Writing on the ITV web site this morning about Barclays their business correspondent Laura Kuenssberg says:
Of course, it makes financial sense for any business to make smart decisions about how, and where they pay their tax.
Sorry Laura; that's just wrong. The duty of a company that wants to be a good corporate citizen - or even just law abiding - is to be tax compliant. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
In that case the only duty a company has is to pay the right amount of tax in the right place at the right time. Deciding to do otherwise is always tax avoidance.
And we need a general anti-avoidance principle to stop that.
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LK’s comments are the crassest I’ve heard in a while. They might make sense if she replaced ‘smart decisions’ with ‘smart-ass decisions’. Who exactly does she think is going to pay to close the deficit if banks try and claim tax credits for tax they didn’t even pay in the first place thereby increasing the deficit? Social responsibility? Perhaps in her topsy-turvy world she believes that is simply irrelevant.
“The duty of a company that wants to be..just law abiding — is to be tax compliant.”
I am afraid tax avoidance is legal, so you are wrong.
“Tax compliance is seeking to pay the right amount of tax (but no more)”
I’ve never understood what the three words in brackets mean. Why are they there? If a company accidentally overpays its tax liability for some reason, does that mean it is not tax compliant?
I think they mean what they say
No one is obliged to pay what is due by the crigteria noted
Only a pedant would not realise that
And so a company that has overpaid can reclaim. Is that really so hard to understand?
So to your mind the fact that 70% of HSBC’s profit comes from its Asia business in Hong Kong means that 70% of the Corporation Tax it pays in the UK should be refunded and it should pay at the lower rate in Hong Kong.
As “where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes”….
But HSBC is also resident here
So sure pay source tax as first priority
But then residence based tax too with credit for source tax
This is entirely consistent with what I say