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Are we in danger of perceived protectionism?

I have been following with interest the twists and turns in the attack on tax avoidance (which is starting to feel like a personal attack on tax professionals) and have also been following the email traffic / chat comments.  There seems to be a growing view, particularly from the USA, that the UK is seeking to increase its share of the tax take at the expense of the rest of the world.  The view seems to be that there is, broadly, a finite tax take and if the UK increases its share the take elsewhere will go down. 

There is, I think, a degree of logic to this as UK corporation tax is generally creditable against tax liabilities in other jurisdictions and VAT and PAYE (or the equivalents) are only due for any one jurisdiction.

The problem is one of perception.  Is the UK trying to take and keep more than its fair share (a phrase we increasingly hear about tax liabilities) at the expense of its European and US counterparts?  Even if it is not over-taxing, if the general belief is otherwise what happens then? We saw Starbucks making a voluntary donation to the Treasury to make up for its lack of tax to appease public opinion.  The UK will have to manage its overseas relationships as part of its war on avoidance.  A war on evasion is easy to sell – no tax is being paid and tax must be due somewhere.  A war on avoidance that seeks to move liabilities to where in someone’s opinion they “properly” belong is much harder to justify.

What are the long term consequences of moving tax revenues to the UK’s benefit at other’s perceived expense?  Will companies want to use the UK as a head office base if the result is that more tax than was ever planned or budgeted has to be paid?  Will any multi-national want a UK base if that results in a public humiliation of chief executives in front of the Public Accounts Committee?  What about the European concept of free trade and free markets?

What is the point of lowering tax rates on the one hand to encourage business to relocate to the UK and on the other castigating those that take up the invitation for not paying enough tax when they come here (the alternative may have been no UK tax)? 

Is anyone looking at the long-term as opposed to a possible (but not probable to be honest) short term gain?

Are we in danger of a back-lash?

 

 

Date: 5th February, 2013
Author: Cathy Corns

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