Firms avoid £6billion tax with overseas profits shift
MuLTINATIONAL corporations avoided almost £6billion in uK tax last year by booking profits overseas, according to HMRC figures.
The taxman is chasing business giants for as much as £5.8billion in unpaid levies for 2016-17 – up 51 per cent on the previous year.
Experts said the surge reflects a more aggressive interpretation of corporate tax laws by HMRC as it clamps down on avoidance.
With tax inspectors on their tails, firms could be forced to cough up huge sums amid growing public anger at the potential loss to the Exchequer at a time of austerity.
George Turner, from the Tax Justice Network research group, said:
‘It’s completely disgraceful’
‘It’s completely disgraceful for companies to be engaging in profit shifting. At the end of the day they benefit hugely from public infrastructure in this country – schools, transport network, the public health system.
‘And they need to make a contribution to the upkeep of these things, otherwise Britain becomes a less good place to do business.
‘And they are making others pay through higher taxes elsewhere.’
under the practice known as transfer pricing, firms shift profits generated in countries with higher taxes into countries with lower rates.
Last month, eBay faced criticism for paying just £1.6million last year in uK corporation tax – currently set at 19 per cent – despite making £1billion in sales here.
It emerged the online auctioneer had booked website listings fees through Luxembourg and Switzerland, where it has special tax arrangements. HMRC has not named any of the companies it is investigating, and eBay stressed it pays all tax owed.
In 2015 the Government tried to crack down on transfer pricing by introducing the diverted profits tax, which aims to make sure profits taxed in the uK properly reflect the company’s activity here.
HMRC, which has the power to open companies’ books, has hired more inspectors to investigate firms over the practice, amid growing pressure from the Treasury to boost the amount of tax it collects.
Pinsent Masons, the law firm that obtained the figures via a Freedom of Information request, says the amount typically due after investigations ended up at around half the original estimate. But many firms appeal, leading to lengthy court battles, with no guarantee the money will end up in the Treasury’s coffers.
The TaxPayers’ Alliance called for a simplification of the tax code, saying big corporates could pay accountants to help them exploit loopholes.
An HMRC spokesman said: ‘Multinational companies must pay all taxes due and we don’t settle for less. Last year alone, we brought in an extra £8billion by cracking down on large businesses that tried to avoid paying their fair share of tax.’