The Treasury Select Committee's announcement that it is looking into tax havens looks significant. Will this up the pressure on small offshore centres, I wonder?

Whether or not it does - and I'm sure we'll see plenty of discussion of the move over the next 24 hours - here are the full list of questions the committee are interested in.

The committee said:

The Committee would welcome, in particular, written evidence that relates to the following questions:

• To what extent, and why, are Offshore Financial Centres important to worldwide financial markets?

• To what extent does the use of Offshore Financial Centres threaten financial stability?

• How transparent are Offshore Financial Centres and the transactions that pass through them to the United Kingdom's tax authorities and financial regulators?

• To what extent does the growth in complex financial instruments rely on Offshore Financial Centres?

• How important have the levels of transparency and taxation in Offshore Financial Centres been in explaining their current position in worldwide financial markets?

• How do the taxation policies of Offshore Financial Centres impact on UK tax revenue and policy

• Are British Overseas Territories and Crown Dependencies well-regarded as Offshore Financial Centres, both in comparison to their peers and international standards?

• To what extent have Offshore Financial Centres ensured that they cannot be used in terrorist financing?

• What are the implications for the policies of HM Treasury arising from Offshore Financial Centres?

• What has been and is the extent and effect of double taxation treaty abuse within Offshore Financial Centres?

• To what extent do Offshore Financial Centres investigate businesses and individuals that appear to be evading UK taxation>

April 30, 2008 | Permalink | Comments (0) | TrackBack (0)

The Tories have been quick off the draw in suggesting that they might drop the taxation of foreign profits for companies, the issue that is driving companies like Shire and United Business Media abroad.

George Osborne was speaking to the British Chambers of Commerce in Liverpool about it today, and I've finally got hold of the full speech.

Here's the section you may find interesting:

...the [Tax Reform] Commission also identified a looming problem with the taxation of
foreign profits - the specific issue that drove Shire to Ireland, and which
is now worrying businesses up and down the country. They recommended a
participation exemption - effectively taking foreign profits out of tax and
encouraging the repatriation of profit to the UK.

There is a powerful case for such a change, which we are looking very
closely at.  It could deliver a simpler and more competitive tax system fit
for the global economy. But the Government's current approach risks making
this area of tax even more complex not less, and could even lead to yet
another stealth tax on business.

Shire's decision should act as a warning shot. Reforming the tax system and
cutting business tax rates is one way to help British businesses succeed...

April 28, 2008 | Permalink | Comments (0) | TrackBack (0)

The story going round about 'what Gordon told Tony'  about the 10p tax rate beggars belief. We are asked to believe that Gordon, quizzed by Tony, said only 25,000 people would be affected in advance of delivering the Budget speech last year.

To which the only real response is: why on earth did Tony Blair believe him? 25,000 people? Really? Just how bad is the former prime minister's mental arithmetic?

April 24, 2008 | Permalink | Comments (0) | TrackBack (0)

An extraordinary suggestion appeared in the Sunday Telegraph yesterday.

In an article on companies being disgruntled with the UK taxman, an (unnamed) private equity figure suggests that after going to the Treasury to talk about sensitive tax issues, he/she and others were investigated by the Revenue.

The quote reads:

A group of us had several meetings at Downing Street over tax and disclosure. Literally a month later, almost all of us had a 'random' personal tax inspection from the Revenue. It was extraordinary.

Extraordinary indeed. Surely the Treasury can't have tipped off the Revenue to make random investigations into individuals it was consulting on tax issues?

I'm inclined to believe it was a coincidence, though I suspect there will be many tax advisers who would not put it past the taxman.

April 21, 2008 | Permalink | Comments (0) | TrackBack (0)

Shire's decision to go offshore is certainly exercising a few minds. I'm told by Bill Dodwell of Deloitte that a further 'two or three' companies are set to announce similar moves 'in the next month or two'.

Perhaps the first thing to note is that this is not about UK tax rates. If you look at the company's annual report (pdf, p.80) for the year ending December 2006, it notes a UK tax credit, rather than charge, of $44m (£22m).

The company is being a bit coy, but the only possible tax reason is the changes to CFC rules, first outlined in Gordon Brown's last PBR.

The Treasury wants companies to pay more tax on their foreign profits. So if you put a treasury function offshore, you can't get away with booking the profits offshore: it is a UK profit and subject to UK tax.

The UK wants to define 'passive' income from such subsidiaries, but it is clearly not doing a very good job of reassuring multi-nationals that it is going to do so sensibly.

The problem for Shire and others is they are worried that all the brands they have, perhaps developed in the UK, might generate profits in other countries that the UK will try and get its hands on.

You can debate whether that's right, and it's not clear cut, but the reason Ireland is attractive is because it doesn't have a regime to tax foreign subsidiaries, or controlled foreign companies, in the same way. So foreign profits are protected.

Again, I should stress I don't think Shire are saying this explicitly, but it can be the only reason really for the move.

Dodwell suggests companies should wait and see what happens with the government's consultation, but some clearly can't wait. All in all, worrying times for the Treasury

P.S. Some debate in the UK seems to be about whether our tax rate is too high. It's actually not really relevant here, since Shire will still pay tax on its UK income (and doesn't pay much anyway). But it is an interesting question.

