You may, like me, have heard Margaret Hodge MP (Labour), chair of the Public Accounts Committee, grandstanding in her attempted demolition of the entire tax departments of the Big 4. She scoffed at corporate structures with companies based in Delaware and the Channel Islands and the £20bn that these firms bill in tax fees because she claimed that they must save at least that amount in tax.
She said she couldn’t understand why intelligent people would do this when the funds could be used on something better such as building schools and hospitals. The representatives were very polite, as is expected when you are representing respected organisations.
But we bloggers have a little more freedom. So would you/ they agree with any of the following points that they could have raised?
– Please can you explain to me when the law is not the law? I know it’s said that the law is an ass but this is even weirder.
– Since you are part of the institution which makes the laws perhaps you could explain to me why you are doing it so badly that you can only ask supposed perpetrators to restrain. Perhaps next time there are some riots you would like to ask the rioters to take only UK made products that are fully insured?
– There are more than enough hospitals now and plenty of schools.
– The money saved goes one of two places
– to more efficient investment (companies are rather better at looking after cash than the Government, just ask the PAC) or
– in dividends which will plug the pensions black hole which was created by..er Gordon Brown (Labour).
We all know in our heart of hearts that structures which reduce tax bills aren’t quite right but nor are they wrong. We now live in a very inter-connected world in which the laws and the institutions that create them are no longer fit for purpose. Intangible assets are a large proportion of our wealth and can whizz cash all round the world. Until there is a set of workable tax laws, that are consistent between countries, to curb this, then nothing will change.
So I’d like to teach the world to tax, in perfect harmony. Here are two suggestions:
1. I’d like to propose an export tax credit of £1.5m. This would work like an R&D tax credit so that if you are an SME and spend up to £1m, in a period between one year before and 2 years after incorporating an overseas subsidiary, outside the EU, you would get a tax credit of £1.5m. EIS relief would also be available to these companies. This wouldn’t reduce tax avoidance but would stimulate international trade and boost tax revenues in both countries.
2. And what about withholding taxes? What is the problem with deducting 10-20% of the gross royalty or interest or dividend payment when money is being transferred overseas? It can be offset in the receiving company’s tax bill and if that jurisdiction doesn’t charge enough tax well hard luck.
Do you have more? Best suggestion wins.. a can of Coke.
If you enjoyed this post by Malcolm Durham, and would like to get in touch, feel free to send e-mail at: firstname.lastname@example.org – or visit his website: http://fdsolutions.uk.com