Let’s start with the incredible revelation that large multi-national companies put a great deal of effort into paying as little tax as possible. The debate surrounding this issue is long overdue. I am also glad to say that there has been some great commentary on this issue.
Examples include: Ian Bell’s: “It’s not an accident Westminster’s financial system allows tax avoidance … it’s designed that way”. His article from the Herald can be found here.
Joyce McMillan outlines the wider debate and criticises the focus at Westminster on benefit fraud rather than tax avoidance. Her article from the Scotsman can be found here.
George Kerevan’s article titled: “Taxing questions for complicit governments” from the Scotsman can be found here. This is from the article: “The current generation of highly profitable internet companies have taken (legitimate) transfer pricing to extraordinary new limits. Google manages to operate almost tax-free in the UK, France and Germany, despite generating more than £35 billion in revenues in all three countries.”
Alsion Rowatt writing in the Herald comments on the increasing evidence of multinational corporations’ tax avoidance and criticises the HMRC for not keeping up with the internet age. This article can be found here.
And from the Guardian: “The bosses of some of Britain’s largest multinational corporations have urged David Cameron to stop moralising and rein in his rhetoric on tax avoidance.” The article in full can be found here.
For an example as to how far some companies will go look no further than our utility companies. More on this from the Telegraph can be found here.
To summarise. Companies rarely consider “morality” when deciding how much tax to pay. I use the word “decide” intentionally. These companies after all have a duty to their shareholders. The fact is that UK and international taxation law is full of holes and has always been. The politicians know this. The politicians have always known this. In the so called good times this issue was simply ignored. Is there an easy answer? Of course not. Do the politicians desperately want to be seen to be doing something? Of course. Is there a huge amount of hypocrisy around this issue? Yes. Do governments want inward investment? Yes. Will they offer tax breaks to achieve this? Yes. Is the headline rate of tax the only deciding factor for companies? Of course not. Is there a growing perception in the UK that the taxation favours certain sectors over others? I believe so. Is this debate going to continue? I hope so.
Now to the fiscal powers debate and two stories on the Scottish Conservatives. The headlines contain the phrases “under attack” and “under fire” and show how difficult a position Ruth Davidson is in. It seems she is damned if she does, damned if she doesn’t. The Scotsman article can be found here and the Herald article here.
The head of one of the UK’s largest quarries has accused tax collectors of “arrogant and high-handed behaviour” ahead of a case this week involving millions of pounds in unpaid aggregates levies. Aggregates levy was of course one of the taxes recommended for devolving under Calman. The article from the Scotsman can be found here.
Now to London. Boris Johnson continues to argue that London should have the same fiscal powers as those available to the devolved parliaments in Scotland and Wales. This is a debate that is going to run and run. More on this can be found here.
HMRC has begun a campaign to make professional football managers and coaches regularise their tax position. It has forced the English Football Association to provide a list of its 3,300 registered coaches, and has written to them all warning that “we have received extensive data about coaches from sources in the football community”. Presumably HMRC knows that football is played in Scotland as well. More on this can be found here.
Now to Europe and another example of the increasing role it is playing in tax matters. The European Commission will present a legislative proposal to require the EU-wide automatic exchange of all types of information on taxable incomes, including dividends, capital gains, salaries, directors’ fees, pensions, life insurance and rents, rather than just interest as now. It will be implemented by an amendment to the EU Directive on Administrative Cooperation which came into force in January. More on this can be found here.
Now to the USA. Criminal investigations by the Internal Revenue Service rose 9% to 5,125 in the last fiscal year. The number of convictions has risen to 2,634 aided by a 93% conviction rate. More on this can be found here. I suspect the trend is similar in the UK.
Again from the USA and a story that will I am sure run and run. The IRS has admitted that its staff gave special scrutiny to the tax-exempt status of organisations supporting the conservative Tea Party alliance during the 2012 presidential election campaign. The IRS says it was trying to distinguish between political organisations as such, and social welfare organisations that are not allowed to engage in political campaigning as their primary activity. US President Obama has now sacked the Head of the IRS, Steven Miller and the FBI has launched a criminal investigation into the affair. Two articles on this from the Wall Street Journal can be found here and here.
And finally to France. The French Government has dropped plans for corporate governance legislation to cap executive pay. Instead the 2014 Budget will introduce the long-threatened 75% levy on employers who pay salaries over €1m. More on this from Reuters can be found here.
Have a great weekend.