All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Osborne figure-fudge highlights UK government’s core conflict on avoidance


COMMENT: George Osborne used inappropriate figures when boasting of the UK government’s success in clamping down on tax avoidance during the latest Budget, the UK Statistics Authority has found.

The mess of the figures Osborne is accused of making is an indication of the tightrope the Chancellor of the Exchequer is walking when it comes to tax avoidance. A policy of publicly criticising corporate tax optimisation strategies somewhat conflicts with reforming national tax policy to reduce corporate tax rates, provide patent-related incentives and relax controlled foreign company (CFC) regulations. However, the government argues there is no inconsistency: in exchange for a favourable tax regime it does not expect taxpayers to use aggressive avoidance techniques to pay less tax.

The Chancellor of the Exchequer’s Budget speech in March claimed that HMRC, the UK revenue collection agency, was collecting “twice as much as before” as a result of new compliance measures.

But those figures have since been shown to be estimates or target figures, rather than representing actual revenue collected by HMRC. The target figures were also based on a separate measurement to that used for the previous five-year election cycle, further skewing the “twice as much” Budget claim.

Balancing a competitive tax policy – “the most competitive in the G20” – with compliance claims such as those made in Osborne’s Budget speech, is not proving to be easy and the revelation about inappropriate collection statistics is evidence of the difficulty of the task.

Those that have accused the UK government of trumpeting an aggressive, zero tolerance attitude to corporate tax avoidance (Osborne has previously described aggressive tax avoidance as “morally repugnant”) while privately cosying up to companies will now feel they have another example to reinforce that claim.

But Sir Andrew Dilnot, head of the UK Statistics Authority, apportions most of the blame for Osborne’s Budget speech error to HMRC. The revenue authority changed its accounting method in 2010 to include revenue protected figures, which essentially allowed HMRC to include predictions of future tax to be paid by those found to have acted outside the law.

The change in accounting method meant figures presented to Osborne ahead of his Budget speech showed a compliance yield of £100 billion ($166 billion), compared with £52 billion for the five years leading up to the last election.

“We’ve discovered and corrected the overstated growth in compliance revenues for the last two years and we have made this clear in our annual report published in July 2014,” said a spokesperson for HMRC.

more across site & bottom lb ros

More from across our site

Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
Tax directors tell ITR that the CRA’s clampdown on unpaid taxes on insurance premiums is causing uncertainty for businesses as they try to stay compliant.
HMRC has informed tax directors that it will impose automated assessments on online sellers with inaccurate VAT returns, in a bid to fight fraud.
UK businesses need to reset after the Upper Tribunal ruled against BlackRock over interest deductions it claimed on $4 billion in inter-company loans, say sources.
Hong Kong SAR’s incoming regime for foreign income exemptions could remove it from an EU tax watchlist but hand Singapore top spot in APAC.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree