A quick thought on Corporation Tax ‘avoidance’

There is a (largely constructed by people ignorant of the very basics of tax laws) furore building up around the fact that various (usually American) multinational companies have been ‘dodging’ UK Corporation Tax (CT). Firms such as eBay, Google, Amazon, Facebook and Starbucks have, amongst others, all been ‘outed’ as part of this wave of silliness.

Leaving aside the convenient fiction that companies pay tax, the reason why the UK government has seen (thankfully – they’d only waste it) little money in CT is because these companies do not have their EU headquarters in this country. Under the Single Market (one of the few things about the EU which is actually sensible) only one HQ is necessary to do business in the EU and so any CT on profits made in the EU is paid to the national government in country where it resides.

Why do firms have their EU HQ in other countries? Simple: because CT rates are lower.

How could we get those companies to place their HQ in the UK? Simple: cut CT. Whilst ideally I’d say scrap it, anything in the 10% – 15% range would make the UK more competitive.

The problem (of course) is that those currently foaming at the mouth about so-called CT ‘avoidance’ are those who hate the idea of lower CT rates.

As Spock would say, ‘Illogical, Captain’.

3 Comments

  1. Demelza says:

    Alas, the Exchequer will have to scrape by on:
    The VAT charged on every sale
    The income tax paid by staff
    The fuel excise duty on everything transported by road
    The employment taxes paid for staff
    And that’s just for starters.

    We gain a huge amount of revenue because these companies operate here, as we do with financial services. Anyhow, whatever this morning’s paper is about, I say “Down with this sort of thing”.

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  3. jameshigham says:

    How could we get those companies to place their HQ in the UK? Simple: cut CT.

    Yes but that’s not likely to happen any time soon.