UK Tax Avoidance: Ed Balls Spells out Labour's Five-Point Manifesto

Labour has unveiled a five-point plan to tackle tax avoidance, as the emotive subject hit the headlines again, following Google's parliamentary grilling.

HMRC has a backlog of around 40,000 tax avoidance cases, which it is investigating, potentially worth £10bn ($15.2bn, €11.8bn) to the UK Treasury, at a time when the government is pursuing an austerity programme of public spending cuts.

"In tough times it's more important than ever that everyone plays their part and pays their fair share of tax," said Ed Balls, Labour's shadow chancellor.

The five points from Labour are:

• Country-by-country reporting of tax paid by companies
• Extending the Disclosure of Tax Avoidance Schemes regime, which obliges accountancy firms to tell HMRC about avoidance schemes they operate, to include global transactions.
• Open up tax havens by requiring the passing on of financial information
• Challenge the government to fully assess the effects of its relaxing of certain Controlled Foreign Company Rules in the UK relating to tax
• Fundamental reform of the corporate tax system

"People and businesses have been shocked by how little tax some companies seem to pay in Britain," said Labour's Balls.

"Sometimes there are good reasons why, such as because they are investing in research and development. But all too often companies that pay low taxes in Britain are doing so because they can bend the rules to their advantages."

Tax Scandals

HMRC fought off a high court challenge over its so-called "sweetheart deal" with investment banking giant Goldman Sachs, which saw the finance firm let off paying around £10m in interest that had accrued on an unpaid tax bill after an avoidance scheme it used was ruled unlawful.

Anti-austerity campaigners, UK Uncut mounted the legal challenge in a bid to expose the deal as unlawful, and set a precedent for future negotiations between tax officials and corporations.

However a judge said the Goldman-HMRC deal was lawful, though they noted it was "not a glorious episode in the history of the Revenue".

HMRC has reportedly done a number of other sweetheart deals with multinational corporations, raking in £4.5bn for the Treasury, though it is not known how much tax owed was waived in the process.

A recent parliamentary report accused HMRC of having an "unhealthily cosy" relationship with the big accountancy firms.

Search engine Google has also been under fire from politicians and the public over its tax arrangements.

Matt Brittin, Google vice-president, faced down the Public Accounts Committee over the company's past assertions that no sales were generated in the UK, which was why it paid so little tax in the country - just £6m in 2011 despite revenues of £2.5bn.

"Literally 99% of the companies paying for advertising with Google do not have contact with the UK," Brittin told MPs on the committee.

"No money changes hands in the UK. Firstly, the rights to what we sell and are sold are owned by Google in Ireland, under intellectual property rights.

"We are talking about buying advertising on a platform created in the US. In the UK, we cannot sell what we don't own, we cannot agree a price, we cannot agree on volume discount and we can't close a deal from Britain."

Coffee chain Starbucks, which had paid £8.6m in corporation tax across 13 years despite revenues of more than £3bn, recently agreed to hand over £20m to HMRC.

The firm had been accused of exporting its profits offshore to reduce its UK tax burden.

Australia rallies G20 on tax avoidance

Australia's government is rallying fellow G20 leaders with a call to eliminate corporate tax avoidance and evasion by closing loopholes, ahead of its chairing of the group in 2014.

"The aggressive tax practices of some multinational and other large companies is an increasing focus of many G20 countries," said Wayne Swan, Australia's finance minister, announcing his Budget for the year.

"Businesses that aggressively exploit tax loopholes gain an unfair advantage over their competitors."

Swan's words came after an agreement between Australian, US and British tax authorities to work together by sharing data in a bid to clamp down on tax-evading companies and individuals.

"This is part of a wider effort by the IRS and other tax administrations to pursue international tax evasion," Steven T. Miller, acting commissioner of the US tax office the Internal Revenue Service (IRS).

"Our cooperative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes."

Related Articles:

Google on Tax Avoidance: 99% Of Customers Have No UK Contact

HMRC Chief: We Collect Tax Under Duty of Law Not Morals

UK Uncut Loses High Court Challenge to HMRC's 'Sweetheart Deal' with Goldman Sachs

UK Tax Avoidance: Top 10 Giant Companies Dodging Corporation Tax [SLIDESHOW]