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

CBI’S Richard Woolhouse calls for international cooperation to tackle tax avoidance


Richard Woolhouse, head of tax and fiscal policy at the Confederation of British Industry (CBI), tells International Tax Review why he thinks international cooperation is the best way to tackle highly abusive avoidance and why the rule of law not morality should determine what counts as a fair share of tax.

International Tax Review: Google, Amazon and Starbucks have been criticised for not paying as much tax in the UK as the public and politicians believe they should. But is it the responsibility of companies to act within the spirit of the law, or is it the responsibility of governments to ensure companies pay the right amount of tax?

Richard Woolhouse: The majority of businesses pay the right amount of tax, and for the small minority which do not, times are getting tougher, and rightly so.

In some cases the tax system is lagging behind commercial reality, particularly around the taxation of the digital economy and transfer pricing. As the Prime Minister highlights, the UK needs to work together with other countries, including the G8, to change the rules where appropriate, so that they are fit for the global business age.

The amount of tax paid should always be determined by the rule of law and not public opinion.

ITR: Do you think corporations need to pay attention to their reputation when designing their tax policies?

RW: Tax and tax planningis now a board-level issue and companies are thinking about their reputationwhen it comes to tax matters.

ITR: Common arguments in defence of corporate tax avoidance are that it’s legal and it doesn’t take into account a company’s total tax contribution to society. Do you believe these are sufficient to placate the public and the media?

RW: The CBI is against highly abusive avoidance schemes which serve no commercial purpose other than the minimisation of tax.

It’s right that the broader discussion of businesses’ contribution to society includes a conversation about investment, jobs and skills, but this is absolutely not an excuse for abusive avoidance. At the same time, companies can do more to explain their tax affairs to the public.

ITR: What government measures do you think would be fair and effective to ensure companies pay the right amount of tax?

RW: Some of the recent high profile examples have arisen because of developments in the digital economy where it is often difficult to value particular business activities in a simple way.

In many cases, the tax system is lagging commercial reality and what is needed is multinational action coordinated by the OECD to update the rules on how business activities are taxed internationally. In particular, the current OECD project on transfer pricing and intangibles will lay down a much more robust framework.

ITR: Is it possible for governments to act alone to close unintended loopholes in international tax law, or is international cooperation the only option?

RW: Business nowadays is often borderless so international cooperation is much more effective.

ITR: There is a lot of disagreement over what a “fair share of tax” means. What is your personal view on this?

RW: The concept of morality is difficult because it is open to different interpretations. A truly effective tax system must be driven by rule of law, which needs to keep pace with how businesses operate.

ITR: Sainsbury’s Chief Executive Justin King said that companies wishing to trade in the UK should contribute back to society through corporation tax. Would you agree with his comments?

Multinational investors in the UK should be taxed on the profits relating to activities undertaken here. Looking at the data more than 90% of all UK corporation tax is paid by multinational corporations and this is split roughly 50:50 between inbounds and UK based companies.

more across site & bottom lb ros

More from across our site

The companies have criticised proposals for the gig economy, while the UK and EU VAT gaps have fallen in percentage terms, and ITR speaks to a European Commission adviser about its VAT reforms.
Corporations risk creating administrative obstacles if the pillar two rule is implemented too soon, sources say.
Important dates for the Women in Business Law Awards 2023
The Italian government published plans to levy capital gains tax on cryptocurrency transactions, while Brazil and the UK signed a new tax treaty.
Multinational companies fear the scrutiny of aggressive tax audits may be overstepping the mark on transfer pricing methodology.
Standardisation and outsourcing are two possible solutions amid increasing regulations and scrutiny on transfer pricing, say sources.
Inaugural awards announces winners
The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.