Tax avoidance crackdown ‘futile’
An attempted crackdown on tax avoidance by firms will prove “futile” and the Government should instead work on an international agreement to target company owners, a former City minister has said.
Lord Myners, a former Labour minister and former chairman of companies including Marks and Spencer, said firms would find a way to get round the new proposals put forward by Chancellor George Osborne in the Autumn Statement.
From April, the Treasury will introduce a 25% tax on profits generated by multinationals from economic activity in the UK which they then artificially shift out of the country.
The tax avoidance loophole has been nicknamed the ”Google tax” because the arrangement – involving payments between different parts of a company to shift profits from higher-tax countries to those with lower taxes – is widely used by technology firms.
Lord Myners told Treasury minister Lord Deighton: “This strikes me rather like the game we play at summer fairs of whack a mole.
“Whatever you do, they find another way to get round it, often with the help of your previous employer Goldman Sachs.
“Would it not be more sensible for us to support a global initiative to tax the owners of companies rather than to tax companies?
“Quite frankly, the taxation of companies is a futile game because they get better and better at finding a way of avoiding it.”
Lord Deighton, answering questions on the statement in the House of Lords, replied: “I will be delighted to use my expertise as a poacher turned gamekeeper to help structure the profits diversion tax in a way that actually works. It is only ultimately going to work if we capture it on a global basis.”
Labour peer Lord McKenzie of Luton said: “The profits diversion tax is to be welcomed, but I suspect it is going to be difficult to implement.”
He asked: “Is it intended it will be applied to profits diverted from England to Northern Ireland and Scotland should those countries end up with lower tax regimes?”
Lord Deighton replied: “I think that other countries will be treated in exactly the same way.”
Tory former minister Lord Forsyth of Drumlean hit out at Labour criticism of the rate at which the deficit was being cut.
“Do you not think it is something of a nerve for the party opposite to complain about the Government’s progress in reducing the deficit when they have opposed every spending cut and every initiative by us to increase revenues?” he asked
“Aren’t they rather like a bunch of arsonists complaining that the fire crew are taking too long to put out the fire?”
Lord Deighton said it was “very difficult to disagree”.
