Baker Tilly: Tax without the nonsense
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Rebecca Reading, Baker Tilly
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There seems to be no respite in the on-going debate about tax avoidance by multinationals. Although part of me, as someone who “does tax” for a living, is still quite pleased that tax is now a fascinating conversation starter rather than the stopper it was a year or so ago, at the same time even I can admit to becoming a little bored. I wonder whether anyone out there has any bright ideas about what should be done about this, especially any suggestions that would make the tax system fairer? One might think that with HMRC being so close to the issues and presumably as experts in this field it would be in their interests to throw themselves into the quest to find a solution. Think of the good publicity, not to mention the extra tax revenues that would result! The fact that whenever tax hits the headlines HMRC, in the main, stay relatively quiet suggests to me that perhaps the situation is not as straightforward as some reports would have us believe. For one thing, HMRC’s own data indicates that as far as the Tax Gap (the difference between the tax revenues the government collects and the revenues they think they should collect) is concerned, corporation tax avoidance by large corporates is not the main problem. Criminal activity and the hidden economy of undeclared “off the books” income, which are undisputedly examples of tax evasion, plus various errors and mistakes by tax payers trying to get things right but not succeeding for whatever reason, are more significant. This is not to say that the behaviour of multinationals is unimportant; more that it is one of a number of challenges that the government and HMRC face to collect the right tax at the right time. Another angle on this is that although it is fairly easy to point out inadequacies in the current system, it is fiendishly difficult to come up with a workable alternative. I say this because surely if there was a simple fix then someone would have come up with it by now. The House of Lords and the OECD have both issued reports in recent months, and both are an important contribution to the debate, however in terms of content they lean towards an in depth analysis of the problems and areas that need further examination, rather than setting out concrete solutions to make the system better. The conclusion I draw from this is that there really is no big idea out there that we are all missing. If this is true, then what can the government (or anyone) do? Perhaps the way forward is to carry on working with the current legal framework and simply live with its imperfections.
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