INVESTIGATIONS into the tax affairs of multinational businesses have brought approximately £4.7bn into the public purse over the last five years, MPs heard.
HM Revenue & Customs chief executive Lin Homer (pictured) said the department performs “reasonably well” by international standards as she defended its record on dealing with tax avoidance, particularly by big corporations.
She added that the public does not “get” the tax rules relating to international companies, reports the Financial Times.
“One of the challenges for people to understand is that, in broad terms, companies are required to pay corporate tax in the country where they carry on the economic activity, not necessarily where the customers are located,” she said.
HMRC director-general of business tax Jim Harra would not be drawn on the cases of Facebook, Google, Starbucks and Amazon, despite the criticism they have faced over their UK tax bills, citing the principle of taxpayer confidentiality.
While he was keen to emphasise there is both a legal and social responsibility for companies to pay a fair share, Harra conceded “there can be a whole variety of reasons why a business, large or small, may pay less than the business next to them”.
He added that transfer pricing – intra-group purchase of goods and services – can allow multinationals to augment their profits. That practice, he said, is subject to internationally recognised regulations administered by the Organisation for Economic Co-operation and Development (OECD).
Freelancers and micro-businesses still need more information about the government’s plans to make tax digital
New dividend tax is an attack on small business owners and is acting against the best interests of the UK economy, warns Top 50 accountants, Bishop Fleming
The Treasury is consulting on how businesses remunerate their staff to assess whether companies are artificially using benefits in kind to avoid tax
HMRC is consulting on proposals to clarify the tax treatments of general and limited partnerships