{"id":32336,"date":"2016-02-12T07:37:33","date_gmt":"2016-02-12T07:37:33","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=32336"},"modified":"2016-02-12T07:37:52","modified_gmt":"2016-02-12T07:37:52","slug":"fisking-hmrc-claims-on-multinational-corporations","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2016\/02\/12\/fisking-hmrc-claims-on-multinational-corporations\/","title":{"rendered":"Fisking HMRC claims on multinational corporations"},"content":{"rendered":"<p>HMRC has issued a '<a href=\"https:\/\/www.gov.uk\/government\/news\/factsheet-on-hmrc-and-multinational-corporations\" target=\"_blank\">fact sheet'<\/a> on why they are good at dealing with\u00a0multinational corporations.<\/p>\n<p>There is a problem with it. Most of it is made up. So, without further ado, here let me look at the claims and what's wrong with them:<\/p>\n<blockquote><p>Since April 2010, through an intense focus on compliance, <abbr title=\"HM Revenue and Customs\">HMRC<\/abbr> has:<\/p>\n<ul>\n<li>secured more than \u00a3100 billion of compliance revenues from all sources \u2014 money that would have been lost without <abbr title=\"HM Revenue and Customs\">HMRC<\/abbr>\u2019s intervention; \u00a338 billion of this was from large business compliance work<\/li>\n<li>reduced the Corporation Tax \u2018gap\u2019 \u2014 the tax which is due but is not paid \u2014 from 9.3% (2010 to 2011) to 6.7% (2013 to 2014) of tax liabilities<\/li>\n<li>won more than 80% of tax avoidance cases in tax tribunals<\/li>\n<li>secured almost \u00a33.2 billion in additional tax from challenging transfer pricing arrangements of multinational companies<\/li>\n<\/ul>\n<\/blockquote>\n<p>Where to start? First, in 2014 The <a href=\"https:\/\/www.nao.org.uk\/wp-content\/uploads\/2014\/07\/Her-majestys-revenue-and-customs-accounts-2014.pdf\" target=\"_blank\">National Audit Office said this <\/a>on the claimed compliance yield:<\/p>\n<blockquote><p>We also consider that HMRC should have been more transparent in reporting its compliance yield and describing what it included. In past years it has not made it clear enough that only some of the yields are in-year revenue benefits, or that there are uncertainties in the data. Unlike other areas of its reporting, such as on the tax gap, HMRC has not produced sufficient detail describing its methodology and approach.<\/p><\/blockquote>\n<p>And even so, <a title=\"HMRC\u2019s been giving itself an easy time on the tax gap\" href=\"http:\/\/www.taxresearch.org.uk\/Blog\/2014\/07\/03\/hmrcs-been-giving-itself-an-easy-time-on-the-tax-gap\/\" target=\"_blank\">they got it wrong<\/a>. There <a href=\"http:\/\/www.taxresearch.org.uk\/Blog\/2014\/05\/29\/hmrcs-claim-to-be-collecting-23-9-billion-a-year-from-compliance-is-about-as-bogus-as-a-fraudsters-tax-return\/\" target=\"_blank\">is more on this here<\/a>.<\/p>\n<div>Then to the tax gap, of which the <a href=\"http:\/\/www.taxresearch.org.uk\/Blog\/2015\/07\/22\/the-national-audit-office-the-tax-gap-hmrc-and-other-estimates\/\" target=\"_blank\">NAO made clear in the summer\u00a0of 2015 <\/a>that 40% was on methodology so weak HMRC could not establush the risk in their own estimates and 23% is just 'illustrative estimates' - of they make it up. In summary they said:<\/div>\n<blockquote>\n<div>The tax gap is inherently difficult to estimate and HMRC acknowledges that no estimate of the tax gap can be definitive and that its estimates carry a degree of uncertainty.<\/div>\n<\/blockquote>\n<div>Not a good basis for claim then.<\/div>\n<div><\/div>\n<div>Yes they win 80% of the time. Because they don't take on the likes of Google.<\/div>\n<div><\/div>\n<div>And I have no way of knowing if \u00a33.2 billion is correct, but just think of this in the context of global trade and total yield of more than \u00a3200 million and ask the obvious question, which is, are you sure that's enough?