Member Article

Is the ‘Google tax’ more about policy or politics?

The Treasury today published the draft Finance Bill 2015 which spells out further details for a new Diverted Profits Tax, which will prevent multinational companies from shifting UK profits overseas. As part of the Autumn Statement earlier this month, the Chancellor announced that a 25% tax would be levied on the UK profits diverted abroad by multinational businesses. Now the details have been announced, including powers being given to HMRC to determine the amount of profits which have been diverted. Companies will be required to pay the tax assessed by HMRC upfront before the liability is finally determined by a court or tribunal. Clearly the Chancellor feels under pressure to tackle the thorny issue of multinationals paying their fair share of tax, but one wonders why he’s felt the need to rush in these measures while the OECD continues to work towards a cohesive, global plan to tackle this very issue?

Requiring multinationals to pay tax before any appeal, and allowing HMRC to be ‘judge and jury’ in this issue, may be seen to be getting the ball rolling, but the subsequent appeal process is likely consume considerable amounts of specialist time within an inadequately resourced HMRC, and use up large amounts of valuable tribunal and court time.

What is really surprising is the extremely low amount of tax HMRC predicts will be generated as a result of this move. The reality is they simply can’t know how much it will be, and there have been a number of occasions where HMRC has predicted tax yields which have ended up much lower than expected. Perhaps HMRC has deliberately downplayed these figures so that the move is seen less as a ‘money spinner’, and more about leading the reform of the taxation of international corporates?

Such controversial powers should be the subject of detailed scrutiny before the legislation becomes law, although it’s possible that because of the election timetable there will be a limited debate on the Finance Bill, and so this draconian power could be rushed through parliament without any proper consideration, or might never actually reach the statute books.

This was posted in Bdaily's Members' News section by Baker Tilly .