Cameron snipes at ‘clever’ tax avoidance advisers

Prime minister David Cameron called on the G8 to focus their attention on corporate tax avoidance, while simultaneously taking a swipe at “clever accountants” who make it possible in his speech to the World Economic Forum in Davos.

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Hypocrisy    10 thanks

D J P | | Permalink

The politicians pass the laws with loopholes in them. Of course those loopholes are exploited by taxpayers, rather like politicians exploited loopholes in their expenses regime. Maybe if the politicians did their job a bit better these loopholes wouldn’t exist.

Really, I think any politician lecturing others about morals is a bit rich.

 

 

ShirleyM's picture

Yes, hypocrisy rules    5 thanks

ShirleyM | | Permalink

Within no time, ICAEW chief executive Michael Izza responded the slight in his blog: “We don’t recognise that description. Our members do not support illegal tax evasion or the kind of aggressive tax avoidance that we believe to be unethical.

So .... is the ICAEW going to kick out the accountants that do promote these aggressive avoidance schemes, or are these accountants too influential and wealthy to bring to task?

cuts both ways    6 thanks

silverghost | | Permalink

Something else that's immoral - politicians, civil servants and public sector numpties wasting taxpayers' money. Massive, clumsy IT projects, MoD leaking money like a sieve, poorly negotiated contracts; how about a speech on that subject? Better still, how about poor stewardship of public assets being made a criminal offence?

Time for change's picture

Didn't George Osborne    3 thanks

Time for change | | Permalink

use a well known CGT "loophole" when he sold his constituency home, in 2009?

ShirleyM's picture

Can anyone explain this one to me?    1 thanks

ShirleyM | | Permalink

http://www.cavendishmanagementservices.com/savings-calculator

The earnings of £500k, less the 12% all-in fee, would leave £440K before tax/NI. How do they take home £438.8K ..... and avoid all but £1.2k tax/NI?

EDIT: it's probably a scheme similar to that used by Jimmy Carr.

Shoddy drafting ...    1 thanks

JC | | Permalink

Is it laws with loopholes or shoddy drafting by civil servants?

ShirleyM's picture

@JC    6 thanks

ShirleyM | | Permalink

There but for the grace of God ... and all that!

I think it must be impossible to write or draw up anything that is 100% watertight, unless you are specially gifted and can see into the future, or into the minds of those people who will put a lot of resources into finding the crack in the legislation, for personal gain.

Do we want endless rounds of updating legislation to seal the cracks, and then repeat when a new crack is found, or do we want people to respect the original intention of the legislation and stop trying to pull a fast one at great expense to the country?

Agreed - but what about ....    1 thanks

JC | | Permalink

@ShirleyM

Forseeable things - for instance, how about this

US section 482 Internal Revenue Code

'.. to allocate income, deductions, credits or other allowances between or among controlled entities if that allocation is considered necessary to prevent evasion of taxes ..'

Someone obviously guessed this might occur

ShirleyM's picture

Sorry JC

ShirleyM | | Permalink

I made too broad a statement.

The essence of my post still applies though.

Another point in respect of child benefit ...    5 thanks

JC | | Permalink

Due to the withdrawal of CB over a certain limit we are getting all sorts of advice on how to mitigate ones salary (sacrifice, pensions etc) in order to remain eligible for CB

Now the thought occurs - how is this any different to multi-nationals arranging their tax affairs - except in terms of scale?

Surely both approaches endeavour to 'play the system' for maximum benefit in one way or another?

Yet we hear nothing about the immorality of adjusting ones affairs to claim child benefit along the same lines as the rhetoric about multi-nationals - very strange!

ShirleyM's picture

Personally ....    3 thanks

ShirleyM | | Permalink

I am not comfortable with allowing a director/shareholder to deliberately deprive themself of income in order to qualify for benefits, but this is small fry compared to most of the aggressive avoidance taking place.

I would start with the big (aggressive) tax avoidances and work my way down, rather than start with the little avoidance and work upwards. The resulting changes in legislation would be more acceptable, and the little guy would be less likely to feel they were the easy targets (again!).

