Report offers up ‘practical’ solution to tax loopholes

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.