Tweet
HM Revenue & Customs yesterday hit back in the wake of a critical report showing that many of Britain's biggest companies paid little or no corporation tax. Just 50 of the 700 largest firms paid two-thirds of the total tax raised from the sector in 2005/06 while 181 paid none, according to the cross-party public accounts committee.
The MPs said corporation tax receipts were skewed towards a handful of sectors, with banking, oil and gas and insurance contributing two-thirds of large business corporation tax.
The committee acknowledged that companies could legitimately reduce their corporation tax payments through a series of relief and allowances, but urged HMRC to speed up inquiries into corporate tax bills and improve its targeting of businesses which posed the biggest risk of non-compliance.
In response, HMRC said: "The tax system supports business expenditure on such areas as pensions, capital investment and research and development through a carefully policed system of reliefs and allowances. This inevitably reduces the amount of tax paid by some businesses. This is not the result of avoidance or evasion, but of the proper use of the reliefs that parliament has approved in order to encourage business growth and support investment in company pension funds."
In response to criticism from the committee that more than 40% of its tax inquiries had been running for at least two years - against a target for completion of 18 months - HMRC said it had cut the number of open inquiries by more than 50% over the last 18 months.
The committee chairman, Edward Leigh said: "The department has introduced a new approach in which high-risk businesses will be singled out for extensive investigation. That's good but it must publicise this new approach. It should also robustly apply new penalties for those companies engaged in serious tax avoidance activities."
In a separate development yesterday 17 of the world's leading economies vowed to draw up an expanded blacklist of countries that failed to meet standards on fiscal transparency. Warning that the global market turmoil spelled an end to tolerance of opaque and uncooperative financial centres, ministers from France and Germany said the new list from the Organisation for Economic Cooperation and Development (OECD) could include Switzerland for the first time.
"Switzerland should be on the blacklist and not the green list," said Peer Steinbruck, the German finance minister. "Switzerland is only prepared to cooperate with us if there is tax evasion. But to prove this tax evasion we need the exact information that Switzerland has, but it will not deliver it," he said.
Eric Woerth, the French budget minister, said: "Banking secrecy has its limits. Switzerland has made progress ... but we must take matters further."
Until now three tax havens - Andorra, Liechtenstein and Monaco - had come in for particular criticism from the OECD, but sources said as many as a dozen could be added to the new blacklist, due to be unveiled in the middle of next year.
Some commentators were sceptical as to how much the meeting, which was boycotted by Switzerland and Luxembourg, could achieve. The absence of the US, without whose participation any global crackdown would be almost impossible, was seen as a particular obstacle.
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
