Taxation is raised by government to fund public goods such as education, health care, and law and order. These services are vital in maintaining strong and healthy societies, and in turn, healthy economies on which business depends. Since individuals and businesses prosper when society prospers, the incomes of both individuals and businesses are taxed to fund public spending. Unfortunately, governments lose many billions of pounds each year due to tax avoidance (which is legal) and evasion (which is illegal). Some methods of avoiding taxes, while technically legal, may suggest limited civic responsibility. Loss of expected tax revenue may result in governments needing to increase borrowing, reduce public spending or increase the tax burden on individuals or other business organisations. This can create forms of unfair competition benefiting tax avoiders at the expense of everyone else.
When it comes to determining how much tax a business pays, larger and especially multinational companies are usually much harder to appraise than smaller firms. This is for two reasons. Firstly, there is often no legal requirement to disclose in either group or individual company accounts how much tax they pay and where they pay it, on a country by country basis. For UK firms, under accounting rules, the tax figure they need to disclose follows the profit disclosures and is therefore a worldwide one – given the multiplicity of tax rates around the world and the fact that they are under no legal obligation to reveal where they make their profits (they simply need to reveal how much they make in total), the worldwide tax data disclosed is often inadequate as a basis for assessment. Second, multinational corporations generate profits across a number of different tax jurisdictions, potentially enabling the exploitation of favourable rules in tax havens and lower tax territories. Third, successive UK governments have changed tax policies to make the UK an attractive holding company location. As a result of tax competition, globally higher world-wide profits do not necessarily result in higher taxes.
This question is designed for UK businesses and organisations that are subject to corporation tax. Those which are not include sole traders, traditional partnerships and limited liability partnerships. The profits of such entities are taxed via their owners/partners and often personal factors (unrelated to the business) have significant impact on the resulting tax due. This question is not designed for unincorporated businesses and such entities may respond NOT APPLICABLE although they are encouraged to take the opportunity to demonstrate transparency regarding their tax affairs nonetheless.
In answering this question, respondent businesses may publish information to supplement the text of any written answer by, for example, referencing other documents and inserting hyperlinks - so long as they are specific, relevant and manageable additions.
All disclosures made in answering this question should be available in the country of the respondent company’s headquarters. All country-relevant disclosures should also be available in each of the relevant local countries and their appropriate languages.