There’s been something of a spat in the UK over the taxation of the web giants, your Google, Amazon, Facebook and Apple. They all sell into the UK from outside it and park the profits from having done so outside the UK. This means that there is no corporation tax payable on the profits they make from having done this. This strikes some activists as being unfair: rather than what it is, which is how the law actually works.
As a result of said activists feeding biased information to several politicians we’ve had a committee of the House of Commons criticising HMRC for the way in which they collect tax. Or rather, don’t collect tax. Specifically, yesterday, that committee, the Public Accounts Committee, stated that HMRC continually understates the amount of tax avoidance because it does not include those sums that Google, Amazon and so on are not paying.
HMRC’s methodology for measuring the tax gap is robust and has been endorsed by the International Monetary Fund (IMF). Contrary to what the PAC report says, the published tax gap does include a measure of the tax lost from avoidance, as well as evasion, but it can only measure non-compliance with existing tax law – it cannot estimate how much tax might be due if tax laws were different.
HMRC can only bring in the tax that is due under the law and we cannot collect what is not legally due, however much the Committee might want us to. The Public Accounts Committee already knows that we cannot prosecute multinational companies for activities that are lawful within the international tax framework and has itself acknowledged that the kinds of international tax planning by large businesses that it has reviewed are lawful.
It’s rare to see a bureaucracy snarling back at elected politicians in such a manner. But it is quite wonderful as well. For the activists, and the PAC, have been releasing a series of reports that contain the most woefully dubious numbers. Essentially, their figures for the amount of tax not paid are made up. Made up by assuming that tax law is as they think it ought to be. Which is a very odd way to go about things really. For tax law is of course as it is and the amount of tax that is due is defined by whatever that tax law actually is. You know, that tax law voted upon by the members of the House of Commons (the House of Lords can only delay, not vote down, changes in tax law), that House of Commons whose membership includes every single person on the PAC.
And that’s why HMRC doesn’t include in any estimates of tax avoidance the amounts that Google, Amazon, Facebook or Apple are not paying. Because, in their infinite wisdom, the members of the House of Commons over the years have decided that no tax is due on those sums and therefore there is no tax not being paid nor any tax being avoided.
As I say, my contacts within HMRC indicate that this last accusation by the PAC was just one step too far. And thus this press release pointing out the blindingly obvious. It’s you the politicians who make the law so please, stop complaining about us, the taxmen, not collecting tax you have told us not to collect.