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Tax avoidance at heart of government policy

Jan 30

Written by:
30/01/2013 14:40  RssIcon

Companies too heavily involved in creating new laws

On last night's File on Four (BBC Radio 4), MP and chair of the Public Accounts Committee, Margaret Hodge claimed that the formulation of new tax law is too heavily influenced by major corporations and accountancy firms.

Speaking to the BBC, Mrs Hodge said working groups set up by the government to discuss a series of tax reforms were too heavily dominated by those with something to gain.

The government "only talks to those who have a self interest in reducing their tax contribution", Margaret Hodge said.
"What to me is really dangerous... is that many are working very closely both with HMRC and with the Treasury to devise new tax changes... and then they exploit those perfectly legitimate objectives," she said.

Mrs Hodge added: "My concern with the way the current government is developing tax law is that it only talks to those who have a self interest in reducing their tax contribution."

Legal changes, which come in this year, include tax breaks for companies which patent their products and this was thought to lose the treasury over £1billion per year. Another controversial change allows companies which have offshore finance arms to pay just a quarter of the standard 23% rate of corporation tax.

In addition research from Mike Lewis of ActionAid suggests that changes to the Controlled Foreign Companies Rules, designed to stop companies funnelling money into tax havens will in fact do the opposite. He says that the government estimates that they stand to loose around £1billion a year from the changes. What's more 30 companies who helped formulate the policy change have over 3000 subsidiaries in tax havens between them.

This revolving door policy was exemplified by the case of Vodafone whose head of tax, John Connors, was named as a member of the Treasury working group helping to rewrite CFC rules soon after it was found to be avoiding millions in tax both here and in India.

A second example was KPMG. The BBC claim that two managers from accountancy firm KPMG seconded to the Treasury to help formulate tax changes now appear on brochures produced by KPMG advertising tax advice services, telling them how they might use the changes to reduce their tax bills.

The programme also claimed that Microsoft had avoided £2.35 billion in corporation tax last year paying just £19 million when it  should be paying around £246 million. This was done using a complex ownership structure that included companies in Ireland, Luxembourg and the Bahamas. This was despite benefiting from lucrative public contracts.

Tomorrow a number of big accountancy firms are due to give evidence to the Public Accounts Committee on their role in formulating tax policy.

Read more about our tax campaign and Amazon boycott.





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