UK government to initiate tax crackdown on tech firms holding earnings offshore
The UK Treasury on Wednesday said it will begin cracking down on large corporations that shift British earnings overseas in a bid to avoid the country's high taxes, a move that follows a wider European Union strategy seeking much the same.

Unveiled by Chancellor Philip Hammond as part of the 2017 budget, the new initiative looks to install rules that will allow the UK to collect on revenues generated in the country, the Daily Mail reports. Importantly, the treasury will be able to recover funds not only from tax havens, but also monies that jump multiple borders to low-tax countries.
Dubbed an income tax on British royalties, the reforms are estimated to raise some 800 million pounds ($1.07 billion) in extra tax over the next five years and will become active in April 2019.
"There is a wider concern across this House and in the business community about the tax system in the digital age," Hammond said. "Along with the innovation and growth that it brings, digitalisation poses challenges for the sustainability and fairness of our tax system."
Along with big-name corporations like McDonalds, the initiative targets tech companies like Apple and Google, which use complex accounting strategies to skirt high taxes.
Apple, for example, leveraged agreements with the Irish government to achieve a tax rate of only 0.005 percent in 2014. The company funneled billions of dollars in international revenue through Irish subsidiaries to avoid paying high tax rates in countries like the UK.
In 2016, the European Commission ordered Ireland to collect $14.5 billion in back taxes from Apple, saying the country's tax agreements with the company amounted to illegal state aid. Both Apple and the Irish government are appealing the ruling.
As the appeals process is expected to take years to resolve, Ireland has set up an escrow fund to hold the massive fine.
Most recently, a report citing the so-called "Paradise Papers" claimed Apple moved a portion of its overseas cash hoard to Jersey, a U.K. crown dependency off the coast of France, as it seeks a new low-tax jurisdiction. The company refuted those claims, saying all Irish operations are still in place. In its rebuff, Apple added that it has not reduced payments to any country and maintains its status as the "largest taxpayer in the world."
Apple has accumulated more than $252 billion in overseas cash, a sum that has many countries salivating over the prospect of potential taxation. The company has repeatedly called for lower corporate taxes and floated the idea of a repatriation holiday, which would allow it to bring the funds into the U.S. without facing a high 35 percent tax rate.

Unveiled by Chancellor Philip Hammond as part of the 2017 budget, the new initiative looks to install rules that will allow the UK to collect on revenues generated in the country, the Daily Mail reports. Importantly, the treasury will be able to recover funds not only from tax havens, but also monies that jump multiple borders to low-tax countries.
Dubbed an income tax on British royalties, the reforms are estimated to raise some 800 million pounds ($1.07 billion) in extra tax over the next five years and will become active in April 2019.
"There is a wider concern across this House and in the business community about the tax system in the digital age," Hammond said. "Along with the innovation and growth that it brings, digitalisation poses challenges for the sustainability and fairness of our tax system."
Along with big-name corporations like McDonalds, the initiative targets tech companies like Apple and Google, which use complex accounting strategies to skirt high taxes.
Apple, for example, leveraged agreements with the Irish government to achieve a tax rate of only 0.005 percent in 2014. The company funneled billions of dollars in international revenue through Irish subsidiaries to avoid paying high tax rates in countries like the UK.
In 2016, the European Commission ordered Ireland to collect $14.5 billion in back taxes from Apple, saying the country's tax agreements with the company amounted to illegal state aid. Both Apple and the Irish government are appealing the ruling.
As the appeals process is expected to take years to resolve, Ireland has set up an escrow fund to hold the massive fine.
Most recently, a report citing the so-called "Paradise Papers" claimed Apple moved a portion of its overseas cash hoard to Jersey, a U.K. crown dependency off the coast of France, as it seeks a new low-tax jurisdiction. The company refuted those claims, saying all Irish operations are still in place. In its rebuff, Apple added that it has not reduced payments to any country and maintains its status as the "largest taxpayer in the world."
Apple has accumulated more than $252 billion in overseas cash, a sum that has many countries salivating over the prospect of potential taxation. The company has repeatedly called for lower corporate taxes and floated the idea of a repatriation holiday, which would allow it to bring the funds into the U.S. without facing a high 35 percent tax rate.
Comments
Even if this sort of thing succeeds, they’ll all soon be fighting among themselves for the same dollar of taxes. Assuming it’s clear what it is that they’re even planning on taxing....
As was a former chancellor of the exchequer…
As are a number of ministers and politicians who support Brexit…
The US growing and nurturing its own domestic terrorists is way better?
Actually, these measures are being taken because of the massive £40billion it’s going to cost to leave the EU, along with the extra cost of having to pay to have access to the market the country has decided to leave.
We will also need to spend millions on border controls – the same border controls that other EU countries have (try moving to Belgium), but the U.K. didn’t implement because EU migrants paying into the taxation system was something they were happy about, until they weren’t.
And I doubt that getting foreign companies to pay their fair share of tax is going to attract them to the U.K.
Hell, most of the biggest companies in this country have their “headquarters” next door to each other, on the same shopping street on the Isle of Mann.
- Is it going to cost £40 billion? That's what the EU asks...
- Paying to have access to the EU? UK is for many EU countries their biggest market, so they are eager to get treaties in place to continue to sell in the UK.
- Are there border controls? Structural border controls are forbidden by EU law within the EU zone. Crossing the border with Belgium a few times a week for the past 15 years, never had a control... I even moved to Belgium years ago and it was only a formality.
- Aren't there a lot of proposals to lower the taxes for businesses in the UK? Genuine question.
- But there are also a lot of real HQ's, think about the City/financial centre in London.
Four Brits over 50 years ago. No Brexit to
pin it on in those days, just other excuses. Nothing new under the sun.
Unfortunately a lot of these large multinational finance organisations have signalled plans to leave London. Even Lloyds of London (est. 1686) is looking at moving away.
Tax havens exist because the laws of the jurisdictions allowed them. What can I say but governments seem to exist for only the purpose of enriching their leaders and their friends.
What’s happening now is the shell game is changing, but the illusion will remain, with perhaps less favored entities required to defend their legal actions to make it seem those in power have the public interest as their chief concern.
Nothing will come of this. Sound and fury constituting nothing. In most jurisdictions, ex post facto laws are illegal. These jurisdictions can pass new laws which collects taxes on new income, but they can’t reach back to collect taxes when the avoidance was legal when made.