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British MPs Debate Corporation Tax and Multinationals

By Amanda Banks,, London

03 July 2013

British MPs have expressed discontent at multinational companies' tax arrangements, in a debate in Parliament at which Exchequer Secretary David Gauke insisted that HMRC has "robust methods in place to ensure tax compliance," and that the UK has "led the way" in encouraging the Organiz9ation for Economic Co-operation and Development to improve international law.

Gauke's comments followed a litany of complaints from MPs about particular companies, in which numerous media groups, internet giants, supermarkets, and utility firms were named. MPs from across the political spectrum contrasted high turnovers with low amounts of corporation tax paid or noted off-shore arrangements.

Gauke observed that that "there can be some confusion" about corporation tax. He reminded his fellow MPs that it is a tax on profits, not on sales, and that it is "entirely legitimate" for companies to make use of reliefs and capital allowances if done so in the way that Parliament intended. He also explained that HMRC has designated Customer Relations Managers working with large businesses, whose role "is essentially to man-mark the most complex and high-risk taxpayers." He added that this approach had been endorsed by the OECD, and that it had secured an extra GBP23bn in the past three years, including GBP8bn more in 2012-13.

Gauke was challenged on internet companies by Margaret Hodge, who as Chair of the House of Commons Public Accounts Committee has been particularly critical of HMRC's ability to get revenue from large companies. Hodge suggested that no action had been taken against internet companies, but Gauke explained that due to taxpayer confidentiality it could not be known whether or not this was the case.

Referring to the problem of  a company's "permanent establishment," he added: "We have led the way in encouraging the OECD to look at what needs to be done to improve the international situation, to make sure that the base erosion and profit-shifting work can ensure that the tax rules are all up to date for the internet world."

TAGS: tax | tax avoidance | commerce | Organisation for Economic Co-operation and Development (OECD) | corporation tax | United Kingdom | e-commerce | legislation | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC) | legislation amendments

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