Cameron Osborne & Clegg: time to name and shame those who help tax avoidance

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The Coalition say thy want to tackle tax avoidance.

This morning in the Public Accounts Committee say that those who help tax avoidance should be named and shamed.

This morning I name Cameron Osborne & Clegg, that well known firm of tax avoiders. The evidence comes from the International Development Committee of the House of Commons:

Implications of UK Finance Bill 2012

50. In the 2012 Finance Bill, the Government proposed a relaxation of its anti-tax haven laws: the so-called 'Controlled Foreign Companies' (CFC) rules. If the Bill is approved as it currently stands, the newly relaxed legislation will apply to accounting periods beginning on or after 1 January 2013.[80]

51. Under the current system, prior to these revisions coming into force, if a UK-owned corporation reports profits in jurisdictions with lower corporate tax rates than the UK, (such as by transacting with its own subsidiaries to shift its profits from developing countries into low-tax jurisdictions) the UK Government is able to impose an extra tax charge on the corporation to 'make up the difference.' Profits shifted from developing countries into tax havens, therefore, would still incur tax at UK rates: this may disincentivise such profit-shifting.[81]

52. Under the new system, the UK will only be able to impose this extra levy if the profits in question have been shifted from the UK. Profits shifted from developing countries into tax havens, therefore, will incur tax at the tax haven rate, rather than at the UK rate–so the incentive to shift profits into tax havens will be significantly higher.[82] A number of NGOs are campaigning vigorously against this legislative change. As an example, ActionAid states its concern that:

the proposals will eliminate a significant deterrent that discourages UK-based companies from shifting profits from developing countries to tax havens. We estimate that the reforms may cost developing countries as much as £4 billion.[83]

53. The Exchequer Secretary to the Treasury told us that he did not accept the £4 billion estimate; however, he did not deny that there would be a cost to developing countries. He stressed that the objective of the CFC rules was to protect UK tax revenues, not those of developing countries.[84] Given that through DFID the Government is also seeking to support revenue collection in developing countries, such a comment indicates a lack of joined-up thinking between Departments.

54. In a recent joint report by the IMF, OECD, UN and World Bank, it was argued that where domestic policy reforms were likely to impact on revenue flows to developing countries, a 'spillover analysis' should be conducted to ascertain the magnitude of such impacts.[85] In the case of the revision to CFC rules, such an analysis has not been conducted.[86]

55. If approved, the newly-relaxed Controlled Foreign Companies (CFC) rules, proposed in the 2012 Finance Bill and due to come into force in January 2013, will incentivise multinational corporations to shift profits into tax havens. This is likely to have a significant detrimental impact on the tax revenues of developing countries. As a matter of urgency, the Government should conduct or commission an analysis of the likely financial impact of the revised Controlled Foreign Companies rules on developing countries. Depending on the results of this analysis, the Government should consider whether to drop its proposals.

56. The Government should designate a DFID ministerial responsibility for the development impact of tax and fiscal policy. Furthermore there should be an administrative or legislative requirement for the government to assess new primary and secondary UK tax legislation against its likely impact on poverty reduction and revenue-raising in developing countries, and to publish that assessment alongside the draft legislation.

The Coalition could stop this damage. Instead they choose to talk about tax avoidance whilst going out of their way to assist it.

I name and shame them.

 


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