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Monday, 29 November 2010

Some sanity in the tax system

Somebody has obviously given George Osborne some sage advice on the taxation of multinationals.

Readers of the left-wing press will be familiar with the story of how the evil mobile telephone operator has defrauded the Exchequer of trillions by refusing to repatriate its foreign earnings to the UK where they would be subject to corporation tax.  Instead it has parked intra group interest receipts and dividends in Luxembourg, from whence it has reinvested the money elsewhere in its business.  The company has argued that this is a legitimate business activity and as Luxembourg is in the EU, UK tax rules concerning tax havens are disapplied by EU rules on non-discrimination and freedom of movement of capital etc.

The reality is that the last government and HMRC were overzealous in their attempts to reach into the affairs of multinational groups and impose UK taxes on profits earned overseas but which remain offshore.  After a number of groups moved their head offices to Switzerland it should have been clear there was a problem, but it has taken a change of government to restore some sanity. For that we must be grateful.

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