The UK has adopted ‘too much of a “light-touch” approach’ to the taxation of multinationals that might invest in Britain, according to a Financial Times editorial.
The paper said Sir Martin Sorrell’s ‘suggestion [in an interview with the BBC last week] that corporation tax has become little more than a warm personal gesture by companies’ could not be lightly dismissed, although a comparison with charitable giving was ‘over-egged’.
It added: ‘Companies such as Amazon and Starbucks have consequently been able to whittle their tax bills down to a fraction of those paid by homegrown enterprises, and in a perfectly legal manner. There may be merit in a flexible tax system, but this should not be at the expense of domestic businesses that have neither the option of relocating to lower-tax regimes (as WPP itself did temporarily, returning this year) nor of shifting profits from one jurisdiction to another. An excessively complaisant HMRC has only increased the incentive to exploit loopholes.’
HMRC has insisted that it strives to maintain a level playing field for businesses. An ‘issue briefing’, published last October, explained that a company that pays less corporation tax than might be expected is not necessarily engaging in tax avoidance.
The FT welcomed David Cameron’s pledge to use the UK’s G8 presidency to seek further multilateral co-operation on corporate taxation.
‘But there are also things countries can do unilaterally to make this tax less optional. For instance, a hard limit on the deductibility of payments to foreign affiliates, including the interest paid on intra-group debt, would make it harder for multinationals to shift profits to low-tax jurisdictions,' it said.
Last October an FT editorial said there was ‘nothing wrong’ with high-profile public shaming as ‘a weapon in the armoury against the exploitation of [tax] loopholes'. But public anger ‘might equally be directed at the tax system itself, especially the way it treats multinationals’.
In December 2010 an editorial suggested that country-by-country reporting of profits and corporate taxes might expose what it called ‘the scandalous tax treatment of multinationals in the rich world’.
The UK has adopted ‘too much of a “light-touch” approach’ to the taxation of multinationals that might invest in Britain, according to a Financial Times editorial.
The paper said Sir Martin Sorrell’s ‘suggestion [in an interview with the BBC last week] that corporation tax has become little more than a warm personal gesture by companies’ could not be lightly dismissed, although a comparison with charitable giving was ‘over-egged’.
It added: ‘Companies such as Amazon and Starbucks have consequently been able to whittle their tax bills down to a fraction of those paid by homegrown enterprises, and in a perfectly legal manner. There may be merit in a flexible tax system, but this should not be at the expense of domestic businesses that have neither the option of relocating to lower-tax regimes (as WPP itself did temporarily, returning this year) nor of shifting profits from one jurisdiction to another. An excessively complaisant HMRC has only increased the incentive to exploit loopholes.’
HMRC has insisted that it strives to maintain a level playing field for businesses. An ‘issue briefing’, published last October, explained that a company that pays less corporation tax than might be expected is not necessarily engaging in tax avoidance.
The FT welcomed David Cameron’s pledge to use the UK’s G8 presidency to seek further multilateral co-operation on corporate taxation.
‘But there are also things countries can do unilaterally to make this tax less optional. For instance, a hard limit on the deductibility of payments to foreign affiliates, including the interest paid on intra-group debt, would make it harder for multinationals to shift profits to low-tax jurisdictions,' it said.
Last October an FT editorial said there was ‘nothing wrong’ with high-profile public shaming as ‘a weapon in the armoury against the exploitation of [tax] loopholes'. But public anger ‘might equally be directed at the tax system itself, especially the way it treats multinationals’.
In December 2010 an editorial suggested that country-by-country reporting of profits and corporate taxes might expose what it called ‘the scandalous tax treatment of multinationals in the rich world’.
