BUDGET IN DEPTH: Bribe rules threaten business

Legislation to disallow tax relief on payments already considered bribes in the UK will be included in the next finance bill and will apply to expenditures incurred as of April 1, 2002.

UK legislation already taxes payment on activities such as business entertaining, commissions, introduction fees and other ‘facilitating payments.’

But in many developing countries these types of payments are standard business practice and companies may find it impossible to gain business overseas without these facilitating payments.

Grant Thornton tax partner Richard Proctor said: ‘Companies are forced to make these payments in many countries.’

He added that UK businesses may be put at a competitive disadvantage if other developed countries do not enforce similar legislation.

The government could stand to make thousands of pounds from taxes on these types of payments. According to Proctor, the payments can be quite large which could increase the amount of money the government makes on this money by 40% .

Although the government is relying on self-assessment to ensure companies comply with this law, it has the power to look into a company’s books and impose penalties if the company has not complied.

As a result the Revenue may look at sectors of the economy such as oil and exploration companies that trade with third world countries.

Last year, BP Amoco and Unilever admitted to the Commons it had made ‘facilitating payments’ in third world countries.

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