To us, it's an obscure shift of tax law. To the City, it's the heist of the century In David Cameron we have a leader whose job is to quietly legitimise a semi-criminal, money-laundering economy By George Monbiot At the moment tax law ensures that companies based here, with branches in other countries, don't get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches. Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies": it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime". The main beneficiaries, in other words, will be the banks. But that's not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate "of any major western economy". By the time this government is done, we'll be lucky if the banks and corporations pay anything at all. Read more: http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century
It is akin to blowing smoke in someones face while picking their pockets. The solution is to go international and make the sovereign nations chase the tax money around. Filling the their budget shortfalls and the providing economic insulation to cash hoarding bussiness strategies. If your on the right side of the fence it all makes perfect sense. Akuma
The US is the same: Individuals are required to report all income earned throughout the world. They are provided a fixed deduction on foreign earned income... something like 80K maybe higher now. They are required to itemize foreign paid taxes and pay the differential. Corporations are taxed based on nexus. If they are registered and head quartered out of a PO box in the Caymans and have no registered offices in the states they have no tax liability to the US. A US Parent company with foreign subsidiaries circumvent not only tax liabilities but also regulatory jurisdiction. The beauty of these schemes are they can freely transfer and use assets intra-company. It's not a crime until you are convicted... any discrepancies are merely clerical errors and 99% of the time a few $ can buy a settlement.
You are right. This brings the tax regime in line with the US where most corporations don't pay federal income tax anyway: http://www.reuters.com/article/2008/08/12/us-usa-taxes-corporations-idUSN1249465620080812 http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes_print.html http://www.forbes.com/2010/04/01/ge-exxon-walmart-business-washington-corporate-taxes_slide_3.html