Better legislation in the first place is the answer    1 thanks

Ken Howard | | Permalink

ShirleyM wrote:
I think it must be impossible to write or draw up anything that is 100% watertight

Agreed, but a lot of the problems are down to poor thinking in the first place (i.e. which lunatic thought the child benefit tax or the pastie VAT were good ideas and would work?), followed by shoddy legislation drafting (why are there different rules as to what constitutes a "business" for CGT as opposed to IHT or the classic definition of a "non business asset" being "an asset that isn't a business asset" - priceless!)

You'll never get the legislation right for the very few, very good experts who will always find a way to exploit the rules, BUT, with better care and attention, you can avoid the basic mistakes.  If the basics were water-tight, then HMRC would free up massive resources to go after the big avoiders, but as it stands today, there must be hundreds or thousands of tax inspectors tied up in small irrelevant cases arguing about trivial amounts in the big scheme of things.

 

mr. mischief's picture

accountancy has questions to answer    2 thanks

mr. mischief | | Permalink

I agree with posters who say HMRC and other tax authorities should be directing more effort to the big guys.

I think  the accountancy profession worldwide got off more or less Scot free from the recession.  Let's face it, worldwide there must have been at least 100, probably nearer 200 or 300, dodgy audits of banks.

More time doing proper audits, less time spent coming up with ever more convoluted schemes to help big corporations dodge their taxes.  That should be a key plank of getting the world economy back on its feet, just as major change to financial regulation in the USA was a key plank back in the 1930s.

But so far, nada.

nigel's picture

But it's the law    8 thanks

nigel | | Permalink

I'm getting pretty sick of this whole debate. Might I suggest that in fact Western governments, particularly our own, could be described as the worst tax avoiders - in the sense that they seem very willing to avoid the whole tax issue and just bang on about "avoidance" as if it was a crime. Come on politicians, tax is law and guess who makes laws - o yes, politicians!

So for goodness sake stop bleating and just change the tax system so it does what you want it to do.

And maybe the media could back you up on this. Only today I read of Starbucks accusing David Cameron of "politicising" taxation! What the hell are they talking about?? Do they think taxation was handed down from on high (it's certainly the impression some politicians give), or just appeared out of the ether?

Maybe as accountants and tax advisers who understand how the tax system works we should be telling our MPs that it's OK to change tax law if they don't like it. They know tax is being avoided, so they must know how it's being done (they could ask an accountant to explain if they don't know themselves - maybe ICAEW could run an educational programme for MPs!), so if they don't like it, close the loopholes and move on. I can't really believe they're waiting for someone to give them permission. 

 

ShirleyM's picture

Do these aggressive avoidance schemes .....

ShirleyM | | Permalink

... allow claims to benefits on top of the tax savings?

The example I posted above, where someone on £500K pays the same tax/NI as someone on minimum wage, presumably because they 'earn' minimum wage and the rest goes through offshore trusts and they get trust loans, will they get the same benefits as someone on minimum pay?

Big Four (and others)

thomas34 | | Permalink

ShirleyM wrote:

Within no time, ICAEW chief executive Michael Izza responded the slight in his blog: “We don’t recognise that description. Our members do not support illegal tax evasion or the kind of aggressive tax avoidance that we believe to be unethical.

So .... is the ICAEW going to kick out the accountants that do promote these aggressive avoidance schemes, or are these accountants too influential and wealthy to bring to task?

No, they're clearly not going to kick them out Shirley because the Chief Executive is in denial that his members engage in aggressive tax avoidance schemes. The periodic cases reported on this site of what can only be described as artificial schemes (i.e. only carried out to avoid tax) is evidence that he is wrong. I'm just glad that my ethical behaviour is I hope better than those practising under the ICAEW banner.

 

Rachael_Power's picture

Responding to Cameron's    2 thanks

Rachael_Power | | Permalink

Responding to Cameron's speech, Ernst & Young's managing partner for Europe, Middle East and Africa Mark Otty said a moral tax code wouldn't work.

