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?