Even as the government admits to a £10 billion black hole in its finances caused by its gifting of tax back to businesses to plug their pensions holes, it looks set to U-turn on its policy to close corporation tax loopholes costing the exchequer tens of billions more every year.
Threats from major UK companies to relocate overseas or into tax havens has prompted a move to revise corporation tax rules following high-profile complaints that the UK’s taxation levels are significantly higher than elsewhere in the EU.
Pharmaceuticals giant Shire recently announced it would relocate to Ireland to take advantage of the low tax regime there.
While UK law stipulates a basic corporation tax of 28%, corporations on average pay closer to 22%, with some of the largest paying significantly under this figure.
A simplification of the rules mooted by the treasury last year would have closed loopholes which at present allow huge levels of tax evasion.
The UK has recently come under fire for itself maintaining more tax havens under British rule than anywhere else in the world, something which campaign groups argue has directly led to tens of thousands of deaths.
Corporate tax avoidance is thought to cost £25 billion every year – more than twice the amount these major companies were gifted by the government in tax breaks to allow them to refill the pension pots they themselves had emptied.
In two years, the same amount would pay for the total line of credit currently being offered to major banks as part of the credit crunch – £50 billion is being underwritten in loans to maintain the flow of money through the economy.
The same banks, along with a host of other companies, are already benefiting from government handouts this year to the tune of £10 billion, as they pour money into pension funds to keep them afloat.
This money, rather than coming from profits or business chiefs who were the investors who caused the problem, is being paid in from taxes.
Pension deficits have soared by more than £100bn in the past year, the Pension Protection Fund said recently.
Meanwhile, as the Treasury struggles to maintain its financial balance, fears are rising that the pensioners themselves could be at risk of falling prey to the 10p tax band changes which the government have proposed.
Up to 420,000 pensioners with small private pensions of up to £1,000 a year could start having to pay tax of £200 a year from next April, under new plans – potentially raising around £80 million a year.
Rob Ray writs for www.freedompress.org.uk
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This post was written by Rob Ray