Ed M pledges a stronger line against tax avoidance


by Sunny Hundal    
8:50 am - January 14th 2013

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Labour party leader Ed Miliband took a strong line against tax avoidance and tax evasion in the UK, going further than the party has ever before.

The move signalled an acknowledgement that Labour had gotten too close to big business when in power, and it was time to break away from that image.

Ed Miliband told the BBC’s Andrew Marr Show yesterday:

“We have a situation where many British companies and individuals are paying their fare share of tax and they look in horror at a system where multinational companies from other countries can make large profits in Britain but not pay taxes in Britain. We’ll end the tax secrecy.”

Among Labour’s proposals are:

- forcing major companies to list a single figure for their UK tax paid, even if they have a complex network of companies in the country.

- looking at the Danish model, which is much more transparent on corporation tax.

- Consult on improvements to transfer pricing rules.

Shadow Chancellor Ed Balls wrote a blog-post where he explained:

To make that happen the government should put concrete proposals on the table for the G8 to deliver internationally agreed action on tax transparency. But in the meantime Labour will also be talking to British business about how transparency of revenues, profits, and taxes paid that’s needed could be delivered domestically if international agreement takes time to be reached. No action isn’t an option.

But this isn’t just about individual companies. So second we’re going to have to reform the current rules that allow companies to make profits in Britain but pay no tax. That means reform of our corporation tax system. In the 21st Century value is now often in brands, intellectual property, customer loyalty and ideas which can be traded globally between different parts of a company group. The rules need to be clearer, tighter and properly enforced.

That is why, as part of the policy review, we will also be looking at the rules underpinning the taxation of multinationals. We will examine international lessons on how we can improve transfer pricing rules, learning from countries where rules are more strictly applied. Shadow exchequer secretary Catherine McKinnell and I will be publishing a consultation document in the coming weeks and we will gather evidence from experts across the corporation tax field.

The party will also launch a consultation to explore ways to force greater transparency on to corporate world.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


If ‘consulting’ and ‘looking’ at other tax schemes a bit is a tough line then the Labour Party is further gone than I thought.

“That means reform of our corporation tax system. In the 21st Century value is now often in brands, intellectual property, customer loyalty and ideas which can be traded globally between different parts of a company group. The rules need to be clearer, tighter and properly enforced.”

Gosh, that’s lovely.

So, lessee. They’ll outlaw the payment of royalties like Starbucks was doing? Ooops, no, they can’t. EU law makes it illegal to tax such royalty payments. So they’ll tax that interest that Boots is paying to Switzerland then? Ooops, no, EU law makes that illegal too.

But they’ll tax the profits that Vodafone hides in Luxembourg at least. Err, no, illegal again, as the Cadbury case sorted out.

Well, at least they’ll get Facebook, Amazon and Google, right? Nope, Single Market rules again.

So what, actually, are they going to do? Other than be very serious indeed about this?

This just shows a catastrophic lack of understanding about taxation and the rules involved. Tim W above has only just touched on the start of the problems.

You seem to think Tim that it’s impossible to persuade EU to change taxation laws too.

Also, publishing details would at least make it harder for companies to maintain opaqueness like they have now. Public pressure.

It seems obvious that, if we are to resolve these tax issues, we must leave the EU. The single market is probably the only part of the EU that benefits us, and if we don’t want it, why should we stay in the EU?

Alternatively it might be all posturing from politicians again who have no intention of changing anything.

You seem to think Tim that it’s impossible to persuade EU to change taxation laws too.

They’re mostly not taxation laws, they’re laws about free movement of capital. Changing that would require a fundamental re-evaluation of the Single Market. What you’re suggesting is a sizeable return of sovereignty to the Member States, bigger, incidentally, than anything Cameron is suggesting.

@4. Sunny Hundal

Sunny, you are not putting 2 and 2 together here. The operation of the EU is dependent on the rules currently in place. What you would need to introduce the rules you have suggested are effectively capital controls. Apart from them never working and having terrible effects on the economy, they would completely undermine the way in which the EU is financed. You would shut down most of the trade with EU states as the right to move capital between nation states becomes a bureaucratic function.

So yes, public pressure could change it, but the change would have to be so fundamental, and the results so drastic that you would crash Europe.

I fear there is a severe lack of understanding on the operation of the EU and the interdependent law here. This is not simply a change of EU taxation law as you think.

As above.

Sure, you might be able to persuade the EU to change. But two things:

1) This isn’t something in the power of the UK Govt to demand or do. They’re one of 27 voices and 27 votes.

2) It is a change to the fundamental basics of the EU. The free movement of capital, labour, goods and services. The “pro-Europeans” would absolutely never, ever, agree to the agenda. We are supposed to be “integrating Europe” after all. And I can’t actually think of any country that has ever had capital controls within itself.

It’s true that I think we should leave the EU. But as above, the only way we could actually gain enough control over taxation to be able to do the things seemingly desired is to do so.

“So what, actually, are they going to do? Other than be very serious indeed about this?”

Prosecute those caught doing tax evasion in Switerland would be a start. Employ more inspectors.

There’s an EU forum on transfer pricing that meets every couple of months.

http://ec.europa.eu/taxation_customs/taxation/company_tax/transfer_pricing/forum/index_en.htm

That’s about all I can offer on that point.


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