Companies have a duty to pay the lowest rate permitted, according to Otty, who also said EY won't be changing their tax practices. 

He told the Telegraph: "The only way you can resolve this issue is through a legal code. I don't see how you can have any assessment on payments of tax other than what is in the statute." 

"The simplest solution is to start banging on about morality and change the law." 

.    1 thanks

ireallyshouldkn... | | Permalink

Tax is not a game of cricket.

Its a question of what is legal, what is not. And if its a grey area the commercial question you have to ask is whats the chance of (a) getting questioned, and losing, and (b) the resulting penalty/surrounding hassle.  

That is the basic matrix that we work in. 

Tax isnt logical, so you cant play morals with it, that's up to the government to determine through their law making, and HMRC to enforce.

The fact HMRC is so weak on enforcement doesn't help, nor the tax law for trying to be too clever and create too many special cases all of which creates the obfuscated environment where tax evasion thrives. 

 

David Cameron Speech    1 thanks

joshia2 | | Permalink

If the PM is serious about tax avoidance by "Clever Accountants “then  why are the  MPs given exemption from tax avoidance rules.  According to Telegraph article in April 2011.

Read here http://www.telegraph.co.uk/finance/businessclub/8437118/MPs-given-exempt...

Does this mean that there is a law for the Elite MP's and other for the average hardworking citizen?

Can we ask that MPs, from the top down, be required to declare any "tax-efficient" schemes to which they subscribe? The legal schemes only! As I would not expect them admit to Tax evasion.

MPs have been granted a special exemption from new rules designed to clamp down on tax avoidance.

Tonykelly's picture

cosy relationship    1 thanks

Tonykelly | | Permalink

In this country there is a very cosy relationship between big business and HMRC - and HMRC policy has come from HM Government based in Downing Street, London, SW1.

A couple of cases come to mind. There were the deals with Vodaphone and also Goldman Sachs.

Basically over the last 10 years corporation tax receipts have fallen. This can't all be explained by the reduction in corporate tax rates.

On the basis of the above, I am not sure what Cameron is on about. Before calling on the G8 for help, they need to start looking at their own policies first.

 

Rules are rules ...

mikewhit | | Permalink

“When shadowy companies don’t play by the rules that drives more box-ticking and regulation and that makes life harder for other businesses to make a profit."

But some of those rules are EU rules - that "bring it back from Brussels" Dave wants to avoid playing by ...

The public mood    1 thanks

AndyC555 | | Permalink

"the prime minister’s comments more accurately reflected the public mood" 

 

In Salem in 1692 the public mood was all in favour of hanging and burning people who were witches.

Not sure that  means it was the right thing to do.

 

Avoidance v evaision    2 thanks

Asimpsoni | | Permalink

 

I too am heartily sick of the aviodance/evasion debate and none of it is helped by large companues such as Starbucks 'chosing' to make a tax contribution when one apparently isn't due to appease the man in the street.

When I joined the profession in the late 80's I wasn't aware of there being the issues of avoidance schemes - I would be interested to know whether these shcemes were used in those days and I was just too junior to know about them, The tax rates were much higher then but the legislation was also better drafted. There was one Budget each year and no leaks and perhaps the poeple who wrote the statute has more time to work on it.

The essence of todays's climate is the knee- jerk response - politicians want to make a soundbite and appear to be on the man in the street's side without giving the issues at the heart of the matter due consideration.

Perhpas if we adopted Hong Kong's model of the 50's and reduced the tax rate down then peopel would regard what they pay as a fair whack and spend less time avoiding it and more time paying it. It would keep high earners in the country and stimulate business- worked in HK in the 50's perhaps we should give it a go  - couldn't create a worse climate than we have now.

 

pot calling the kettle

David Trangnar | | Permalink

 

people avoiding tax ... tut tut, just like MP's fiddling their expenses (and please dont tell me that they have stopped doing it

although I didnt like the    3 thanks

asking | | Permalink

clever reference as I am anything but...

