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.
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Why not get the auditors to confirm that a company’s tax affairs comply with both the law and the spirit of the law? Where the company doesn’t, this is fully disclosed in the financial statements? In return for the work, and to remain independent, the auditors must cease all tax avoidance advisory work, Surely that work would be better than people just trying to interpret limited amounts of publically available data in order to draw an opinion. It would fit with your tax approved list of companies.
The auditors could not spot it – that’s why
Some of the best lines today have been…we don’t want to chase these important multinational companies away from our shores; it’s difficult to find a way to keep track of what these companies are doing…if we crack down too much, other countries may suffer; HMRC have been cracking down on the Tax Gap and so on.
Do we or do we not believe in competition? If we chase these companies away…then won’t some enterprising young gun fill the vacuum and give us our books online or our coffee efficiently, or our internet services the same? The sheer inanity of discussion around multinationals is breathtaking. It’s still almost impossible to get anyone on the main news to say the ‘c’ word…country by country reporting. Lastly can someone explain how a UK crackdown would hurt any other country? If this is a reference to Ireland…then they need to say so and also explain why the Irish don’t bother talking about GDP anymore, they talk about GNP. Now why would that be I wonder?
Oh yes….HMRC cracking down on multinationals… ha, ha, ha, ha, ha, ha, ha,ha, ha, ha, ha, ha,ha, ha, ha, ha, ha……………..and then he expired after hearing the world’s funniest joke (that’s a Monty Python reference).
Richard, presumably you are still suggesting we boycott Starbucks given the deal they have struck with HMRC, and announced today, actually reduces their world-wide tax bill (through a reduction in overseas taxes) and doesn’t give rise to any more UK corporation tax as they still have losses after the royalty adjustments?
Smart lawyers and accountants have clearly been earning their money turning a negative into what appears to be a tax saving opportunity and improved PR.
Seems to be an outrage.
I think Starbucks is doing a PR stunt
In that case all you say follows
Although if that were the case it would rather undermine the claim that they were avoiding taxes in the first place. You can’t have it both ways Gary.
Congratulations on seeing some results from all your hard work Richard.
It’s a small point, but I think it’s worth spelling out *why* inequality is bad whenever it is used as an argument against the status quo. For those who already agree with you, it’s not a contentious point. Others need it explaining in terms they can grasp.
Rich people ‘invest’ (aka save) their money in property and other pre-existing assets which create no new wealth, but do create bubbles in those assets. This raises prices for everyone without adding anything to the economy. Worse, it destabilises the economy and takes money away from productive activity because so much of our national income ends up going to rentiers.
Poor people spend their money because they need every penny they can get.
All else being equal, if you increase inequality you reduce demand and the economy as a whole suffers.
I know I’m not telling you anything you don’t know. I’d just like to see more left-leaning authors emphasise the self-interested economic arguments instead of the fluffy moral ones. We need to convince the tone deaf who never joined the choir.
It is by now very obvious that the Tories want to turn us into a sweatshop economy, selling stuff to the new middle classes that India and China are scrambling to create now that their main customers have gone bust. They don’t care, but their voters do.
Those voters don’t respond well to being lectured about fairness by what they view as a bunch of naive, pious lefties. They have a different, and perfectly valid, moral viewpoint. Which is fine, because the centre-left has a much more coherent economic argument than the right anyway – if only we could stop polishing our halos for long enough to explain it.
Cheers.
Looks like Amazon has taken these issues with the UK seriously. They’ll be settling their publishing HQ in Luxembourg: http://www.wort.lu/en/view/amazon-publishing-to-settle-down-in-luxembourg-50bcc3fce4b07fdda78c8af6
I can’t say that I’m terribly surprised by this (they get a great deal in Lux). I wonder if the UK / Germany will get some teeth?
I saw Margaret Hodge on Sky yesterday. The chap on with her ran circles around her, unfortunate.
You are entitled to your opinion