Offshore planning has caused fall in tax revenue

A House of Lords member says that the anger and alarm from UK-based multinationals should not obscure the real problem that the Treasury is trying to address – that of the erosion of the national tax base caused by offshore planning.

Referring to comments by Angus Russell - the chief executive of Shire who claimed the company wanted 'to be a good corporate citizen' and 'to provide them most efficient tax structures for shareholders' – Lord William Wallace of Saltaire said these were 'divergent objectives' of Shire.

'Institutional shareholders, especially offshore-based hedge funds as activist shareholders, do not naturally rank the quality and security of the societies within which their companies operate as qualifying their pursuit of the profit objective. 'Reputational considerations for companies with direct relations with the public may moderate the hunt for tax-efficient offshore structures to a degree. Past revelations of efficient tax avoidance by major supermarkets and news companies, however, do not seem to have significantly dented their reputations or sales,' said Lord Wallace in a letter to the FT.

Lord Wallace pointed out that governments of advanced democracies faced the unwelcome choice of further reducing taxes on companies, depending for their revenues more and more heavily on consumer taxation – and personal income tax on those who cannot claim to live across national borders – or of limiting the autonomy of offshore financial centres and negotiating tighter international rules for corporate taxation.

'The CBI, the Engineering Employers’ Federation, the pharmaceutical companies as a group, would do well to offer a constructive response to the erosion of the national tax base, before some populist politician or press campaigner seizes on the issue to use against them,' he said.

Further reading:

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