Experts clash over taxing multinationals

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Tax experts clashed in a House of Lords Finance Bill sub-committee yesterday afternoon on the issue of taxing multinationals, shining a light on the essence of the avoidance debate.

Following Graham Aaronson’s QC warning earlier in the week that the general anti-abuse rule (GAAR) would be just “one weapon among many” in preventing abuse, the CIOT’s Patrick Stevens said the rule would not stop multinationals using transfer pricing and that you would need to go back to how countries tax multinationals.

Tax commentator Richard Murphy came head-to-head with Stevens and Bill Dodwell when he suggested many large companies were “exploiting loopholes” when choosing where to locate parts of their businesses.

Dodwell was quick to disagree

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About Robert Lovell

Business and finance journalist


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    24th Jan 2013 14:06

    Richard Murphy...

    ... is an idiot!  I agree with Rebecca that there's a huge section of the debate that are uninformed on the issue and they, the media, are our new political masters.

    Thanks (3)
    By B Adder
    to Dick Stastey
    24th Jan 2013 15:12

    I agree with George

    but back to the debate;

    We've had Ramsay for years........


    Thanks (1)
    24th Jan 2013 15:46

    gone are the days

    when HMRC and our government refers to case law in making a decision.... its only when cases get to judicial review and high court appeal that finally(I hope) our judges take to task statutory intstruments and legislation(the GAAR will be a future example)................fewer and fewer hmrc staff have any concept of things like ramsay and will simply follow stipulated guidance-without any scope for discussion-

    may be its time hmrc redeployed away from their call centres and put call centre staff through training on transfer pricing in large compliance offices.

    the dutch have been humiliating us and many other states(as have the irish) by cosseting multinationals with a generous tax code-its not fair play,... but we in the uk can only affect our uk tax take and tax base-forget about any thought or hopes for an "international" tax code(this went out with the ARC as has IFRS/USGAAP convergence)- after all we didnt even sign up for obvious reasons to the financial transactions tax.-

    perhaps if we want to stay in the EEC-forget calling it the EU- we should start mimicking the german tax code and get them behind us. 

    Thanks (0)
    25th Jan 2013 07:43

    The report in The Times...


    ..about this said tax evasion is costing the UK economy £14 billion a year.

    This is obvious nonsense. Tax evasion may cost the Exchequer £14 billion a year but it does not cost the UK economy anything at all. The uncollected £14 billion remains in the wider economy and, while there, may actually be doing more to stimulate the economy than if it had been collected as tax and wasted by the Government.

    Thanks (2)
    25th Jan 2013 09:52

    Let's call an apple an apple

    The taxation of large companies, in this country and most others, has failed to keep up with globalisation, as they are freely able to manipulate their tax jurisdiction to pay substantially less tax - whether it be a company in Ireland or a separate entity based in Bermuda. This is not an ethical judgement but merely an observation.

    On this, Richard Murphy has a valid point and to argue that companies merely choose to locate in the countries with the lower corporation tax rates for a variety of reasons, whilst having some truth, smacks me of willful naivety.

    Henry Williamson - I would be grateful if you could provide some evidence that the uncollected corporation tax of these multinational companies remains within the UK? Granted, tax avoidance by the ordinary UK citizen will largely remain in the UK but I have seen no evidence that this is true for the likes of google et al.

    I'm tempted to say that the argument is not about how well the government spends money but to my mind what makes a country an attractive and productive place for both external and internal enterprise is it's infrastructure - roads, general transport, population health, security, eduction etc etc. We tend to need taxes to ensure these things are in place. A race to the bottom in tax rates is simply short sighted and designed to benefit a minority of people.

    And I say all this as a tax advisor who has saved my clients many thousands of pounds in legitimate tax avoidance. I'll take advantage of what I can - but let's all be honest about what's going on here - particularly where these multinationals are concerned.

    Thanks (3)
    to pauljohnston
    28th Jan 2013 14:12

    Which is it?

    Happy Up North Accountant wrote: argue that companies merely choose to locate in the countries with the lower corporation tax rates for a variety of reasons, whilst having some truth, smacks me of willful naivety.

    Happy Up North Accountant wrote:

    ... what makes a country an attractive and productive place for both external and internal enterprise is it's infrastructure - roads, general transport, population health, security, eduction etc etc


    So which is it? Low tax rates or the other stuff?


    Probably both and with international tax competition most countries will try to balance the two. Just as competition in the market will tend to drive up quality while maintaining value for money (something which most governments profess to support or there would be no continuing efforts towards global free trade) so the same would apply to tax and public services, as long as Richard Murphy and his fellow far-left travellers don't get their way.


    Thanks (0)
    28th Jan 2013 14:35

    Both indeed BUT...

    But therein is my point - multinational companies that have been mentioned INVEST resources in countries like ours due to the attractive infrastructure which allows them to make a profit on that investment but they LOCATE, generally, in tax havens or near enough havens.

    Fundamentally I would argue that the tax should be applied based on the tax laws of the jurisdiction of where the profits have derived from - this notion is currently idealistic however due to the fact that this legally can be manipulated ergo my assertion that corporate taxation has not kept pace with globalisation.

    Thanks (1)
    By vstrad
    28th Jan 2013 17:14

    Horses for courses

    Companies like Honda, Toyota, Ford etc. locate manufacturing operations in the UK for a variety of reasons. Tax is one but access to a skilled (and cheap) workforce, access to EU markets and so on are as or more important. Such companies also bring investment into the UK and their presence is to be valued, even if some tax concessions are required.

    Companies like Starbucks are only in the UK for one reason, to sell their product to UK consumers. They do not "invest" in the UK in the same way as Honda et al. If they do not make a profit from an outlet they will close it. If they don't make a profit from their UK sales as a whole they will abandon the UK market. Clearly, whatever their CT calculation may say, UK sales are profitable otherwise they would be long gone. The ability to pay little or no tax is obviously key to profitability. So, if tax law is changed to extract more CT from Starbucks, they might well end their UK operation. Should we care? No, because if the coffee-shop market is viable, another (with luck, indigenous) operation will enter the space thus vacated and might even pay some tax.

    Thanks (1)