There were two corporate tax abuse stories yesterday.
One was about Next, where HMRC believe they have closed a £22 million loophole the company was trying to abuse.
The other was McDonalds, where allegations of large-scale tax abuse through Luxembourg have caught fresh media attention, although it is likely that the company will already be subject to an EU investigation.
So to get things in right ordering, firstly congratulations to HMRC. All such winds are good news.
As for McDonalds, the allegations extend the scope of enquiry into the artificial diversion of profits in to Luxembourg and simply show the pervasiveness of such behaviour if proved to be correct, but they do not break new ground. That is not to understate their significance: the issue is important and McDonalds and the structures they have used need to be tackled. But, and it is an important but, the fact that these issues are known about and that action on investigating this case at an EU level does already seem likely show how far we have come on tax justice issues as they relate to corporate abuse.
I applaud all those campaigners and politicians (especially MEPs) who are addressing these issues: their work is vital. But the other day I was asked by a well known journalist if I thought that such revelations and the attack on corporate tax abuse could now sustain campaigning on tax. My answer is that it cannot, in the long term. Whilst it is vital that work goes on to ensure that the changes we still need, such as country-by-country reporting on public record, are delivered such campaigns are now changing. For example, investors are now appreciating the role they can play on such issues, and the advantages to them of doing so.
More than that though, there is an awareness now that big as this corporate tax abuse issue is it is not the only tax issue of concern. So, for example, if we're talking business tax how the world's 2 billion or so self employed people and temporary employees are taxed is at least as big an issue now, and also vital to the well-being of developing countries.
Corporate tax abuse will be with us for a long time to come, I fear, not least because I still think there is a real lack of awareness amongst many companies as to what good tax practice looks like. But one of our aims must now be to to use publicity as the springboard for wider awareness of the issues involved.
I increasingly feel that's the next stage of what I, at least, am doing.
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It is high time these assholes were taught a lesson and cleared out. We need people with an ethical view of business to run these things.
Indeed Guy Felching.
Let’s hope they can learn to keep their noses clean. The whole thing leaves a nasty taste in the mouth – I’m not sure I can stomach much more of it. Yuck.
I am sure the corporates are designing and implementing structures that are different to those under investigation at present. The game is always very fluid and is played on many fronts. The desire to reduce tax payments by corporates and others will continue while the rewards for doing so outweigh the risks. Greed is a very powerful motivator.
No it will not but the more worrying question is, will the cuts at HMRC end as without adequate staffing, these sort of practices cannot be countered.
My sense is that it is the major accounting firms who need to be targeted as it is they who devise most of these schemes by coming up with (mis)interpretations of HMRC tax law and regulations. They also make substantial fees from their Tax and Advisory practices that are little more than professional tax dodgers. For the big firms these fees run into £100mns – check their accounts.
I agree. The major accounting firms want it both ways – because that is the way they make money. As a small business when we were in difficulties a while ago the bank required us to be scrutinised by one of the major accountants. They contributed precisely nothing – but the bank had their ‘approved’ conclusion. Our own ‘basic’ accountant was considerably more effective! The government also has faith in these big names who know nothing more than the rest of us but it seems to please the government to get their approval and then of course they devise an avoiding subterfuge. Time I think, for the Treasury Select Committee to say evidence from outside accountants will be treated as incidental -or worse- compared with evidence from the Treasury itself…
Yes, I agree with you that corporate tax abuse has been a problem for a long time. And just maybe, that is the reason for such an arrogant reaction during the financial crisis, caused by many of them. It may also speak to the way our governments have been bought-off. By that I mean, they have, without any legal discussion with the targeted global community of bank customers and taxpayers– set these customers up pasty to pay for their gambling debts through ‘bailouts, bail-ins and I believe the US has ‘safe harbors’. Now, how does that work, when bank robbers are still treated as criminals, subject to prosecution. Curiously, no one seems to recognize them as the lethal equivalent of snakes; who have unilaterally treated taxpayers with banking assets as enslaved donors/ATM’s. I have yet to read one article, in which any government, corporation or bank, is taken to task for what is the most obscene abuse of contract or any other clean legal practice. No wonder, winning is all, I had hoped these customer/taxpayers would withdraw and or act in some creative way. Time will definitely tell..