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22 Jan 2016 12:05pm

BBC documentary takes on the Revenue

A small town in South Wales has set out to challenge HMRC by setting up a tax avoidance scheme, said to emulate those used by a number of multinationals

The town that took on the taxman, broadcast on Wednesday evening featured a group of local businesses in the Welsh town of Crickhowell as they set up an offshore scheme in an attempt to highlight the flawed tax system.

To demonstrate the need to review the current tax system, local traders came together and created a national tax revolt by emulating the accounting techniques some big companies have been accused of using to avoid paying corporation tax.

The town is well-known for its successful campaigns to keep big chains away from its high street.

“I don’t have an issue with taxation, I have an issue with the fact that it can be avoided if you have got a bigger lawyer and a bigger accountant that I have,” the owner of a local coffee shop said.

The filmmakers referred to high-street chain Café Nero, which is said to have not paid any taxes since 2007, and Amazon, which paid £11.9m in tax of sales of £5.3bn in 2014.

To set up their offshore company, The Fair Tax Town, the group travelled to the Isle of Man, before a trip to Amsterdam, where they were advised to create a “Dutch sandwich” – a loophole built by setting up a company in a tax haven in order to avoid withholding taxes.

According to Heydon Prowse, the filmmaker and presenter, there are over 15,000 entities registered in Holland only for tax reasons, meaning there is €8trn (£6.18trn) coming in and out of the country every year - translating into 10% of the total GDP in the world.

After setting up their offshore company, the group met Jim Harra, HMRC’s director-general for business tax.

One of the traders started the meeting by saying, “It seems big businesses are able to come in and negotiate their tax terms with HMRC so that’s why we are here.”

Harra explained, “The big multinationals, from our point of view, are both a high value group and also a high risk group. Our approach is to man mark them – so we put quite a lot of resources on to making sure we understand what they are doing and their tax strategies.”

Accused of promoting a cosy relationship with the multinationals, Harra argued that the Revenue needs to engage with them in a bid to “manage the risks they pose”.

The traders lamented these kinds of conversations never seem to happen with small businesses, asking Harra if the Revenue would be willing to negotiate their tax contributions if their plans go ahead.

An HMRC spokesperson said, "We fairly and dispassionately enforce the law and as Jim Harra makes clear in the programme, if we receive a plan we will look at it in that light.

"HMRC enforces the tax rules fairly across the board, irrespective of the size or structure of the business. The government is clear that big business must pay its fair share of tax, so new legislation has been introduced to prevent multinationals from diverting their UK profits from the UK tax system, and additional funding has been invested in HMRC to tackle abuse by multinationals."

The Fair Tax Town has expanded to several neighbour towns, with many other across the UK expressing interest in creating their own tax schemes.

Richard Murphy, a chartered accountant and a political economist, who also heads the Far Tax Pledge campaign, said he was glad the documentary turned out to be about a group of people trying to the change the tax law, rather than about people trying to avoid tax.

A spokesperson for the BBC said the show averaged 1.6 million viewers and was the second most watched programme on BBC Two on the day it aired.

Jessica Fino

 

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