<\/div>\n<div><\/div>\n<div>HMRC then went on to claim a whole raft of new initiatives are also making a difference, as follows:<\/div>\n<ul>\n<li>\n<blockquote><p>introduced the Diverted Profits Tax (<abbr title=\"Diverted Profits Tax\">DPT<\/abbr>). This measure came into effect in April 2015 to address the contrived diversion of profits out of the country, so that multinationals pay tax on profits that would otherwise escape UK tax. <abbr title=\"Diverted Profits Tax\">DPT<\/abbr> is designed to change companies\u2019 behaviour so they pay more corporation tax on their UK profits rather than risk paying a higher rate of <abbr title=\"Diverted Profits Tax\">DPT<\/abbr>. It is anticipated to yield \u00a31.35 billion between 2015 and 2019<\/p><\/blockquote>\n<\/li>\n<\/ul>\n<p>The slight problem is it was intended to apply to Google. It has not.<\/p>\n<ul>\n<li>\n<blockquote><p>played a leading role in the OECD-G20 project to reform the international corporate tax system, to address aggressive tax planning and close loopholes<\/p><\/blockquote>\n<\/li>\n<\/ul>\n<p>Coat tailed and window dressed is how I would put it from seeing HMRC in action on the ground in Paris. Never once did I see a lead.<\/p>\n<ul>\n<li>\n<blockquote><p>reinvested \u00a3800 million in <abbr title=\"HM Revenue and Customs\">HMRC<\/abbr> for additional work to tackle non-compliance in the tax system<\/p><\/blockquote>\n<\/li>\n<\/ul>\n<p>Oh come on: this was window dressing cuts reversals. No one was deceived.<\/p>\n<ul>\n<li>\n<blockquote><p>introduced the General Anti-Abuse Rule (<abbr title=\"General Anti-Abuse Rule\">GAAR<\/abbr>) to tackle abusive tax avoidance schemes that might otherwise succeed under existing legislation. The <abbr title=\"General Anti-Abuse Rule\">GAAR<\/abbr> is expected to protect \u00a3235 million in revenues before the year 2017 to 2018<\/p><\/blockquote>\n<\/li>\n<\/ul>\n<p>It has never been used. \u00a3235 million could be zero for all we know: stop lying,<\/p>\n<ul>\n<li>\n<blockquote><p>given <abbr title=\"HM Revenue and Customs\">HMRC<\/abbr> the power to collect disputed tax upfront through Accelerated Payment Notices, removing the benefit of dragging out disputes. <abbr title=\"HM Revenue and Customs\">HMRC<\/abbr> has collected more than \u00a32 billion from avoidance scheme users using this power<\/p><\/blockquote>\n<\/li>\n<\/ul>\n<p>That was not aimed at multinationals. And it has not solved a single dispute as yet.<\/p>\n<blockquote><p>In 2016, the government has continued to toughen its approach to big business tax compliance, including proposals in <a href=\"https:\/\/www.gov.uk\/government\/collections\/finance-bill-2016\">Finance Bill 2016<\/a> to:<\/p><\/blockquote>\n<ul>\n<li>\n<blockquote><p>introduce a legal requirement for large businesses to publish an annual tax strategy relating to UK activities<\/p><\/blockquote>\n<\/li>\n<li>\n<blockquote><p>introduce a new Special Measures approach, targeted at the very small number of large businesses with an ongoing history of aggressive tax planning, which present a significant and continuing risk to the Exchequer<\/p><\/blockquote>\n<\/li>\n<\/ul>\n<p>Let's be blunt, the second of these measures will, like the GAAR and DPT, probably not be used.<\/p>\n<p>And as for the first, it's feeble in comparison with what is needed, and ONLY addresses UK issues when the concern is in multinational activity.<\/p>\n<p>All in all, the claims are complete nonsense.<\/p>\n<p>I really do wish we had a tax authority that would tell the truth about what the issues are.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>HMRC has issued a &#8216;fact sheet&#8217; on why they are good at dealing with\u00a0multinational corporations. There is a problem with it. Most of it is<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2016\/02\/12\/fisking-hmrc-claims-on-multinational-corporations\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[107],"tags":[],"class_list":["post-32336","post","type-post","status-publish","format-standard","hentry","category-hmrc"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/32336","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=32336"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/32336\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=32336"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=32336"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=32336"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}