Tax Justice UK submission to parliamentary inquiry into tax avoidance and evasion

Tax Justice UK submitted evidence to the Treasury sub-committee inquiry into tax avoidance and evasion. 

You can read the full text of what we submitted here. 

The summary is: 

The last decade has seen a shift in the way the UK government tackles tax avoidance and evasion. Responding to public anger over wealthy individuals and companies not paying their fair share of tax, and the need to plug holes in government revenue, the UK has joined countries around the world in closing loopholes and tightening enforcement. Following the financial crisis, the G20 declared in 2009 that ‘the era of banking secrecy is over’. There is anecdotal evidence that FTSE 100 companies, especially those with a high public profile, are less likely to use some of the more complicated tax avoidance schemes than used to be the case. 

At the same time, the Conservative-led coalition government that came to power in 2010 pledged to create one of the most company-friendly tax regimes in the world. With a corporate tax rate heading to 17%, from 28% in 2010, there is simply less tax to avoid in the first place. The UK government has set out a policy to use the corporate tax regime to attract foreign investment. Mechanisms such the the Controlled Foreign Companies (CFC) rules and the Patent Box are part of this approach. Companies can use the UK’s light touch corporate tax regime, and the UK’s tax treaty network, to reduce their tax bills in other countries, including developing countries.

The risk of tax avoidance is still high for private companies and wealthy individuals. HMRC’s budget has been cut and it does not have the resources it needs to properly target tax evasion and avoidance. The agency’s governance also needs to be overhauled to insulate it from corporate capture, while at the same time responding to the needs of all stakeholders.

There are a range of things the government should do. They include:

1. Properly resource HMRC, and adjust its priorities,
2. Reassess the overall approach to taxing companies in the UK,
3. Scrap the non-dom rules,
4. Tax different types of labour the same,
5. Support global reform to ensure fairer taxation of multinationals,
6. Require UK-linked territories to implement transparency measures to match the UK’s, and ensure that their tax regimes do not undermine other countries’ ability to tax, and
7. Re-evaluate the UK’s tax treaties so that they do not undermine the tax base of developing countries.

 
We also submitted to the inquiry on tax disputes. You can read the text of our submission here. 
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