If adopted, the policies would put an end to big multinational companies avoiding tax
Labour’s Shadow Chancellor has welcomed guidance from a new report which looks to close tax loopholes for multinational companies.
Taxing Multinationals: A New Approach sets out a “unitary” approach to taxation – meaning large companies working across borders should be seen as one single company, rather than as lots of subsidiaries.
This will enable countries to tax large-scale companies where they are earning money, rather than where the companies are “banking” (usually in countries with tax breaks).
The Shadow Chancellor, John McDonnell MP, said that Labour would look into how to incorporate the report into government practice.
“We welcome this exciting and important report on fair taxation of multinationals,” he said in a statement, adding that the report offered a “practical” solution to tax issues.
“We need to find a practical way for multinationals to pay their fair share to support the proper funding of our public services.
“We’re looking closely into how we could implement this approach in government and champion the new framework internationally.”
A “unitary” approach has been championed by campaign groups such as ActionAid and the Tax Justice Network for the last few years.
If it was implemented, then it would likely boost cash flow for public services, as well as lessen the tax demand on British businesses.
The report also criticised Johnson’s government for allowing such large loopholes in the current tax system, and called on the UK to take on the report’s findings and “take a lead in supporting a new approach”.
“It is time for countries to take both unilateral and multilateral actions to tax multinationals,” said Professor Joseph Stiglitz, Nobel Laureate in Economics, in response to the report.
“Labour’s proposal to start taxing multinationals through formulary apportionment is the right way forward,” he added.
Meka Beresford is a freelance journalist. Follow her on Twitter.
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2 Responses to “Report offers up ‘practical’ solution to tax loopholes”
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I agree, I had first hand experience of this working for HMRC in Collections. Group Accounting allowed multi nationals to cook the books in favour of themselves using many ‘devices’ to ensure no tax payable. It was simply a fancy name for fraud.
Tax is made far too easy to avoid for these big companies. The penalties for failing to submit returns timeously are miniscule and end up being LESS than for a self-employed individual. Which, eve now, I find astonishing. It should also be up to the company to show they have complied with tax regulation rather than HMRC to show they have committed fraud. This could end many dodges currently used.
This is not the doing of HMRC, which has always favoured the removal of loopholes and the exceptionally favourable treatment of these companies. This is entirely the doing of politicians. They want to attract big companies (which is understandable) and they want to keep them too. But, in trying to compete with other countries they offer ‘sweetheart deal’ which allow them to pay little to no tax at all. The only taxation benefit is from the PAYE paid by many of the lower paid employees.
Many people would find it hard to believe, what with the plethora of multi-billion multi-nationals that the mainstay of our tax take is from the basic rate tax PAYE employee, essentially the more money you have the less tax you pay, and not JUST as a percentage of your income, in many cases this is in real terms too.
We have a VASTLY unequal society which is fuelled by a vastly unequal tax system which has been deliberately designed to be so by successive governments both Tory and Labour. I expect no better from the Tories but from Labour I do, the problem was they found it would hurt their donors and therefore donations. Labour have forgotten who they represent..
kit
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