Corporate tax strategies and exemptions are under the scanner again in the UK.
Is it any wonder that corporate taxation has become a source of such controversy? After five years of economic torpor and deep government spending cuts caused by the excesses of the banks,the perception of big business of any kind not paying its share is understandably incendiary. Nor is there any shortage of fuel for the public outrage. With Starbucks,Google and Amazon among the big names barracked for their albeit legal sleights of hand,the arcane terminology of the Double Irish has crept into the lexicon.
During the past week,The Independent has taken matters a step further by exposing the extent to which just one of HM Revenue and Customss tax exemptions is taking a chunk out of the revenues flowing into the public purse. The scheme in question is simple enough. Rather than buying shares in a British company,an international investor makes a high-interest loan to it instead; but by routing repayments through a designated stock exchange such as the Channel Islands,the 20 per cent withholding tax usual on overseas interest fees is avoided. Meanwhile,of course,the UK group records much lower profits,so it,too,pays less tax…
The problem,of course,is that the mechanism is not only legal,it is deliberate. The quoted Eurobond exemption was introduced in 1984 with the specific purpose of encouraging foreign investment in British business.
From a leader in The Independent,London