Corporate Tax Collection

Representatives of the UK’s Revenue and Customs appeared yesterday before the Public Accounts Committee of the Houses of Parliament.  The exchanges were interesting though the evidence from the HMRC officials was sometimes confusing.  Following on from previous work done by the committee much of the focus was on corporation tax with issues relating to tax residency, tax compliance, the tax gap and permanent establishment among those referred to.

The questioning from the committee chair, Margaret Hodge, was forthright but at times slipped into grandstanding, primarily a suggestion that the Revenue show take “a few show cases”.  Ms Hodge also wanted the Revenue to estimate how much the tax gap would be if it was calculated “between the money that you collect and the money if everyone paid their fair share”.  Of course, “fair share” is an alien concept to tax collectors; their job is to collect what the tax code prescribes. Unless something illegal is being undertaken the answer to such a question in relation to MNCs will be close to zero.   If the UK wishes to collect more corporation tax Parliament changing the tax laws would be more effective than the Revenue undertaking some show cases.

An investigation into Google’s activities was alluded to through an exploration of documents provided by a former employee but it is not clear that it will lead to a change in the judgement that Google does not have a permanent establishment in the UK.

I don’t know if the Houses of Parliament make transcripts of the committee sessions available.  The transcript of a recent appearance by our Revenue Commissioners at a sub-committee of the Oireachtas Finance Committee is available here.

A Bloomberg feature on some elements of the Irish corporation tax regime was also published yesterday.

UPDATE: A transcript of yesterday’s Commons PAC hearing is here (H/T Gavin).

One reply on “Corporate Tax Collection”

Margaret Hodge MP has done a good job in bringing public attention to this issue.

The impression from the transcript is that the small fish who would not have high-paid BIG 4 accountants to bat for them wouldn’t be indulged.

The folks from the HMRC contrast with American counterparts in the IRS and DoJ who have aggressively gone after both their own tax evaders and Swiss banks.

It’s good that the G-20 and the OECD are involved in the issue.
As for place of establishment, what could be a more artificial arrangement than a small fraction of staff of a company (presumable they’re not all senior managers) are technically responsible for not only all EU sales but for most countries of the world.

It’s doubtful that the HMRC would accept this nonsense from a UK company trying to minimise their liabilities in the UK and I would be surprised if the Irish Revenue accepted it from an Irish company.

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