Tax-Avoidance

Oscar Marchal Martos,

Correspondent (Business) 

 

In times when economic recession goes deep, when families and small businesses are progressively struggling to pay their duties and tax bills, the British authorities have come up with a debate in recent weeks about the tax contribution of the global companies dealing in UK. Chancellor, George Osborne, insisted that the government is determined to “go after” aggressive tax evaders.

This statement was made after the Public Accounts Committee recently published a report criticizing the tax avoidance practices of largest MNC’s , such as Amazon, Google and Starbucks operating in UK. In this report, the head of PAC, Mrs Margaret Hodge said that these MNC’s produce significant amounts of income and pay little or no tax at all , which is, she stated, an insult to British businesses and individuals who pay their fair share.

In the context of the European Union, on 6th December, 2012, the European Commission adopted an Action Plan to reinforce the fight against tax fraud and evasion. Through this plan, initiatives from the Commission are set out to enhance administrative cooperation and to protect Member States tax revenues against the challenges of aggressive tax jurisdiction and unfair competition.

In the global context, considering the unfairness of these practices, strong economic competition pushes companies to exploit weaknesses in the rules. For this, the authorities deserve a fair share of the blame for leaving loopholes that can be exploited. One instance of this is that of the US authorities, who, by giving an FASB exception, allows firms to avoid reporting their foreign earnings if they plan to invest these overseas.

In recent times of financial recession and economic turbulence, tax evasion is yet another financial crisis that has to be dealt with immediate effect. With MNC’s protecting their interests, the ultimate victims of such evasions are the law abiding tax-payers, who have to deal with high taxes and cuts in benefits at the same time. If not dealt with quickly, the governments would stifle hopes of balancing the financial situations in their respective nations, thus dragging economies deeper into the recession.