Currently it seems likely that Britain will not ‘play ball’ in introducing common anti-avoidance tax rules with the rest of Europe. David Gauke, financial secretary to the Treasury, explained that the UK wants to maintain the flexibility to enforce its own rules, therefore ensuring tax competition.
Reform plans were announced on Wednesday of last week by European commissioner for tax Pierre Moscovici when he explained that he wants to put tax harmonisation policy back on the agenda. This would aim to limit the ways that large corporations are able to exploit the rules of individual countries in order to decrease their overall tax bills. This would be achieved by establishing an overarching set of rules which would dictate where profits should arise and therefore be taxed. For example this would ensure that companies like Starbucks pay their fair share of UK tax in respect of profits from UK shops.
The UK had been expected to agree to this plan because some of the more controversial aspects had been watered down. For example there had originally been proposals for there to be a consolidated European tax return but this was dropped.
Although Pierre Moscovici expressed surprise at the UK’s response, it is perhaps not surprising, particularly in the wake of ‘Brexit’. The UK has already offered significant attractions to large (and small) corporations for things like research and development and patents and there have been recent suggestions that the corporation tax rate will soon be dropped to an all-time low of 15%. In these troubled times the UK wants to keep as many gambling chips as possible on the table for all future negotiations. The threat of becoming a ‘tax haven’ may well be the UK’s first meaningful poker play…….
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