Give us a (tax) break!

As the President and Congress argue as they approach the Fiscal Cliff in the US – an argument over spending cuts and individual taxation, in the UK, Mail online reveals:

Big business makes more money but pays less tax as small firms are hit harder – Corporation tax paid by big business falls 20% while profits rose £359 billion.

The most revealing line in this: “Another factor was overseas takeovers of firms, such as Cadburys and Boots, where the tax base is moved to more lenient regimes.”

The British Government should establish a new requirement on overseas takeovers of UK companies that prohibits the transfer of profits made in the UK to overseas, more lenient, regimes. This is not news, but it is an example of how real business no longer gets taxed where profits are made. International business can simply move profits around to where they want to pay as little tax as possible. This impacts small companies that cannot fight against HMRC and the rest of society that pays a higher tax bill to compensate.

Boots and Cadburys are unlikely to  be better UK businesses because their taxes have been lowered – it is more likely that these tax benefits will accrue to their new owners – Walgreens of the US now owns 45% of Boots and Kraft owns Cadburys. In 2010 it was announced:

“Cadbury’s new owner Kraft Foods has confirmed plans to move part of the business to Switzerland in a move which could cut its UK tax bill.

By switching a few key roles to Zurich, the US food giant is expected to pay less corporation tax, depriving the exchequer of millions of pounds.” see BBC –

I don’t blame companies – that is their job. We should blame our governments and tax authorities for allowing this to happen and work to ensure it stops.