Partner Article

Tax avoidance – but who are the real goodies and baddies?

Childhood movies of the Wild West seemed very simple. There was only one real question: who are the goodies and will they win? They always did.

Later in life, trying to catch up with the plot of a television drama being watched by my family, a similar question helps me along: ‘is he/she a goodie or a baddie?’

While it’s a big jump from Wild West movies to international tax arrangements (not everybody agrees with that proposition!), it’s not so easy to distinguish the tax goodies from the tax baddies.

For example, a few years ago a broad distinction could be drawn between the large, mainly western economies (tax goodies) and tax havens (the baddies). Now it’s not so clear.

In our Weekly Tax Brief we have often made the point that, if UK MPs don’t like the way the UK tax system works, then they should change it. Sometimes the need for change arises almost by accident, with a belated recognition that in its tax legislation Parliament has got to the wrong place but for all the right reasons.

At other times, correcting a mismatch between tax rules seems to require too much parliamentary time. Hardship for some taxpayers may follow; perhaps tax loopholes for others.

Two recent developments have emphasised that some large European economies may look suspiciously like tax baddies.

In the first, David Cameron has indicated that his pressure on British dependencies to accept automatic tax information exchange was part of a plan to bring Austria and Luxembourg into negotiations on the European Union savings directive.

In the second, the European Commission has ordered Ireland, the Netherlands and Luxembourg to disclose details of ‘sweetheart’ tax deals made with multinational companies in possible breach of EU state aid rules.

As secrecy and state-led tax competition have both cost the UK Exchequer huge amounts of tax, we can be sure that these developments are being warmly welcomed by HMRC and the Treasury.

We can be equally certain that the UK itself will come under pressure over some of its tax practices. In European tax politics, the next couple of years are shaping up for a shoot-out at the OK Corral.

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