation more ably though, so much of what you draft is just silly), you would change the law on tax credits it is unfortunate that you appear to be misleading your readers on how tax credits at present work.
In response to this post, I fully expect you to attack the man rather than expound the truth.
Cheers
the profits would be taxed here first as this where the profits arise.
All the rest of your comments ignore that – and are therefore absurd
To be candid – your comments are clearly only intended to be abusive, as is evidenced b your commentary on my drafting, which passed several lawyers and the parliamentary draftsmen’s review
In which case you’ll return to the spam list now – it is where anonymous trolls belong
I am guessing that the British Government will be using all its diplomatic talents and wiles to try to subvert and emasculate any such EU-wide action. If there is a risk the law might be effective, they will insist it must be stopped.
Please please use this blog to expose any evidence of Britain getting in the way of progress, as & when you get it. They’re our diplomats, but they will be working for other peoples’ interests.
The briefings to the press will be about “Brussels threat to jobs/freedom” or whatever and we will get zilch on what’s really happening in the liberal MSM.
“Be wary of any Government which wants to remove the legal means of you challenging its decisions and abuses of power”
http://www.firmmagazine.com/news/3064/PM_plans_restriction_on_judicial_review%3A_invokes_fight_against_Hitler.html
I’d like to see this get ratified and it would help rid abusive tax structures. It’s great that they decided against providing explicit rules, but rather gave guidelines of what an abusive structures is (It’s much more difficult to “game” guiding principles because things like common sense come into play).
From a pragmatic point of view there will need to be an immense amount of political will to get this through the draft stage (Germany / France both pushing it hard). I foresee the same fate as the european tax and savings ammendment though – getting vetoed whenever a vote comes up (more political pressure needed).
Individual countries can at least do this
We’re not….
That is true. I’m not very knowledgeable regarding politics in the UK, but what’s the oppositions take on these issues? From what little I do know major party particularly wants to take on the city of London and their co-horts (Though who would have thought tax policy would ever be in vogue – so that can change 😉 ).
This is probably a little off-topic for this post, but I’m surprised that Apple hasn’t been brought for questioning on tax avoidance structures (or at least I haven’t heard about it). Do you have any idea as to why they’ve been excluded? I know they have a mailbox in Luxembourg and go through the same haunts as Google, Amazon for tax arbitrage.
The evidence on Apple is secondary i.e. they have never themselves given UK sales data
Agree, but it can be strengthened further. The Sarbanes—Oxley Act transformed corporate reporting and internal controls. How? It made directors subject to criminal and civil penalties for failure to build an effective internal control environment.
We need the same provisions here – directors have to sign an annual statement declaring that they have communicated all tax avoidance schemes to the inland revenue and obtained their approval before implementing them. If a tax avoidance scheme is not authorised it cannot be used. If directors fail to disclose or use a schem without authorisation they are personally subject to criminal and civil penalties including jail time.
[…] I had read about a law that would assume tax liability and immediately liked the sound of it, but I didn’t quite know what it would look lie or how it would work. Thanks to @richardjmurphy I now know and add this as my first policy. […]
there are a lot of very subjective questions in your drafting – would you propose a clearance system? I understand that was one of the main recommendations of the review around the GAAR – which was ignored for some strange reason.
obviously we have clearance processes for a number of far more formulaic tax provisions, quite why we arent going to have one for something far more subject is just weird. It would, at a stroke, stop all the arguments about “uncertainty” for business around the GAAR.
no doubt you are aware that the guidance around the GAAR still hasnt been drafted, which is appalling given the timetable for introduction of the rule – lack of resources again at HMRC no doubt.
I do propose clearances – yes – but paid for
payment for clearances is actually quite a neat idea – any idea why we dont already have this (just wondered if you had ever had a conversation with HMRC about it?)
No formal discussion
Top don’t like it
Staff do