Following the news of the government’s Google tax deal, the Treasury Select Committee has launched an inquiry into ‘the shifting sands of UK tax policy’ and the corporate tax base, starting with a three-hour hearing into corporate tax on Tuesday 2 February.
Following the news of the government’s Google tax deal, the Treasury Select Committee has launched an inquiry into ‘the shifting sands of UK tax policy’ and the corporate tax base, starting with a three-hour hearing into corporate tax on Tuesday 2 February. Chaired by Andrew Tyrie MP, the witnesses called to give evidence to the Committee were: John Cullinane, CIOT tax policy director; John Whiting, Office of Tax Simplification (OTS) tax director; and Richard Murphy, director of Tax Research LLP.
Google aside, subjects covered at the hearing included the UK tax base, tax avoidance, profit apportionment, public disclosure, HMRC resources, the effectiveness of the diverted profits tax, and whether companies have a legal duty to shareholders to minimise tax liability. The Committee also asked which areas it should focus on in its inquiry to make the most significant progress.
The witnesses often expressed differing views in response to the Committee’s questions. When asked whether he was concerned that the UK’s corporate tax base appeared to be being eroded, Cullinane said he saw no evidence the CT base was reducing, despite the fall in the tax take. Whiting expressed the view that taxing profits was still ‘convenient’, but that the UK had to be prepared for its tax base to evolve over time. Murphy, meanwhile, argued that the UK was not losing profits but was losing the ability to adequately capture (and tax) them. Murphy advocated a unitary system of tax apportionment in levying business tax, while Whiting and Cullinane said the key was international consensus and that any apportionment formula would be difficult to agree on.
In terms of the main areas companies were exploiting to avoid tax, Cullinane highlighted global mismatches between tax codes. Whiting believed the permanent establishment rules were the biggest problem, while Murphy argued that companies not filing their accounts with HMRC was a more pressing concern than BEPS.
The Committee has also called for written evidence to be submitted by 31 March 2016 (www.bit.ly/20EAcbc). Questions have been asked within the following topics: the making of tax policy; the problem of the shrinking tax base; radical solutions to the problem of the shrinking tax base; other mitigations of the problem of the shrinking tax base (addressing tax avoidance and non-compliance); and the administration of UK tax.
Tyrie said: ‘The complexity of tax law is turning what should be a straightforward principle – that everybody should pay the correct amount of tax – into a piece of elastic. For corporation tax, the problem is exacerbated by the globalisation of economic activity and any liability to tax that accompanies it.
‘Google may be the symptom, but it is not the cause. There is a lot the government could be doing. Tax policy must be made more practicable and the tax system more coherent. Tax needs to be fair. It needs to provide more certainty and stability. There is a lot to do and a lot for the Committee to examine.’
Meanwhile, the ICAEW has argued that the UK Treasury is not functioning as a modern finance ministry. In its report, Modern finance ministry, the ICAEW argues that reforming and restructuring HM Treasury would allow the government to more effectively tackle the deficit, be more efficient in spending taxpayers’ money and empower political decision-making.
Following the news of the government’s Google tax deal, the Treasury Select Committee has launched an inquiry into ‘the shifting sands of UK tax policy’ and the corporate tax base, starting with a three-hour hearing into corporate tax on Tuesday 2 February.
Following the news of the government’s Google tax deal, the Treasury Select Committee has launched an inquiry into ‘the shifting sands of UK tax policy’ and the corporate tax base, starting with a three-hour hearing into corporate tax on Tuesday 2 February. Chaired by Andrew Tyrie MP, the witnesses called to give evidence to the Committee were: John Cullinane, CIOT tax policy director; John Whiting, Office of Tax Simplification (OTS) tax director; and Richard Murphy, director of Tax Research LLP.
Google aside, subjects covered at the hearing included the UK tax base, tax avoidance, profit apportionment, public disclosure, HMRC resources, the effectiveness of the diverted profits tax, and whether companies have a legal duty to shareholders to minimise tax liability. The Committee also asked which areas it should focus on in its inquiry to make the most significant progress.
The witnesses often expressed differing views in response to the Committee’s questions. When asked whether he was concerned that the UK’s corporate tax base appeared to be being eroded, Cullinane said he saw no evidence the CT base was reducing, despite the fall in the tax take. Whiting expressed the view that taxing profits was still ‘convenient’, but that the UK had to be prepared for its tax base to evolve over time. Murphy, meanwhile, argued that the UK was not losing profits but was losing the ability to adequately capture (and tax) them. Murphy advocated a unitary system of tax apportionment in levying business tax, while Whiting and Cullinane said the key was international consensus and that any apportionment formula would be difficult to agree on.
In terms of the main areas companies were exploiting to avoid tax, Cullinane highlighted global mismatches between tax codes. Whiting believed the permanent establishment rules were the biggest problem, while Murphy argued that companies not filing their accounts with HMRC was a more pressing concern than BEPS.
The Committee has also called for written evidence to be submitted by 31 March 2016 (www.bit.ly/20EAcbc). Questions have been asked within the following topics: the making of tax policy; the problem of the shrinking tax base; radical solutions to the problem of the shrinking tax base; other mitigations of the problem of the shrinking tax base (addressing tax avoidance and non-compliance); and the administration of UK tax.
Tyrie said: ‘The complexity of tax law is turning what should be a straightforward principle – that everybody should pay the correct amount of tax – into a piece of elastic. For corporation tax, the problem is exacerbated by the globalisation of economic activity and any liability to tax that accompanies it.
‘Google may be the symptom, but it is not the cause. There is a lot the government could be doing. Tax policy must be made more practicable and the tax system more coherent. Tax needs to be fair. It needs to provide more certainty and stability. There is a lot to do and a lot for the Committee to examine.’
Meanwhile, the ICAEW has argued that the UK Treasury is not functioning as a modern finance ministry. In its report, Modern finance ministry, the ICAEW argues that reforming and restructuring HM Treasury would allow the government to more effectively tackle the deficit, be more efficient in spending taxpayers’ money and empower political decision-making.
