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‘Two faced’ tax policy?

Margaret Hodge, chairman of the Commons Public Committee, has warned against countries “adopting a two-faced approach” to tax policy by signing up to international standards while engaging in tax competition.

Ms Hodge welcomed the UK government’s plans to stop companies moving profits offshore but also said that the UK had “found it hard to resist the temptation to engage in a race to the bottom on tax”. She referred to the patent box regime, which provides for a lower (10%) rate of corporation tax on patent income, as an example of this practice.

“The success of international efforts to tackle tax avoidance depends on all countries being prepared to play by the same rules, and not adopting a two-faced approach where they sign up to OECD standards in principle, but try and undercut one another in practice,” she said and added that exploiting the complexity of tax law to avoid paying a fair share of tax was “morally reprehensible”.

Tax experts have argued that what is necessary is to have a legal definition of what is to be taxed, and at what rate, to ascertain what tax is actually due in a way that is practical and enforceable.  Tax rates and quantum should depend on the law. There is no other way of determining the tax due.

 

 

Date: 13th November, 2014
Author: Cathy Corns

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