A BBC Panorama program aired earlier this week has fuelled the tax haven debate again.
The Panorama team has been investigating the way that some of the top UK companies save millions in corporation tax by using Luxembourg as a tax haven. The programme got hold of confidential agreements that showed tax avoidance was rife amongst large corporations and that Luxembourg was fully aware of the situation.
Richard Brooks, a writer for Private Eye, who took part in the programme, said that for the first time we’re seeing how companies avoid paying tax via a jurisdiction that seems happy to help them.
Another participant in the programme, Richard Murphy, a tax expert, explained that what these organisations were doing is legal, but is it acceptable? They’ve set up artificial structures solely to undermine the UK’s tax revenues.
The rules over Controlled Foreign Companies were supposed to stop organisations diverting profits overseas to avoid UK taxation, but some firms felt the regulations were in breach of European law and a series of court cases followed. HMRC then started making deals with major organisations rather than pursue the matter through court.
It does seem hugely unjust that large corporations can legally avoid paying taxes, especially at a time when the government needs all the revenue it can get. Even if this a legal loophole, shouldn’t these large organisations have a moral obligation to pay their just dues to this country. Or does morality disappear when money is concerned?