There was a short debate in parliament yesterday on the EU's common consolidated corporate tax base (although I've yet to find the link).
Associated Press reported:
The Government does not support European Union proposals for a common tax base for companies operating in more than one member state, Treasury Economic Secretary Justine Greening said tonight.
Ms Greening said the UK needed "stronger justification" from the European Commission that the existence of 27 different tax systems was a "significant barrier" to the functioning of the single market.
Now that's interesting. The UK sees tax as a barrier to business in the UK. That's why it says it's going to cut the tax rate. But at the same time it can't see how 27 tax systems in Europe are a burden on UK companies working in all 27 states (or a reasonable number of them).
The positions Justine Greening has made are irreconcilable. If tax is a problem for companies and hinders markets as she claims then it follows that of course having 27 tax systems impedes the market.
Alternatively, if tax is not an impediment, as I'd argue, but minimising compliance cost and maximising tax recovery to minimise the tax ga so that the tax rate can be kept as low as possible for those honest companies who seek to comply with their obligations is a priority then of course one system that saves admin cost and eliminates transfer pricing problems is a massive boost to efficiency.
Either way Justine Greening makes no sense at all.
Unless, of course, she's not telling the truth (heaven forbid) and what she's actually saying is that the UK wants a tax system where:
a) profits are artificially relocated to the UK because we have a low tax rate;
b) transfer pricing abuse can continue and we can ignore it by claiming we only have a territorial tax system in future so such things are not our concern unless they directly affect us;
c) we want to underline other government's revenues by encouraging tax cheating in the UK at cost to other governments;
d) the government is not committed to a level playing field for honest business but is instead committed to creating an environment where tax cheating, driven by banks in the City of London is the supposed basis for our economy.
I think that's Greening's agenda and it brings discredit on her and the UK.
But quite absurdly Labour agrees with her.
It really is time we had some decent debate on tax in this country.
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No single silver bullets, more a “two-in-the-chest, one-in-the-head” kind of approach (if we’re following on from recent suggestions of violence).
(1) The EU should set minimum rates of tax and countries should be allowed to set their own rate above this within the framework of the Lisbon Treaty (economic hegemony is not permitted under that Treaty).
(2) EU countries should (at least try) to wholesale simplify their tax rules, as independent anti-avoidance mechanisms are ‘fixes that fail’ – they fix the direct avoidance issue, but usually create some sort of international arbitrage opportunity- i.e. the simply create a different type of avoidance activity.
Countries retain fiscal Sovereignty, and the rates of tax adjust for geographical adversity.
(3) The key problem being the difference between UK and European law systems…the GANTIP/GAAR would fix that.
Problem solved – 10 beers to the peace-loving part of the Isle of Man please (i.e. all-bar-one-silly-little-boy).