 

I actually applaud his motives behind the speech and agree with a lot of what he said.

 

When you stand back from the argument about tax and consider the impact a multinational can have on a country it is important for them to add something to that country in return.

Oil, coal and gas are easy targets as they are using up valuable resources, however its the engineering companies etc that use cheap labour and add to a countries woes. 

It is all very well saying its employment and thats what is needed - but they need employees more than people need jobs and will do business wherever they can make most money - a consequence is they will inevitably return as little as possible to 'society'.

Done for the day.

Evasion and.......    4 thanks

AndyC555 | | Permalink

As far as I can see, there is tax evasion (which is breaking the law) and there is tax compliance (which is legal).

"tax avoidance" really is a description we ought to stop using.

You are either breaking the law or complying with it.

 

 

Local Council    3 thanks

hiu612 | | Permalink

Did people see the latest re-invention of the moral vs legal argument? As local councils were lambasted for putting up council tax 1.99% to avoid the implications of exceeding the 2% increase cap set by central government? They were accused of cynical abuse of the spirit of the rules.

 

I would have thought that the idea of a 2% cap was to encourage councils to stay below 2%, and that setting incerases at 1.99% would be exactly in line with the policy objective. But apparently not.

 

 

Nick Graves's picture

Actually a warning    1 thanks

Nick Graves | | Permalink

I believe the cogent world is getting a bit sick of the criminality of the Banksters and their hypocritical lackeys, the Polyingticiunts.

Their soundbite diatribe may have some appeal to the mouthbreathers, but patience will only last as long as their deception continues. The blinkers are falling off more & more people by the day.

 

 

 

 

 

Cameron snipes at ‘clever’ tax avoidance advisers

petermorriscpa@... | | Permalink

The politicians do not make laws with loopholes in them - it is tax advisors who create schemes to get around the laws.  Unless you would like a to see all tax laws with a final clause that says the HMRC can strike down any arrangements that it feels does not fit the spirit of the law?  Let's face it a company paying its subsidiary in low tax Switzerland for coffee beans from South America and used in the UK is not a loop hole in the law.  How do all the profits end up in NIL tax Bermuda? It is the artificial tax avoidance schemes that are a sham and should be struck down for taxation purposes.

Loopholes?    4 thanks

petermorriscpa@... | | Permalink

Is sending your salary to an off shore tax haven and receiving it back via a non repayable loan a loophole?  Blimey there must be thousands of loopholes in every piece of legislation if you believe that.  Arrangements like that are not exploiting a loophole - they are shams that should be struck down for taxation purposes.

Loopholes    1 thanks

quadra | | Permalink

Agree completely, but not with retrospective legislation - HMRC needs to be clear on its approach & fair with tax treatment

(S58 Finance Act 2008 refers)

Camerons' Dad    2 thanks

chatman | | Permalink

Didn't Cameron's dad make his fortune (which was then used to pay for Cameron's unfairly privileged start in life) selling tax avoidance schemes?

Tax    1 thanks

Ketts999 | | Permalink

I don't see a problem with this talk of stopping elaborate tax avoidence. I have to pay all my tax why shouldn't everyone else including companies that use the resources of the UK that I and other tax payers pay for. I use an accountant to ensure I pay the right tax and I use tax helpful instuments to minimise my tax. It would be great if it was all made more simple. Is it true that in HK the tax rate is a straight 8% paid on the 8th of Jan each year and there isn't an accounting industry like we have here because it is not needed. People want to pay the tax because its felt fair to all.

