Multinationals are using overseas subsidiaries to avoid paying tax - George Osborne is relaxing the rules to make the shifty manouevre easier to perform.
Last night’s Panorama showed how giant multinationals, like Glaxo SmithKline are using overseas subsidiaries to avoid paying millions in pounds in tax.
Watch how they do it:
And instead of clamping down on it, Chancellor Osborne is relaxing the rules to make the shifty manoeuvre easier to perform. The pre-existing rules also protected the tax payable by British companies in developing countries.
Changes to obscure sounding ‘Controlled Foreign Company (CFC) rules’ – debated in Parliament this week – could give the green light for Barclays and other large British multinationals to increase their use of tax havens like the Cayman Islands to dodge their taxes in the developing world.
Despite the rhetoric about cracking down on “morally repugnant” tax avoidance, George Osborne seems happy to turn a blind eye where poor countries are concerned; while the IMF, OECD, UN and World Bank all recommend an impact assessment – to highlight where the greatest damage will be done – so far the Treasury refuses to do so.
In evidence submitted to Parliament’s Treasury select committee last year, Barclays said the “majority” of its Cayman Islands companies were:
“…managed and controlled in the UK and are therefore subject to tax in the UK… under the UK CFC legislation.”
It is likely some of these tax haven companies that are currently covered by the CFC (anti-tax haven) rules will be exempted after the changes. ActionAid estimates developing countries could lose £4 billion a year if these changes make it onto the statue book.
• Osborne, Barclays, the Cayman Islands and tax avoidance 17 Apr 2012
• Slasher Osborne accused of £1.6m tax avoidance 18 Oct 2010
The British taxpayer is losing out twice – uncollected taxes from megacorporations have to be picked up by ordinary citizens, and by taking money out of developing countries’ treasuries, they remain reliant on aid – including that from the UK.
“What my members see every day is that some large businesses are managing to avoid their fair share of taxes which means everyone else has to pay more too. That doesn’t seem fair.
“[The Government’s tax changes are] rather like you legalise murder and then you say your crime rate is falling.”