As the UK leads a campaign for action against corporate tax avoidance and
seriously trims the sails of domestic offshore tax havens, it has overtaken
low-tax rivals such as Ireland, Luxembourg and Switzerland, to become big
multinationals’ favourite tax regime.
It may be just a survey but George Osborne, chancellor of
the exchequer, hailed it as a “remarkable turnaround” in efforts to make
the country more
attractive to foreign investors. However, the debate over corporate tax
avoidance is making business jittery, with 63% of big companies polled
by KPMG, professional services group, saying it had adversely affected UK tax
The UK is now the most attractive tax regime compared to key competitors,
according to KPMG’s sixth
Annual Survey of Tax Competitiveness [pdf] - - the results were
published this week.
For KPMG’s 2012 Tax Competiveness Survey, senior tax professionals from
some of the UK’s largest companies were interviewed by specialist strategy
consultants, Gulland Padfield, on which countries they thought were the
most attractive from a tax perspective. For the first time in the survey’s
UK came first in terms of most commonly cited in the top three.
Osborne has cut the headline rate of corporation tax from 28% in 2008 to
a planned 22%
rate in 2014.
Researchers polled executives at 57 international companies - - both
British-owned and foreign -- and asked which countries had the lowest tax
burden. Some 72% of the executives questioned named Britain as among the most
tax-competitive countries, up from 27% last year. The UK finished fifth in the
annual survey last year.
Domestic tax havens
UK tax officials are to be given the names behind secret offshore bank accounts held
in the Isle of Man as part of a new crackdown on tax havens.
A similar deal granting Revenue & Customs inspectors access to accounts in
Jersey and Guernsey is also due to be agreed.
The maximum income tax rate in the Isle of man is 20% (compared with 45% in Britain from April
There is also a generous tax-free allowance and a big chunk of income is taxed
at just 10%.
The agreement includes a “disclosure facility” to
allow account-holders on the island to come forward and settle outstanding tax
bills, plus interest, before their details are passed to HM Revenue & Customs.
The Financial Times says the disclosure facility is expected to start on April 6
and run until September 2016. It will not be open to individuals already under
investigation but will cover liabilities dating back to April 1999. The facility
offers immunity from prosecution but, in most cases there will be a penalty
charge of 10% of unpaid tax up to 2009 and 20% for later years. Those who do not
come forward could be hit by a penalty of up to 200% of the unpaid tax, or
The Treasury said the deal was modelled on an agreement with the US to improve
international tax compliance – the Foreign Account Tax Compliance Act
(Fatca). The UK and Isle of Man’s version of Facta will, like the US rules,
allow for the sharing of information across borders.
The UK has also set up disclosure facilities with Liechtenstein and Switzerland
and it expects to collect billions from untaxed revenues in coming years.
Andrew Watters, director and
tax specialist at Thomas Eggar LLP,
a national UK law firm, commented today: “The announcement
is simply the latest example of the ongoing determination of the UK authorities,
in collaboration with the Organisation for Economic Co-operation and Development
(OECD), to ensure they know about assets held abroad by UK residents. The
Channel Islands, together with various other international financial centres,
are under similar pressure. Having identified the persons concerned, the taxman
will examine their affairs to see whether there is avoidance or evasion.
“Individuals who hold such offshore assets may wish to consider whether they are
exposed to challenge. Some, including non-domiciled individuals, may have an
over-optimistic view of their tax position. If there is an undisclosed
liability, there are opportunities to gain advantageous terms by making a
“The reference to having until 2016 to make a disclosure clearly links to the
terms of the Liechtenstein Disclosure Facility which is open until 2016.
However, for anyone who is thinking of waiting, the danger is that if their name
comes to the attention of the UK authorities before they make a voluntary
disclosure, then the option of such a disclosure disappears and they can face
substantial civil penalties or even criminal prosecution.”
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