The Tax Gap is falling!

Following the ‘corporate roadmap’ published by the Treasury in the autumn, Osborne could also introduce exemptions on profits from intellectual property and, crucially, exempt a large portion of overseas ‘finance income’ from corporation tax.

Many UK-based multinationals are already bending the rules by setting up financing subsidiaries in low-tax jurisdictions.

Profits are funnelled through these ‘treasury’ divisions, and are subject to lower rates of tax when the cash is moved back ‘on shore’. Richard Murphy, director of Tax Research UK, fears that tomorrow’s-Budget will ‘legitimise’ these ‘grey areas’.

As we know, Richard defines the Tax Gap as the difference between the rates (amounts) of tax actually paid and the rates (amounts) of tax that Parliament thought would be paid when they set the various tax laws.

So, Parliament is to clarify the law. What would be, under Richard\’s definition, part of the tax gap will now become the entirely righteous tax compliance, doing exactly as Parliament intended companies to do when they set the law.

The Tax Gap will therefore shrink.

Sadly though, the man who has been screaming about the iniquity of the size of the Tax Gap seems not to be welcoming this move to reduce the Tax Gap.

Nothing like consistency in a public intellectual, is there?

4 comments on “The Tax Gap is falling!

  1. Quite.

    The most reliable long-term method of reducing avoidance and evasion is to reduce the tax burden and thus the incentive to “dodge”.

    But of course that would mean government spending less which would stop the world from turning.

  2. The real problem is that the government (primarily Labour) have already spent the money and all of that spending is sat on the national credit card accruing interest.

    I am sure that a lot of the Tories would like to cut both spending and taxes. The problem is that they are dependent upon the Liberal Democrats to support their legislative aims and the Lib Dems are pretty much full throttle big-state lovers.

    The only way that we will get back to reasonable levels of taxes is for a full scale revolt followed by either massive inflation or default or both.

    We often talk about UK PLC as a legitimate entity, but if it was it would have been declared insolvent and liquidated years ago.

    I’m going for a starve-the-beast solution myself. It seems to be working quite nicely. Just need to get all of the workers to stop paying taxes, either by leaving the UK or by working “on the black” and we’re covered.

    I reckon we’ll by there by about 2018 at the present rate.

  3. “I am sure that a lot of the Tories would like to cut both spending and taxes” (John Galt, #2)

    I doubt it.

    I think a few of them would be sufficiently keen to actually do something about it.

    Most Tory MPs might have a vague desire to cut taxes a little bit, but it is not strong enough for them to put up with the moans and insults from the public sector and its supporters in the BBC and Guardian.

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