{"id":21796,"date":"2013-07-31T09:40:59","date_gmt":"2013-07-31T08:40:59","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=21796"},"modified":"2013-07-31T09:41:50","modified_gmt":"2013-07-31T08:41:50","slug":"the-house-of-lords-recommend-some-deeply-regressive-corporate-tax-reforms","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/07\/31\/the-house-of-lords-recommend-some-deeply-regressive-corporate-tax-reforms\/","title":{"rendered":"The House of Lords recommend some deeply regressive corporate tax reforms"},"content":{"rendered":"

The House of Lords' Economic Affairs Committee has reported on Corporation Tax this morning following a review to which I presented evidence. As they note in their report<\/a>:<\/p>\n

All our conclusions and recommendations are listed in Chapter 7. They are\u00a0summarised below.<\/p>\n

We recommend that Parliament should establish a joint committee\u2013made up\u00a0of MPs and Peers\u2013to exercise greater parliamentary oversight of HMRC and\u00a0the settlements it reaches with multinationals. Like the Intelligence and Security\u00a0Committee, the new Committee would examine confidential evidence in private.\u00a0<\/strong><\/p>\n

We recommend that the Treasury should urgently review the UK\u2019s corporate\u00a0taxation regime and report back within a year with proposed changes to be made\u00a0at home and pursued internationally, especially through the OECD.\u00a0<\/strong><\/p>\n

On the international front, we recognise that the Treasury are already working\u00a0for early implementation of the OECD\u2019s Action Plan to tackle Base Erosion and\u00a0Profit Shifting (BEPS). We recommend that the review should also consider\u00a0other approaches to the taxation of multinational companies\u2019 profits, such as a\u00a0destination-based cash flow tax.<\/p>\n

In the UK, we recommend that the review should re-examine some\u00a0fundamentals of the UK\u2019s corporation tax regime, including differential tax\u00a0treatment of debt and equity and the scope for introduction of an allowance for\u00a0corporate equity.<\/p>\n

We recognise that the Treasury will already be working on policy initiatives\u00a0against avoidance already announced by the Government, such as naming and\u00a0shaming promoters of tax avoidance schemes, and self-certification of\u00a0compliance with tax obligations by companies bidding for public contracts. We\u00a0recommend that the review should also consider a series of anti-avoidance\u00a0measures for the shorter term, such as:<\/p>\n

(i) regulation of tax advisers;\u00a0<\/strong><\/p>\n

(ii) measures to penalise users of failed tax avoidance schemes;\u00a0<\/strong><\/p>\n

(iii) a requirement on companies with large operations in the UK\u00a0to publish a proforma summary of their corporation tax\u00a0returns, so as to bring about greater transparency.\u00a0<\/strong><\/p>\n

We also recommend that HMRC should be better resourced to deal effectively\u00a0with the tax affairs of complex and well-resourced multinationals.<\/strong><\/p><\/blockquote>\n

I welcome the report: some of its conclusions are clearly relevant and appropriate, I have highlighted those that make obvious sense. There are, however, some deeply worrying recommendations in there.<\/p>\n

Giving allowances for equity rather than restricting relief for debt simply reduces, yet again, the tax paid on capital and shifts the burden of tax, once more onto ordinary people.<\/p>\n

And a\u00a0destination-based cash flow tax (a Prof Mike Devereux idea from the Oxford University Said Business School - funded as it is by very big business) is actually and very simply a suggestion to, in effect, increase VAT to replace corporation tax - which would again simply shift the burden of tax from capital onto ordinary people. It would also strip taxing rights out of poorer and developing countries where, of course, consumption is lower but need for corporate tax revenues is highest. This is a theme I will return to.<\/p>\n

For now it is worth noting that this is a welcome report for the summary to provides of current thinking. But in terms of its economic logic it reveals a profoundly regressive view point that ignored evidence on unitary tax, gave too much weight to big business and its advisers and which reveals a poverty of thinking about how to really address the problem - which is the ability of\u00a0multinational corporations to arbitrage the tax system to provide them with an inherent tax advantage, which the committee appeared unwilling to tackle based on my reading of the report, so far.<\/p>\n","protected":false},"excerpt":{"rendered":"

The House of Lords’ Economic Affairs Committee has reported on Corporation Tax this morning following a review to which I presented evidence. As they note
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