The Treasury says we're fine: our tax rate is lower than those of similar countries. True, but our corporate tax burden is higher. Look at page 167 of the IFS's Green Budget from 2006, showing the corporate tax burden as a share of national income. For the UK, the number is 3.3%. For Germany and the US, with higher tax rates, the numbers are 1.3% and 2.2% respectively.

The message of course is that the tax base is as important as the tax rate. (the IFS further notes that the financial sector in the UK may explain some of this, but that surely doesn't argue it away completely).

April 16, 2008 | Permalink | Comments (1) | TrackBack (0)

Who is going to be the winner in the Guardian/Tesco battle? Well, actually, I am not going to answer that question - at least not directly. I'm not that silly.

The question is curious because there are differing views out there as to how the whole battle will play out.

Dennis Howlett takes the view that he would like to see Tesco's tax computations discussed in court. John Kavanagh, a newish blogger who works for Shaws, the Chartered Tax Advisers, thinks that the result can only be good for Tesco.

As he puts it on his blog and here too:

If the Guardian argues successfully that their article is not defamatory, then Tesco loses their case but regains the moral high ground. If the article is defamatory if untrue, the Guardian will have to show that it got its facts right in order to win, and only Tesco can know whether they have.

He also thinks the courts will not take the view that tax avoidance is immoral. From my experience of covering court decisions on tax avoidance matters, I'm sure he's right: court decisions on avoidance are more 'amoral' than anything else, preferring to take a literal approach to tax matters than a moral one.

But who really does win here, whatever a court's verdict? I think Kavanagh underestimates what a forensic examination of the tax affairs of big corporates, and the activities of the tax profession, might do for debate about tax as a whole. I don't, by that, mean it will be a good thing for the profession. Could HMRC end up being the winner?

Richard Northedge has a similar view: that Tesco could be entering into a MacLibel situation.

This battle has the appearance of a Goliath versus David fight – and remember who won that. Tesco should look at the MacLibel case: after years of dispute, the hamburger giant won but it was the protestors that gained the sympathy and McDonalds is still regarded as a representative of big bad business.

Actually I think one point is being missed in the whole debate, particularly by those who hope this battle will feature a great discussion of tax avoidance as a moral issue. And that is that libel cases in this country rarely, if ever, involve any discussion of what the truth is in relation to a newspaper or magazine's claims.

The 'justification' defence, as it is known, is far too expensive to pursue. The smart money must be on The Guardian opting for some kind of 'Reynolds' defence, in which you argue that the story was in the public interest and that you followed all sound journalistic procedures, in putting the story to Tesco, etc, etc.

I expect we will hear an awful lot about who said what to whom and when, and precious little about the rights and wrongs of tax avoidance. Whatever happens, if it comes to court, it's going to be gripping stuff.

UPDATE: Roy Greenslade has covered this subject, and quoted this blog, in his weekly media column in The Evening Standard. It's worth a read (and I don't just say that because he's mentioned me...).

April 9, 2008 | Permalink | Comments (0) | TrackBack (0)

I don't mean to be partial, but Tesco's threat to take on The Guardian over its tax avoidance articles does, in the words of the paper, send a 'chill' through media debate on tax.

If, like me, you write about corporate tax avoidance day in, day out, it's a bit of a wake-up call, but not an unexpected one. I have been thinking for the last eighteen months that it was only a matter of time before someone sued for libel over tax avoidance claims.

Readers of this blog will need no reminding that tax avoidance is legal, a fact the Guardian acknowledges.

One issue with Tesco is whether anyone would have found its offshore arrangements surprising. Huge numbers of companies benefit from these arrangements. Of course, just because noone finds something surprising doesn't necessarily mean others shouldn't bring it up as an issue.

Tesco says the Guardian is just wrong, disputing the value of tax avoided and the type of tax. The paper says Tesco only says that now, and refused to discuss the matter for months before publication.

Whatever the rights and wrongs, the issue highlights the increasing importance of tax to corporate reputation. I'd been meaning to blog about how someone would inevitably sue for libel for being accused of tax avoidance on a grand scale for a long time now, but events have overtaken me.

Has anyone sued in this way before? I don't think so.

April 7, 2008 | Permalink | Comments (3) | TrackBack (0)

Gordon Brown's move to abolish the 10p rate of income tax, which, it became quickly clear, was the great con of his last budget, is coming back to haunt him.

MPs have signed an early day motion against the move, which takes effect this week.

The motion says:

That this House notes that, despite assurances to the contrary, many people are being made worse off by the abolition of the 10 pence tax rate; notes with concern that this is having a disproportionate impact on people who can ill afford to be made worse off; accepts that this was not the intention of the Government but is dismayed at the response to the plight of those adversely affected; and calls on the Chancellor of the Exchequer to bring forward measures to correct this damaging change to the taxation system.

The only thing I would disagree with in it is the the suggestion that it 'was not the intention of the government'.  Gordon and his Treasury acolytes would have to have been fairly silly not to realise that abolishing the rate to pay for a cut in the basic rate effectively meant charging the poor so the middle class would be better off.

Ben Brogan of the Daily Mail has the political background to the EDM, signed by 30 MPs, here.

Despite the calls from MPs, I fear that there's no money left to correct the mistakes made by Brown in his time as chancellor.

April 3, 2008 | Permalink | Comments (0) | TrackBack (0)