One third of large companies don’t pay tax – Radio 4 pick up the theme

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The theme of this morning's article in the FT on large companies not paying tax has been picked up on Radio 4's World at One programme. I was asked to appear, as was Mike Devereux of Oxford university and the CBI.

Mike was amusing. He expressed surprise at the finding, which has in fact been well known for some time e.g. PWC trailed it in a report for the 100 Group a couple of years ago. And his response, that it's as unreasonable to ask a large company to declare its tax on a national basis as it would be to do so on a regional basis in the UK was ludicrous. Mike and big business might wish to fantasise about a global world without governments with the power to impose tax, but the reality is that those governments exist and corporations are accountable to them. So unless Mike comes out strongly in favour of formula apportionment then national reporting is going to remain a necessity. And even if that happens, the case for country by country corporate reporting remains - as all businesses know only to well. Which is why they do it, and would do so whether it was required for tax or not.

My comments were simple and focused on two things. The first is that the capital allowances the UK gives are not aligned to the economic substance of the transactions to which they relate, and so constitute a subsidy which is not needed to create successful businesses. The second was that the UK's tax relief on interest is ludicrously generous meaning that tax relief is given here on monies used overseas so that in effect the British taxpayer is subsidising business activity elsewhere in the world. This makes no sense. Lastly, I made the point that the UK does not need to give subsidies to attract already successful businesses.

Martha Kearney then put these points to the CBI. They seemed to have no answer.

Unfortunately the HMRC comment was absurd. In their comment they entirely missed the point that discussion about tax not paid is not about tax evasion, it's about whether the system is desirable or not. Why can't they get their heads round that?

PS Curious thought for all bloggers out there - I was on because the BBC read this morning's blog, here. It's an interesting example of how various media are mixing.