Tax Evasion Measures to be Taken – G8 Summit

G8 leaders agreed on new measures to deal with money laundering and tax avoidance. They include giving automatic access to information to their residents` tax affairs and a requirement that all shell companies identify their effective owners. G8 includes UK, US, Germany, France, Italy, Russia, Canada and Japan.

The main purpose of the new measures is to “fight the scourge of tax evasion”.

David Cameron hosted the summit in Northern Island. Another important event, which happened is the launch of free trade negotiations between EU and the US, which Cameron referred as “the biggest bilateral trade agreement in history”. Hopefully the future  legal agreement will be beneficial for both sides.

The Three Ts – Tax, Trade and Transparency – this is placed at the top of the UK agenda, for its presidency of G8

The summit was overshadowed by the conflict in Syria and Vladimir Putin called for talks for Syrian peace to be held in Geneva  as soon as possible, which was discussed, however no for the Geneva talks was given, and the statement made no mention of what role Mr Assad could play in the future

The summit has been overshadowed by the conflict in Syria.

The G8 leaders – including Russian President Vladimir Putin, an ally of Syrian leader Bashar al-Assad – backed calls for Syrian peace talks to be held in Geneva “as soon as possible”.

All G8 leaders agreed on that transparency is required for multinational companies, which should tell the authorities what tax they have paid and where.  ”Countries should change rules that let companies shift their profits across borders to avoid taxes,” the communique said. It follows revelations about the ways in which several major firms – including Google, Apple, Starbucks and Amazon – have minimised their tax bills.

Illegal activities, including tax evasion and money laundering, will be tackled by the automated sharing of tax information. Speaking during the summit, Mr Osborne said more progress had been made on reforming the global tax system in the past 24 hours than the “past 24 years”.

These and many other topics have been discussed during the summit.

The Tax Policy of Starbucks Will Probably Change

As the legal avoidance of corporate tax is a very popular topic now, The Legal Stop have learnt there is a chance that Starbucks might change the way it operates in order to stop paying corporation tax in the UK at all..

Regardless of the fact that Starbucks has almost one-third of the UK coffee shop market, researches show that it has paid corporation tax only once in 15 years.All foreign countries have to pay corporation tax on profits made in the UK and UK-based companies pay it on their taxable profits no matter where they were made.

The Public Accounts Committee chairperson Margaret Hodge shared her opinion about the work of HMRC in a report published on Monday. In her statement, she said that HMRC needed to be “more aggressive” because now the level of tax taken from multinational firms with large UK operations was “outrageous and an insult to British businesses and individuals who pay their fair share”.

The best example for this is Starbucks. It sold goods for nearly £400m in the UK last year, but in fact avoided paying corporation tax, due to the fact that they did things like transferring some of their money to a sister company in the Netherlands in the form of royalty payments, buying coffee beans from Switzerland and paying high interest rates to borrow money from other parts of the business.

This sister company in theNetherlandsis currently paid 4.7% of Starbucks’ sales but this will not help reducing the tax liability anymore. HMRC promised that in the future all international companies would pay the tax due “in accordance with UK tax law”.

Starbucks will give their opinion over the changes on Wednesday ahead of Chancellor George Osborne’s Autumn Statement. Amazon and Google were also criticized by the Public Accounts Committee’s report because they also did not pay enough corporation tax.

HMRC is promised to get £77m of new money in order to cope with wealthy people and big companies who try to avoid paying taxes.The expected result after these changes is equal to £22bn a year.

 

UK Loses Billions because of Tax Avoidance Schemes

A recent report shows that the UK loses billions just because HM Revenue and Customs (HMRC) are unable to control the tax avoidance schemes spread across the whole country.

By the words of The National Audit Office, HMRC was dealing with about 41,000 cases with up to £10.2bn at stake. The professionals from HMRC claim that during the last two years they had successfully contested 40 schemes.

No matter one of the main priorities of the coalition government in order to reduce the deficit in the budget is to stand against the tax avoidance, according to the NAO more than a hundred new schemes became evident each year having in mind the time between 2004 and 2011.

