One of the things I love about this current tax avoidance insistence

The competition commissioner, Margrethe Vestager, has announced an investigation into the UK government’s “controlled foreign company” rules, which were altered by George Osborne in 2013 to exempt multinationals from anti-tax avoidance measures. The European commission believes that the UK’s CFC rules give an unfair advantage to multinationals over UK companies with no foreign subsidiaries. Osborne’s rule change may be costing HMRC around £800m a year, according to its own estimate.

It’s worth pondering quite why the CFC rules were changed. Because Cadbury, and by strong implication Vodafone, showed that the UK’s CFC rules were illegal under EU law.

Which is fun, isn’t it?

And this is even better:

Country by country financial reporting, with tax paid where revenue is generated, might help clear up some of this fiscal and moral mess. We need to put an end to the excessive jiggery-pokery of transfer pricing and aggressive tax avoidance.

Country by country reporting depends for its very existence upon those transfer pricing rules. Otherwise, how can you allocate revenue or costs to a specific location?

5 thoughts on “One of the things I love about this current tax avoidance insistence”

  1. “Otherwise, how can you allocate revenue or costs to a specific location?”

    A literal reading of the piece, particularly “with tax paid where revenue is generated”, suggests the idea might be to tax on a revenue basis rather than a profit basis. Revenue is easier to allocate than costs?

    Magnificently barmy idea.

  2. “Because Cadbury, and by strong implication Vodafone, showed that the UK’s CFC rules were illegal under EU law.”

    One more reason for Brexit.

  3. Not clear whether the EU is talking about CFC rules in general or the Osborne changes. Either way the whole exercise sounds like a lot of BS. The tax advantage comes from other countries having lower tax rates and the UK not taxing the income of foreign entities until it is sent back to the UK, apart from the case of certain CFCs where it may be taxed sooner.

  4. So if we have CFC rules that is illegal in EU law, and if we don’t have CFC rules that is also illegal in EU law. Doncha just love the Continental System.

  5. As jgh says; the CFC rule-change was to some degree to avoid falling foul of EU competition rules. The Commission is now saying those very measures are effectively state aid to firms with non-UK activities.

    What fun.

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