The PCA report's forward summarises just why tax avoidance is such a problem in this country. The committee says:
Transparent, predictable and fair taxation is at the core of our public finances. The Government has a responsibility to assess and collect tax due from all taxpayers, without fear or favour, and taxpayers should pay all that tax which is due. Whilst we looked at a range of issues among HM Revenue & Customs’ (HMRC’s) activities, our principal enquiries were into the corporation tax paid by multinational companies.
The hearings we held showed that international companies are able to exploit national and international tax structures to minimise corporation tax on the economic activity they conduct in the UK. The outcome is that they do not pay their fair share. We believe that this practice is widespread and that HMRC is not taking sufficiently aggressive action to assess and collect the appropriate amount of corporation tax from these multinationals. If companies do not pay their fair share of tax, other taxpayers have to pay more. Both HMRC and corporate taxpayers are failing to meet the legitimate public expectations from the tax system.
We took evidence from multinational companies and HMRC to understand how successful companies with huge operations in the UK pay little or no corporation tax. The evidence we received was unconvincing, and in some cases evasive. We are concerned that multinationals have an unfair competitive advantage over British businesses which have no choice but to pay their corporation tax. It is also unclear whether HMRC has the necessary resources or are devoting the time and effort to collect the appropriate level of tax.
What else to say? Tax avoidance by multinational corporations and their agents and advisers:
- creates unfair competition;
- ensures that tax is paid by the wrong people - including those without the capacity to pay;
- undermines public confidence in both these companies and HMRC;
- corrupts the companies that take part in this activity;
- demands additional resources from HMRC at cost to us all.
The impacts of this are not stated by the PAC, but let me add them:
- Tax avoidance increases inequality;
- By reducing the profits UK owned businesses can make tax avoidance undermines investment and employment in the UK;
- Tax avoidance wastes resources, whether it be those of HMRC or those who undertake it;
- Tax avoidance undermines trust and so the effectiveness of markets and the cohesion of society;
- Tax avoidance is unjust, and that's a cause of social resentment.
In a word, and it's one that the PAC does not shy way from, tax avoidance is immoral. That immorality imposes enormous cost on us all.
And that's why parliament now has a duty to defeat tax avoidance.