It is determined that 30,000 small companies or individuals use the so-called employment intermediary schemes and partnership loss schemes. This way they inflate the loss artificially using “circular loans”, which gives them the opportunity to conceal other income from tax.

Despite the fact that HMRC strives for success in this area, such cases often consume lots of time and appear to be too hard to be resolved.

Litigation has opened 110 investigations since April 2010. HMRC managed successfully with most of them but according to the NAO, this does not prove that the litigation will turn out to be an effective way to stop the schemes.

“It is inherently difficult to stop tax avoidance as it is not illegal. But HMRC needs to demonstrate how it is going to reduce the 41,000 avoidance cases it currently has open.”

The NAO also mentioned these schemes are usually used by specialist tax advisors whose aim is to prevent their clients from paying taxes.

By virtue of the law since 2004, authorities should be notified but the watchdog is skeptical about the positive results of this regulation over the scale of tax.

“This changed the shape of the market, but has not prevented some promoters from continuing to sell highly contrived schemes to large numbers of taxpayers, depriving public finances of billions of pounds.”

The chairperson of the Commons Public Accounts Committee observing the work of the NAO, Margaret Hodge, shared her opinion that HMRC have to try harder in order to clamp down on promoters of tax avoidance schemes so that some evident results appear.

“People who pay their taxes promptly and in full will be dismayed to discover that the enormous level of tax avoidance taking place is overwhelming HMRC’s efforts to combat it,” she said.

As an answer to her statements HMRC claims that their successful investigations brought to court protected about £4bn.

The spokesperson later added that the Government would help HMRC giving it more powers to obtain information and creating an anti-abuse rule in 2013.

If you are worried about your company`s tax, do not hesitate to get a legal advice online.

Multinational Companies Accused of Tax Avoidance

The UK branches of Starbucks, Amazon and Google UK will face questions, because of tax avoidance accusations. All of them have been suspected to have been paying little or no tax on their UK earnings. The overseers of government financial issues , the Public Accounts committee will meet the executives of these companies and investigate the case, where companies have been accused of seeking various means to avoid paying the required amount of taxes, defined by the UK legislation. Matt Brittin, the chief executive of Google UK, as well as Starbucks chief financial officer Troy Alstead and Amazon’s director of public policy Andrew Cecil, will speak before the committee, which is headed by Margaret Hodge.

Generally, multinational companies, like the stated above usually seek ways to pay as low tax as possible. For example they settle the company in low-tax jurisdiction countries, which legally allows them avoid paying taxes in the countries in which they do the majority of their business.

The question is then which country’s tax authorities should get the tax receipts and over what share of the sales.

For that reason there is a great complexity in dealing with tax law issues- it is difficult to define how much tax should each company pay and where.

The investigations over Starbucks, Amazon and Google UK shows that during a 14-year period, Starbucks paid £8.6m corporation tax, they are also found claim  accounting losses when it was profitable. Google UK is claimed to have paid £6m tax in 2011, with a turnover of £395m and Amazon is reported to have paid no tax, despite profits of over £3.3bn, as the company has been transferred to a Luxemborough-based firm.

Starbucks, Amazon and Google UK are not the only multinational companies suspected in tax avoidance schemes. Multinational companies such as eBay, Apple and Facebook also have faced some controversy over their tax contribution to the UK. For example Facebook in the Uk has paid only £238,000 in tax last year, by having its European base in Dublin, where tax is considerably lower than elsewhere in the UK. Apple is reported to have paid less than 2% corporation tax on its profits outside the UK and eBay is claimed to have paid £1.2m in tax in the UK.

Former City minister Lord Myners has claimed that the current tax regime isn’t working, saying: “Corporation tax for an MNC [multinational company] operating in the UK is close to being a voluntary payment.”

Messing up with authorities can be dangerous, that`s why The Legal Stop offers a great amount of legal documents necessary for your business. If a document is not featured in the list, it can be easily drafted by our experienced UK solicitors.