HMRC has got "worse rather than better"

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MPs have a launched a stinging attack on HMRC saying it “must be more aggressive and assertive” in confronting corporate tax avoidance

The Public Accounts Committee report today urged HMRC to get tough on large scale on tax evasion or it faces undermining “public confidence in the tax system” which could have a negative impact for wider tax compliance.

“At the moment there is a pervasive acceptance of the status quo by the top officials in HMRC and we have seen little evidence of a desire to be more assertive,” said the MPs.

Committee chair Margaret Hodge the amount paid by international companies was “outrageous” and an “insult” to British businesses that had to “pay their fare share.”

“Corporation tax revenues have fallen at a time when securing proper income from taxes is more vital than ever," the Labour MP added.

The report follows last month's feisty committee hearing into the amount of tax paid by Amazon, Google and Starbucks, amid a groundswell of public and political anger over the amount of tax being paid.

It comes after a weekend when George Osborne promised increase funding to tackle avoidance and evasion. Later today he is expected to announce an extra £77m a year for two years for more staff, and the chancellor said the extra investment would help recover an extra £2bn a year in unpaid tax. 

Hodge said there is “little credible information about what is going on” and that HMRC “lacked clarity when trying to explain its approach to enforcing the corporation tax regime.”

Hodge said HMRC should be challenging but its response so far to aggressive tax avoidance by big businesses “has lacked determination and looks way too lenient.”

“We consider that paying an appropriate amount of tax in the country in which profits are made is not only a matter of basic economics. It is also a matter of morality. The UK should be taking the lead in making this point,” she added.

The MPs said that reform will “have to be conducted on a number of fronts, and include “possible legislative change within the UK and efforts to increase international cooperation.”

“The multinationals should be required to report their tax practices transparently. Prosecutions should be mounted where necessary and offenders should be publically named and shamed,” added the statement.

Following intense criticism over the past few months, Starbucks announced on Saturday it is reviewing its tax approach to Britain with a view to paying more.


Raymond Doherty


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  • Comment by Pamela Greener

    Mrs Hodge and the Public Accounts Committee use the word "Morality" because it is immotive and convenient to their case. Harder to get the same headline with "Legality" not "Immorality". These 3 US businesses are all substantial inward investors to the UK from outside the EU, contributing much to our economy, structuring their businesses legally. The EU stupidly allows Luxembourg, a country slightly larger than the M25, to tax high value low headcount flows at only 3%. Why? Because no one in either the UK or the EU parliaments has the courage to challenge this "Rob Thy Neighbour" approach which, ultimately, will be the undoing of the EU. Luxembourg is a small EU country with little infrastructure challenges and 3% is a good result for them. Mrs Hodge, use your influence wisely and effectively. Instead of indirectly promoting UKIP, try phoning the EU parliament to demand a minimum tax rate of 15% on all EU taxable income and you might do us all a real public service.

  • Comment by Mike Holland

    In linking the amount of corporation tax paid by multinationals to their turnover in the UK, rather than to their profits here, the members of the PAC are either being disingenuous or displaying their ignorance. If the former, it may play well with voters at large but is a disgrace. If the latter, it is a sad reflection on the quality of talent amongst MPs available to sit on this powerful Committee and should worry us all. So much for the Government encouraging inward investment!

  • Comment by Stephen Herring, Senior Tax Partner, BDO LLP

    We are entering unchartered waters where the mere accusation that a multinational business (especially, it appears, if American owned) is sufficient evidence that it is avoiding tax. At least three points ought to be made. Firstly, corporation tax is on profits and not on turnover; Comet of course had a substantial turnover. Secondly, our tax laws contain by design many areas which lead to taxable profits being lower than accounting profits; expanding businesses with high capex will often have a zero corporation tax liability. Thirdly, our double tax treaties which generally accord with the OECD model treaties from these perspectives do not tax companies making exports in their export markets unless and to the extent that they have permanent establishments or branches in those markets. I consider many multinational businesses would benefit from greater transparancy but we should not assume that will lead to a higher corporation tax take from those companies or, indeed, generally.