Tax avoidance measures ‘a long way short of a solution’

22 Mar 19

Confronting “outrageous” tax abuse by tech giants could provide £700m for public services, a think-tank has claimed.

Measures to tackle tax abuse by large multinational corporations in the chancellor’s autumn Budget “fall a long way short of a solution”, according to TaxWatch UK.

The think-tank noted that large multinational companies – big tech companies, in particular – use countries like Ireland and the Netherlands to get out of paying their taxes.

Chancellor Philip Hammond announced new taxes to address this issue, but TaxWatch UK claims they do not go far enough.

A digital services tax announced in Hammond’s October Budget is likely to be subject to legal challenges as it arguably breaks international tax principles. The government predicts the DST will raise £275m in its first year (2020-21), rising to £440m a year by 2023-24.

Hammond also announced in the budget a new tax on royalties derived from sales to UK customers that are later transferred to tax havens like Bermuda. But TaxWatch UK said this policy will raise just £475m in its first year, dwindling to £165m after three years.

The report used tech giant Google as an example, and estimated that it’s Bermudan branch received €20bn in royalties from a Dutch company in 2017.

The think-tank estimated that roughly €4bn would have come from revenues made from UK customers. And if this was subject to the UK’s 20% corporation tax, it would provide £700m to be invested in UK public services.

George Turner, director of TaxWatch UK, said: “For more than 10 years, the public has been outraged by the worrying ease with which the global tech giants have managed to get off paying their taxes. Now is the time for action.

“It is abundantly clear that much of the problem with international tax avoidance lies with tax-haven governments that allow large companies to use them as a base to abuse the tax regimes of others.

“Unless the government is prepared to take on the biggest facilitators of tax avoidance – countries like Ireland – few will take their efforts to stop tax abuse seriously.”

The Treasury and Google have been contacted for comment.

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