Deloitte comments on today’s House of Commons Public Accounts Committee |
31 January 2013
Deloitte was invited to give evidence to the House of Commons Public Accounts Committee on 31 January. Bill Dodwell, Deloitte’s Head of Tax Policy, attended the session. Representatives from Ernst & Young, KPMG and PwC also gave evidence alongside Deloitte.
Bill Dodwell, head of tax policy at Deloitte, said: “We were pleased to help the Committee in its work. We hope that the experience and expertise Deloitte provided was useful to the Committee’s deliberations. The effectiveness of both the tax system and the tax authorities affects everyone, so it is important that the issues are considered and discussed in detail. We hope we have helped the Public Accounts Committee in its inquiry and that our evidence helps inform and balance the debate.
“The UK - like all countries - wants to attract businesses to base themselves in the UK and a competitive tax regime is vital to achieving that. Growth in UK employment is the single most important factor in economic growth. The UK’s newly competitive corporate tax regime is encouraging multinationals to move additional activities here - supporting jobs and building on the many strengths of the UK.
“A major part of our role is to help our clients understand the law and to meet their vital compliance obligations. The UK has very substantial body of tax legislation and case law; we perform an essential function in the UK economy by helping our clients navigate this complexity. HMRC has pointed out that 90% of tax receipts come in with no compliance interventions by them - which is down to the high level of compliance in the UK by business and individuals, supported by professional tax advisers. The OECD’s 2008 report on Tax Agents also acknowledged that intermediaries play a vital role in the tax system, helping taxpayers understand and comply with their tax obligations.
“Deloitte advises our clients to make tax decisions in line with their commercial position. Multinational companies, like all businesses, make commercial decisions based on a wide range of factors, of which tax is just one. We advise clients on how approaches will be seen from a risk and reputational standpoint, and take this into account in our recommendations.
“We support greater transparency about taxation. Measures such as ‘country by country’ reporting, proposed by some, appear impractical and burdensome on business, and are unlikely to provide the clarity and simplicity that would aid a better understanding of an organisation’s tax contribution. We also believe that any transparency initiative needs to be adopted internationally if it is to provide uniformity of reporting and easier benchmarking between companies and across industries.”
Further points:
- The UK and international tax systems are based on international agreements originally negotiated before the Second World War. Those agreements are designed to allocate profits to countries based on the activities carried out in those countries - and thereby to avoid economic double taxation. UK companies benefit from those agreements. The UK is one of the world’s largest exporters and it also receives much more in royalties from overseas than is paid (ONS International Trade in Services -2010 Exports £10.9bn; Imports £6.8bn).
- The OECD has acknowledged that some parts of these international agreements have not kept pace with modern developments and, at the instigation of the UK, Germany and France plans to address this through its Base Erosion and Profit Shifting study. This will look at areas where modern business practice and the development of the internet may have led to unintended tax consequences. It is due to deliver a proposed work programme to the G8 meeting in June. Deloitte is happy to contribute recommendations to this group.
- UK business pays substantial amounts of tax. The CBI has reported that about 30% of UK tax (principally corporation tax, employer’s NIC, business rates and irrecoverable VAT) is borne by business.
Ends
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