Osborne's tough tax talk falls short

Should companies with a reputation for ducking their UK tax contributions fear George Osborne? This week Osborne announced he's giving HMRC more funds to pursue corporate tax avoiders in an attempt to claw back up to £10bn for Treasury coffers.

But Osborne also claims he wants to make the UK's super-competitive. Can he do both?%VIRTUAL-SkimlinksPromo%


Avoiding avoidance

With difficulty. Earlier in the week Osborne told the BBC that hiking taxation will mean more large companies avoid investing in the UK. Meanwhile the Public Accounts Committee complain HMRC is too soft on big business. It's a tricky balance: acting against corporate tax evasion while pushing for more overseas jobs and investment.

Lawyer and tax expert Richard Jordan says much of the current UK corporate tax mess is because too many British politicians are operating at the very limits of their knowledge on business - and tax.

"If MPs are unhappy, then they should change the law to make the corporations pay more tax. The problem is that, unlike HMRC employees, MPs today have rarely worked in the real world of commerce which means they lack any commercial common sense."

Little understanding

He adds: "We need MPs who truly understand how business works. HMRC employees have a lonely and thankless job to do, but they do it well. It is disappointing to see them publicly undermined and criticised by some MPs in this way."

Yesterday War on Want claimed the Coalition has rejected the opportunity to recover up to £5.5 billion a year from overseas companies via a General Anti-Avoidance Principle, instead opting only to target 'artificial and abusive' tax avoidance through an 'anti-abuse' rule.

Meanwhile it's likely Osborne will introduce new measures tomorrow to force non-UK residents to pay capital gains tax on residential property. There could be annual charges of £15,000 on company-owned homes worth between £2 million and £5 million while company-owned property worth £20 million ore more could see fees of £140,000 slapped on it.

Shop around

For consumers, the moral is shop around - and shop British. "Sainsbury's," said the company in an emailed statement to AOL Money, "is not an international company so all of our trading profit is subject to corporate tax in the UK. Consumers can elect which companies they shop with and, if they don't believe a company is contributing to our society, can vote with their wallet."

John Lewis and Morrisons are also pushing for a more even playing field between British domestic businesses and multinational competitors, like Amazon.

You can read the Public Accounts Committee findings on HMRC here.

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Osborne's tough tax talk falls short

Most recently HM Revenue & Customs let Vodafone off the hook - for quite a sum. Vodafone paid out just £1.25 billion despite an original tax bill being closer to £8 billion (HMRC has always refused to reveal how much it thought the Vodafone final bill was). The episode was made even more shaming and painful because Vodafone was given several years to come good with the cash owed - even though it was sitting on a substantial cash pile at the time.

The Exchequer is estimated to have lost around £10 million to Goldman Sachs recently through an 'error' made by HMRC. The episode relates to an employee benefit trust run by Goldman allowing employees to take non-repayable loans that had no National Insurance contributions tied to them. HMRC did claw back the full amount from more than 20 businesses - but not Goldman. HMRC remains cagey about the details of the deal. Little HMRC accountability or transparency.

Huge problems with QinetiQ, the former Defence Evaluation and Research Agency, or DERA. A lack of clarity on contractual arrangements at the outset didn't help, allowing private equity company Carlyle to hammer the price down (why would you start negotiations when you didn't know the company's true value?). The Ministry of Defence behaved, it was said, like "an innocent at a table of card-sharps". Estimated cost to the taxpayer - £90 million. Huge sums were later made by QinetiQ management when the company listed.

The TaxPayers' Alliances estimates £2.7bn worth of taxpayer cash was wasted with a super-expensive 'National Programme for IT in the NHS'. The Department of Health, in the end, had very little to show for it as a consequence. Another example of poor management and a seemingly ingrained inability to provide taxpayers' with value for money.


"BT is paid £9 million to implement systems at each NHS site, even though the same systems have been purchased for under £2 million by NHS organisations outside the Programme", the Commons Public Accounts Committee noted.

Contentious. The Office for National Statistics estimated this has declined 3.4% since 1997, "with inputs increasing by 38%." The Centre for Economics and Business Research estimate that this inefficiency costs the taxpayer £58.4 billion a year.

Given the above record, are there any deals that the taxpayer has actually won out on? Not many, but the one successful project was the roll out of new Jobcentre Plus offices. It came in £314 million under budget, claims the Taxpayers' Alliance. A small cheer.

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