KenKLM's picture

ICAEW    2 thanks

KenKLM | | Permalink

Cannot agree more with this comment. It is major accountants whom are members of his body that come up with these "BIG fee earning" schemes such as , for example , the abuse of EBT legislation ( Employee Benefit Trusts ) . Is Mr Izza also on another planet ?

vowlesj's picture

its easy to blame others    2 thanks

vowlesj | | Permalink

 

It is clearly easy for David Cameron and others to blame everybody for being both law-abiding and looking out for themselves.   But it is both hypocritical to blame others and bit like asking the tide not to rise...ie clearly stupid.    Tax planning utilises opportunities (eg poorly drafted laws and inconsistencies) to make a profit.   Both self-interest and the reason for being in business in the first place dictate that companies as well as individuals should plan to minimise their costs and maximise their profits.   But this goes further:

Firstly, the human instinct is to look after yourself first, and others second.  Expecting anything else by way of human behaviour is as stupid as ordering the tide not to come in.   The best anyone can expect is that you control and civilise public behaviour through laws and regulations- after all that is why we have them.   If any politician complains then all they have to do is change the rules – and we have seen successive governments tweak the tax system in just this way.   So stop bleating and draft laws that are sensible and not so complex that they create loopholes and leave inconsistencies.

Incidentally, the MP’s expense scandal shows that nobody is exempt from the human desire to look after themselves first as well as how hypocritical MPs can be.

We live in a world-wide economy, therefore multi-national companies will obviously minimise their tax costs by choosing where to base their regional companies.   In the same way, those individuals who are rich enough to choose a country may well do so for tax reasons.  And there are plenty of examples of that happening both in the 70s and in the recent past.

Given that the UK needs to attract the wealthy so that they spend here and attract new business to inward invest and operate in the UK it is equally clearly stupid for any politician to place barriers that would make this less likely. 

There has been lots of whinging about Starbucks paying a bit less corporation tax – but how much have they paid in VAT?  How much employer’s NIC have they paid?  And how much payroll tax and NI have their employees had deducted?  How much have they paid to other businesses in the UK because they are spending here? In other words look at the big picture and how much have they contributed to the UK economy just by being here?   And if the politicians don’t like the franchise fees going back to the States – introduce a withholding tax on them.  BUT, be prepared for every other government to do the same back!

Also, it would do the politicians well to learn from the past. Remember that UK experience since the Labour governments of the 1970’s is that the higher the tax rates the greater the level of both avoidance and evasion. I remember working out a surtax that gave an effective rate of 98% tax and paying bonuses in platinum sponges!   And look at the Greek economy for an example of what happens if you have apparent evasion on a grand scale.  So a bit of advice, keep tax rates low and there is less of an appetite for tax avoidance and evasion.

And finally, a plea for a bit of calm.   A politician’s job is to think what should happen for the best of the country, not to have a knee jerk comment or reaction to newspaper headlines or blame others   Come on Dave, you are meant to be a world leader so have some perspective and stop blaming others for taking whatever advantage they can.

...

asking | | Permalink

AndyC555 wrote:

As far as I can see, there is tax evasion (which is breaking the law) and there is tax compliance (which is legal).

"tax avoidance" really is a description we ought to stop using.

You are either breaking the law or complying with it.

 

 

 

Avoidance is the bit in the middle.

Tax avoidance    1 thanks

Ketts999 | | Permalink

 

Why is it that the P&O adverts show a white european serving the breakfast on the ship yet on my recent trip there was no such waiter they were all of Indian origin earning (i was told) less than the UK minimum wage. But then of course the ship and virtually all the ships I saw were not regisitered in the UK they were registered in Bermuda and the like. So what tax do P&O pay to the UK, maybe its enough thay they visit Southampton , stock up and pay local wages on-shore. Is receiving something of the pie better than none? When will the premiership footballers be exposed, I am quite sure we will find out they are not paying 50% in tax on their £250K per week earnings. If I was in a position to pay less tax, would I ?

KenKLM's picture

Ethics    1 thanks

KenKLM | | Permalink

The article is about ethical activity of members of ICAEW - you think it is ethical to find ways of not paying a fair amount of tax ? It is repugnant . Legal - of course - ethical ? - hardly . Will ICAEW do anything about aggressive tax avoidance schemes offered by their members - doubt it because they make too much money from devising them .

its easy to blame others

Ketts999 | | Permalink

vowlesj - I believe you have hit the nail on the head, twice here - Unless 100% of all countries have the same rules how can we operate better - if we withold they will etc. And then there's the BIG PICTURE, we can and should only judge from the bigger picture. Starbucks pay tax in many other ways other than corporation tax, so do we want them here or not ? Starbucks should be telling us what they bring to the country other than coffee beans and minimium wages, then the public might be more sympathetic. So Cameron is right - we need transparancy , vowlwsj is right we need the all of the picture not just the headlines.

