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Gauke invites business to address tax avoidance debate ‘myths’

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Businesses should consider engaging ‘more forthrightly’ in the tax avoidance debate to address ‘some of the myths and confusion that exist’, David Gauke said today.

In a speech to the Hundred Group, which represents the finance directors of the UK’s largest companies, the Exchequer Secretary to the Treasury accepted that ‘at the margin, some people try to be too clever by half in an overly aggressive pursuit of lower tax bills’.

‘The truth is the public will not wear this – especially during times like these,’ he said. ‘And as their representative, nor will we. But it is equally unhelpful to try to exaggerate the scale of the problem.’

He added: ‘We have all seen some campaigners choosing to stoke the fires of public opinion. It is a feature of this debate that legitimate behaviour by taxpayers – consistent with both the letter and spirit of the law – is being classified as “avoidance”. This action artificially inflates both estimates and perceptions of the “tax gap”.’

Gauke said that while the sensible course of action for most businesses is to ‘keep a low profile here’, and avoid being drawn into a contest that is ‘complicated and unpredictable’, there is a danger that the collective voice of business is ‘getting lost’.

Gauke welcomed the ‘Total Tax Contribution’ surveys conducted by PwC for the Hundred Group and claimed that ‘people believe – or at least give the impression they do – that corporation tax is somehow a victimless tax, not paid by real people’. The incidence will ultimately fall on someone, he said.

‘As far as corporation tax is concerned, the question is whether the burden falls on shareholders (largely in the form of pension funds) employees (through lower wages) or consumers (as a result of higher prices). The consensus, among economists at least, is that it’s predominantly the employee who foots the bill.’

Gauke pointed out that the anti-avoidance campaigner Richard Murphy, whom he described as ‘author of the oft-quoted TUC tax gap estimates’, acknowledges the use of allowances and reliefs ‘within his calculations’.

Murphy, responding on his Tax Research blog, said the data published by companies is ‘becoming almost impossible to use to assess their compliance’. The answer, Murphy suggested, is country-by-country reporting of profits and tax liabilities.