Partner Article

Tax avoidance debate: actions speak louder than words

What a week! In the tax avoidance debate, noisy proclamations from both sides of the debate have continued. Between the protagonists, two clear positions are emerging from the clouds of dust that have been kicked up.

First, from multinationals in the firing line, a clear statement of their right to pay no more than the minimum amount of tax required by law. In a nutshell, they assert that tax is a cost to be managed in the same way as any other business cost. A court of law, not the court of public opinion, is the venue in which the efficacy of their tax arrangements should be judged.

Second, from the pressure groups, a reminder that corporate social responsibility requires companies to deal fairly and transparently with their obligations to society at large, whether in their own countries or internationally.

Further argument shows no sign of moving the debate towards a conclusion. However, some actions speak louder than words:

• The stated intention of Fiat Industrial to relinquish its Italian tax residency (tax rate around 30%) and move to the UK (tax rate 20% from 2015) demonstrates the effectiveness of the UK’s strategy to tempt international business with the lowest tax rate in the G20.
• This also reveals the hypocrisy of UK politicians who seek to establish the UK as a future tax haven while reviling overseas companies for tax planning which has in the past allegedly extracted taxable profits from the UK.
• Meanwhile, concerned US voices are accusing the UK government of anti-American bias in singling out US-based multinationals for ritual humiliation.

The time is coming when the UK Parliament will have to get off its collective soapbox and come up with clear and workable proposals to address the issues. If the electorate does not like the tax effect of laws enacted by Parliament, then Parliament has only itself to blame and must come up with proposals that meet the needs of the country and business alike.

This was posted in Bdaily's Members' News section by George Bull .