A simple man's perspective    3 thanks

bob tunstall | | Permalink

In my small Tearoom business, I claim a couple of thousand pounds in my accounts for an associate's (my wife) wages and over the years have had to quantify, qualify, verify and justify the claim. When the multinational's claim millions of pounds for the payment of royalties and licensing fees etc, to one of their foreign associates, are they made to jump through the same hoops? 

Cameron Tax Avoidance    4 thanks

dollop | | Permalink

Cameron's Government advisors will, no doubt,  be very experienced  in dealing with advisors from the tax avoidance sector. 

How else would the Government have been able to become providers of tax avoidance themselves.

The UK provides flat rate havens for non-domiciles, stealing  tax from the French etc. If anyone doubts this have a wander around Chelsea, Bute Street area , and Fulham, listen to the accents, look at the shops and note the French schools that have recently opened. Remember Cameron's comments about rolling out the red carpet for the French when Hollande said he would hike the tax rates. 

What about the tacit compliance with the Channel Islands, not UK but benefits the UK as still part of sterling area  . 

Cameron, are you running with the hare or hunting with the hounds?

How dare he take the moral high ground when promoting tax avoidance at a national level and presiding over a tax system where bullying by HMRC exists (  G Aaronson QC report on GAAR ) and which penalises entities for paying the correct tax but getting their paperwork wrong.  

How the USA can whinge is beyond me . The Swiss would be proud to have secrecy laws that exist in Delaware. Mr Aaronson stated to the  Gov, in  his evidence that that USA had funded and helped Puerto Rico to set themselves up as a tax haven for the pharmaceutical industry 

Holland have confirmed that they will not stop their available havens 

Cameron, get your morals in order before you preach to me . 

 

 

 

 

 

 

Cameron

Incharta | | Permalink

I'd rather be a "clever accountant" than a fiscally incompetent politician who is utterly clueless when it comes to the real world outside of Disneyland politics

Politicians bending the truth    1 thanks

mickeyparish | | Permalink

Cameron is just like all the others of his ilk, happy to ride a bandwagon.  When he says tax avoidance is morally wrong because it deprives the economy of resources, he is being more than deliberately naive.  You would imagine a Conservative Prime Minister would be able to understand that money in the hands of government is probably the worst place it could be.  Those who can legally minimise their tax bills are doing the economy a favour by keeping the money free, to be economically active and productive, not to be squandered on bureaucracy and ministerial shibboleths.  However the lynch mob are smelling the blood of the avoiders, and Cameron is quite happy to ride the populist wave.  His call for harmonisation of corporate taxes is a call for the end of inter-nation competitiveness.  Federalist or what ?

Cameron's speech was for the

Oppco | | Permalink

Cameron's speech was for the voting public, via the media. Of course he didn't mean anything he said

Didn't you guys ever watch Yes Minister in the old days? Repeats are on Dave or something

 

 

 

Tax avoidance    3 thanks

KB Powers | | Permalink

It's about time the Cameroons grew up and got into the real world.    The Conservatives used to be the party of low taxation because they knew that this incentivised citizens to pay their tax.    If you lower taxation, you get more money.    If you increase taxes, the rich, who contribute the most, disappear.    The "New Labour" Conservatives seem to have forgotten this - probably because none of them has ever had a proper job.

Tax avoidance moral, legal and economic

indiajack | | Permalink

Tax avoidance that uses aggressive constructs that uses the letter of the legislation other than the spirit under which that legislation is constructed should be outlawed - this is attempted by many cases including Furness v Dawson.

