I have just noted what David Cameron had to say yesterday on tax avoidance by multinational companies.
I’m delighted he has said he will tackle this issue, and on the scale that he has indicated. But let’s be clear what precisely he has to do to achieve his stated goals. At a minimum:
I wonder what he\’s going to say, eh?
1) He has to abandon his government’s policy of territorial taxation since this is a tax avoider’s licence to abuse this country
That\’s fun, isn\’t it? By taxing only profits made in the UK this gives people the opportunity to not pay UK taxes on profits not made in the UK.
Quite why this is abuse of the UK tax system I\’m not sure. Aren\’t profits supposed, in a Courageous State, to be taxed where they are made?
2) He has to invest heavily in HMRC to give it the resources it needs to really tackle tax avoidance and tax evasion
Not really a surprise from one sucking from the tax mans\’ union teat.
3) He has to change the law and OECD tax treaty standards on company residence and change all UK double tax treaties to comply
He\’s got to change every international tax agreement we\’ve got plus the entire standard of international taxation that everyone else has agreed to.
I have to admit I think that\’s a rather ambitious thing for a British Prime Minister to try to do really.
5) He has to move to unitary taxation
Under EU law that\’s not something we can do unilaterally. You\’d have to change EU law which is again rather ambitious for a British Prime Minister to attempt.
6) He has to pesuade the OECD to abandon arm’s length transfer pricing
Bit ambitious: change the laws that the 30 richest nations on the planet have agreed amongst themselves.
7) The EU has to change many tax directives and potentially allow tax withholding at source on inter-EU payments
That over turns the basis of the Single Market. The root and heart of the entire EU project in economic terms. And political too really. Those tax withholdings for example: they are specifically and exactly declared to be illegal (for royalties and interest payments for example) under those very Single Market rules.
So Ritchie\’s solution demands that the entire heart of the EU project be ripped out. Which I agree with of course, but it does sound rather ambitious.
8 ) He has to re-establish the controlled foreign company rules he has just been dismantling
Cameron hasn\’t killed the CFC rules. The EU did that, in Cadbury. This just isn\’t something that is in the power of the British Government to change.
9) He requires a proper General Anti-Tax Avoidance Principle Bill
As I\’ve said before I\’m all in favour of Michael Meacher\’s bill. So badly written that it relaxes, massively, the controls against tax avoidance.
10) He needs to tackle the UK’s tax havens as the starting point of a demand for global transparency, automatic information exchange and proper recording of the beneficial ownership of companies
Meh. Ritchie seems to have forgotten that colonialism is somewhat out of style these days. Dusky foreigners are allowed to go their own ways these days, not subject to dictats by white peeps in England.
11) He needs to ensure companies are properly regulated in the UK, which is far from the case now, if he is to get any more than 34% of UK companies to pay corporation tax, which is the number that do so now.
Quite why companies that don\’t trade, or that don\’t make a profit, should pay corporation tax I\’m not sure.
12) He will, of course, need to adopt country-by-country reporting
Entirely unneccessary if we\’ve unitary taxation. For cbyc supposedly will tell us where the profits are made. But if we\’ve a formulary approach to apportionment then we don\’t need to know where the profits are made: we\’ve a formula, see?
Ritchie simply cannot see that his latest obsession makes redundant his own invention.
13) He needs to re-appraise the tax gap and the way HMRC measure it – which currently excludes all the tax avoidance he finds so repugnant
But the tax gap is tax that should be paid but isn\’t. And if people have legally structured themselves so as to owe no tax then it\’s not part of the tax gap, is it?
What\’s really so fun about this is that Our Retired Accountant From Wandsworth is not in fact calling for some clean up of the UK\’s corporate taxation system. He\’s calling for a wholesale rewrite of the entire international system. Including the abolishment of the EU\’s Single Market. And every single one of our bilateral tax treaties. Note, do, that bilateral means the other peeps have to agree as well.
Can\’t fault him for ambition but that\’s all rather out of the power of the UK Prime Minister, isn\’t it?
And then there\’s this of course:
14) He needs to get some proper advice from people outside the FTSE 100 and the 100 Group of Finance directors funded Oxford Centre for Business Taxation on just what an appropriate tax policy for the UK might be
15) He has to replace those people who are heading H M Revenue & Customs who have had ties with tax avoidance and whose influence may explain HMRC’s lax attitude to the issue.
Don\’t listen to them, people who disagree with my plans, listen to ME! Oh, and head of HMRC will do nicely thank you.
I\’m almost tempted to recommend him for Dave Hartnett\’s old job. Would be most fun when the EU, the OECD and 120 or so sovereign nations tell him to fuck off.