Rebecca Reading: Tax without the nonsense
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 Rebecca Reading, Partner, Baker Tilly
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The other side of the story. Just in case you missed it, tax was once again at the top of the political agenda, with the Prime Minister announcing that individuals and businesses must “pay their fair share,” and going on to say that, “the public who buy from them have had enough,” referring indirectly to the now widely-reported tax planning antics of some well-known multinationals. But Davos is in Switzerland. Switzerland is a well-known low tax country, and in the views of some analysts, a full-blown tax haven. Tax rates in Switzerland can be as low as around 8%, although there are complexities in terms of the types of company, income and precise geographical location. Compare that with the UK main corporate tax rate, which appears to be approaching 20%, or with higher taxing nations such as the US, which come in around the 35% mark. In all the recent fuss about the behaviour of global businesses and their tax advisers, and the criticism of UK politicians and pressure to do something about this, I have heard very little comment on or discussion about the tax policy of other countries, including places like Switzerland! I recently attended a presentation by a Swiss tax expert, and actually found myself shocked at some of the low tax rates and other tax breaks still available. It was a strange juxtaposition, considering the prevailing attitudes here, and one which I found slightly unpalatable. I have come across contradictory, although I would probably say respectable, views about whether there is anything morally wrong with a state deciding to be a tax haven. Some consider this tax competition inherently unhealthy, sucking wealth and resources out of “real” economies. Others believe that low-tax countries, provided they have a robust compliance environment, keep other tax authorities honest and that it is just another form of capitalism to compete on the basis of your tax system just like anything else, especially if the country happens to have rather limited other opportunities to compete on the global stage, as might be the case for some Caribbean islands for example. It may not be the spirit of the age as expressed in the UK media, or across the other G8 countries, but being a tax haven is big business internationally. No matter what the British public might think, our government cannot actually stop another state creating a low tax environment, perhaps especially to attract foreign businesses in a rather predatory manner. Neither can any politician prevent someone else thinking that, say, Switzerland, would be a good place to do business, hold intellectual property, run a finance company or whatever. Multinationals can chose where they operate and if the law in another country purposely makes a tax break available or offers an irresistibly low rate, changing the law in the UK can surely only have a limited impact on business decisions, especially in the long term. More articles in
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