Report of UK Parliament Public Accounts Committee - Tax avoidance 

June 16: The Public Accounts Committee (PAC) of the UK Parliament has published a report entitled Tax Avoidance - Google.

Read a release and text of the report on the UK Parliament website.


Read the HM Revenue & Customs (HMRC) response to the PAC report on the HMRC website.


Summary

The PAC report finds that:


  • To avoid UK corporation tax, Google relied on a "deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes place in the UK."
  • Artificial tax structures, such as those used by multinationals, serve to avoid UK taxes rather than to reflect the substance of the way business is actually conducted.
  • HMRC is hampered by the complexity of existing laws that leave "much scope" for aggressive exploitation of loopholes.
  • HMRC has not sufficiently challenged the "manifestly artificial tax arrangements" of multinationals.

The report's recommendations include the following:


  • Multinational companies need to establish a corporate structure that provides that a company pays tax where it generates profit.
  • The PAC will continue to pursue this issue over the course of the Parliament.
  • HMRC needs to be much more effective in challenging the artificial corporate structures created by multinationals with no other purpose than to avoid tax and conduct full investigations of such companies.
  • HMRC and HM Treasury need to push for an international commitment to improve tax transparency, including by developing specific proposals to improve the quality and credibility of public information about companies’ tax affairs, and use that to information to collect a "fair share of tax from profits generated in each country." This data is to include full information from companies’ based in tax havens.
  • "[B]ig accountancy firms...should provide responsible advice to ensure that corporate arrangements reflect the substance of transactions and operations in the UK and enable their clients to be more transparent about where they make profits and pay tax."



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