The Guardian is currently running a series on the UK “tax gap” and purported tax avoidance by large companies. Today’s instalment continues the theme with something of a potentially ill-advised rant against the use of offshore entities, particularly with regard to IP.
It’s a pity the reporters either didn’t talk to tax advisers, or didn’t listen to them if such talks took place – the reports continue to be riddled with errors of varying degrees. For example; “Diageo managed to hold off capital gains tax on the sale by use of a legal concession” – Diageo used a tax relief spelt out in the legislation, not a concession. It sounds minor, but there’s a world of difference between a “concession” – which sounds somehow dubious, which is no doubt what the Guardian intends – and something that’s in the law in black and white. Yesterday’s instalment complained about companies taking advantage of the UK’s territorial system of taxation – but the UK taxes resident companies (and individuals) on their worldwide earnings, profits and gains. Surely The Guardian can’t be shortsighted enough to suggest that the UK should widen the tax rules to tax the profits of all offshore subsidiaries as well (beyond the controlled foreign companies rules)? When the Government even hinted at that idea, in the original taxation of foreign profits rules, it almost killed inward investment into the UK.
It’s difficult to see what The Guardian hopes to achieve with the series: most of what they’ve described is standard tax planning, rather than tax avoidance. They’ve also rather shot themselves in the foot today by highlighting GSK and AZ, both of which it’s had to admit have average group tax rates above the UK corporation tax rate. Bringing their profits onshore to the UK would reduce those companies’ tax bills, not increase them. It’s a pity that the Guardian couldn’t see past their indignation to that obvious point.
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