Taxing Times: UK Corporate Tax System In Need Of Overhaul

Guest Posttax lawUnless you’ve been hiding out in the Himalayas you can’t have missed the recent uproar over the extent of tax avoidance by global corporations like Google, Amazon and Starbucks. As small businesses and individuals feel the financial pinch there has been growing discontent over the comparatively minor amounts paid by huge companies, resulting in the cross-party House of Lords committee on economic affairs calling for a huge overhaul of the UK corporate tax system.

Although the current low-levels of tax paid by these companies are legal, they rest on the exploitation of loopholes in the international tax systems. For an idea on just how little tax some companies can pay US technology giant Apple paid no UK corporation tax in 2012. That’s right: none. When you consider the huge profits such a company makes it’s not hard to see why there’s a consensus that change needs to take place.

The House of Lords committee believe that the ability of global corporations to avoid tax to such a huge extent, while smaller UK-based businesses are forced to play by the rules, calls the whole tax system into disrepute. The lost revenues are also enormous, and at a time when state benefits and public sector services are being stripped back to the bone to make savings it only seems fair that these corporations be forced to pay their fair share.

To help facilitate this the peers, led by Lord MacGregor, have recommended that companies be forced to publish tax summaries which would allow the Government and the general public to see what they have paid.

A major hurdle that would need to be overcome before such a system could be put in place is the current duty of confidentiality that HMRC has to taxpayers. Although the House of Lords committee has suggested a joint committee made up of members of the Lords and the House of Commons, which would review reports and evidence in confidence, HMRC believes a change to the current laws would need to be made.

In addition to disclosure by the companies, the committee also suggested new regulations for tax advisers to adhere to. It’s felt that the issue of major corporate tax avoidance is facilitated in part by tax advisers encouraging companies to sign up to what the committee called ‘blatantly contrived’ tax avoidance schemes. The committee recommended stiffer regulations, with the removal of their right to practice if tax advisers breach the proposed codes of conduct.

These findings chime nicely with the current plans being formulated by the OECD to help bring about wider change to the international tax landscape. However the committee are also urging the Treasury to explore other options including a destination-based cash flow tax system similar to VAT.

With the growing voice of public disapproval mounting, fuelled by disclosures in the media, it seems that the days of low tax or no tax for the big multinationals might be coming to a close.


Popular posts from this blog

Blogger’s new templates: Contempo, Soho, Emporio and Notable

Charlotte Dymond Facts

Christmas sandwiches