If in the spirit of the legislation then there is no legal or moral standpoint. Many in this debate do not realise that big companies are seldom a domestic organisation. If Jaguar car sales were made over the internet from China to the Jaguar sales office in the UK, would the Chinese nationals expect Jaguar to pay tax to China? This is a simplistic illustration but covers the concept when dealing with a multinational entity. the UK taxpayer may not be entitled to that tax it thinks it should morally deserve. Side remark: However, it is deemed okay by the general public to pay cash to builders and plumbers for a reduction in charges - this is tax evasion (not even avoidance); and the football heroes tax shennigans are overlooked while the masses are happy to forgo a more nutritious meal for a football ticket.

Although, I am not a fan of the Laffer curve and believe that its exposition is flawed. There is apoint where the economic contribution by a firm to the country is larger than the economic effects of marginal (extra) tax colected.

41115BARRI's picture

If politicians had backbone the answer would be simple    2 thanks

41115BARRI | | Permalink

Avoidance is legal, evasion is illegal - there is no grey area. But whilst politicians, and their civil servant masters bleat we must recognise that what they are bleating about is the fact that much brainier people than themselves are able, on a regular basis, to outwit them and find the flaws and "laws of unintended consequences" in the rules they devise.
The answer is simple, abolish NI and bring in a simple flat rate of income tax at say 28% (or whatever would be an appropriate rate to bring in the required amount of tax) on ALL income, no deductions, reliefs etc, but give pensioners a higher personal allwance to compensate them. Heh presto, problem solved. .... but the real problem remains, which Chancellor/Government is brave enough to "increase" income tax by 8% or so and who will sack all those civil servants that collect NIC's?

cfield's picture

Scrap corporation tax (for multi-nationals)

cfield | | Permalink

No, I'm not siding with the likes of Starbucks on this issue. What they should do for multi-nationals is scrap corporation tax altogether (it's a losing battle trying to plug all the loopholes) and replace it with a new tax based on UK turnover.

Instead of paying 23% tax on say a 1% profit margin (if we're lucky) they would pay something like 3% on the top line. It's much more difficult to manipulate turnover than profit. That way, we could be sure they're paying a fair whack on their UK activity.

The 3% would be an impost rather than a tax, just another overhead like business rates or employer NI.

If the "real" profit margin is say 10-12% before all the messing around with royalties, license fees and transfer pricing, the tax revenue raised should be more or less the same.

Possibly you might need to negotiate different rates for different industries (rather like the VAT flat rate scheme) or even agree/impose a rate in advance for individual multi-nationals, but the principle would be the same.

Am I missing something here or is that too simple?

The middle of muddled thinking

AndyC555 | | Permalink

asking wrote:

AndyC555 wrote:

As far as I can see, there is tax evasion (which is breaking the law) and there is tax compliance (which is legal).

"tax avoidance" really is a description we ought to stop using.

You are either breaking the law or complying with it.

 

 

 

Avoidance is the bit in the middle.

 

The middle of what?  I use speeding as an analogy.  If the speed limit is 30mph you are obeying the law driving at 30mph and breaking it if you do 31 mph.  There is no 'bit in the middle' of the law.

 

(and to save people the bother, it's a myth that there's a 10% speed limit 'tolerance'. The police might use judgement and let you off but legally, you've broken the law)

ShirleyM's picture

Avoidance    1 thanks

ShirleyM | | Permalink

There is the generally accepted avoidance, like using an ISA rather than a normal savings account. The ISA is being used for it's intended purpose, and there is a cap on the available relief. All genuine avoidance methods do have a cap on them (I think!).

Then there are the aggressive avoidance schemes, which are 'legal' only because HMRC don't have the resources to challenge them, eg. use of offshore trusts in ways never intended, which allow a massive earner to pay the same tax as someone on minimum wage (and probably still claim child benefit & other benefits). That wasn't the intended purpose of trusts, ie. to sidestep income tax and give tax-free 'non-repayable' loans. There is no 'cap' to the amount of tax that can be avoided by these schemes.

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