At the last COPOV Forum there was a discussion about tax avoidance. The discussion was about legal tax avoidance and relied on examples from Richard Brooks book "The Great Tax Robbery". The big question is "Is it fair?" Over the next few weeks we will set out some examples and why nothing is being done about it. Consider the following:
(1) Prosecutions for evasion of direct taxes (like income tax) run at just thirty per year even though the offence is estimated by HMRC to cost around £5.5 billion annually.
(2) Following its takeover by a private equity group in 2007 Boot's tax payments halved as the new owners loaded the company up with billions of pounds of debt on which it now makes tax deductible payments. As a result, out of operating profits of £1 billion in 2010/11, the now Swiss-controlled group paid just £59 million in tax.
(3) Barclays has over 300 tax haven subsidiary companies, 181 of them in the Cayman Islands.
(4) In 5 years from 2006 the Revenue put just eight corporation tax schemes - all of which took place before the end of 2003 - before the tax tribunal that is the first step in the legal process.
(5) Foreign football players - as "non-doms" they can keep their image rights offshore in a tax haven company entirely untaxed. Share schemes for bonuses are more valuable to non-dom players who can leave them offshore. The same net wage for a foreign player thus costs a club far less than it does a native one. So for the same total cost the club can get a better overseas player. This goes some way to explaining why the Premier League had just 11 non-British or Irish players in 1992 but by 2007 it had 250.
(6) In 2006 accountants Grant Thornton estimated that in the previous year Britain's fifty-four billionaires, mostly non-doms, paid tax of £15 million on combined fortunes of £126 billion.
(7) By 2010 penalties for fraudulent or negligent understatements of income charged on all 770 companies dealt with by the Revenue's Large Business Service had dropped to £0.4 million, or around 0.01% of the tax they had underdeclared on their tax returns.
(8) Public Buildings and Territory of Ownership
HMRC Tax Offices Bermuda
HM Treasury Jersey
Home Office Guernsey
Ministry of Defence Guernsey
(9) Research suggests that developing countries lose at least $50 billion per year and perhaps as much as $280 billion in corporate profit sharing (i.e. avoidance) and evasion by individuals. Total worldwide annual aid to developing countries is around $100 billion.