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Large companies should pay 'a fair tax rate', says Cameron

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Consultation on the introduction of a general anti-avoidance rule appears likely to feature in the Budget on 21 March, after David Cameron backed Nick Clegg’s call for tougher action to ensure that large companies pay their ‘fair share’ of tax.

Speaking to small business owners and entrepreneurs in Maidenhead yesterday, the Prime Minister said: ‘For the large companies that have the fancy corporate lawyers, I think we need a tougher approach. One of the things we’re going to be looking at this year is whether there should be a more general anti-avoidance power that HMRC can use, particularly on very wealthy individuals and on the bigger companies, to make sure they pay their fair share.’

The May 2010 coalition agreement committed the government to ‘make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals’.

Writing in Tax Journal (26 April 2010) Vince Cable, then the Liberal Democrat Treasury spokesman, said his party would introduce a general anti-avoidance principle to ‘ensure that people pay the amount of tax expected not just by the letter, but by the spirit of the law’.


Graham Aaronson’s study on the merits of a general anti-avoidance rule, commissioned by HM Treasury and published last November, recommended a narrowly targeted ‘anti-abuse’ rule to counter arrangements contrived to achieve an ‘abusive tax result’. Artificial and abusive tax avoidance schemes are widely regarded as ‘an intolerable assault on the integrity of the tax regime’, Aaronson said.

The government has said it will not introduce a general anti-avoidance rule without a public consultation.

Cameron yesterday echoed his deputy’s criticism of companies seeking to manage their effective tax rate. ‘I’ve worked in corporate Britain, I know how companies use the complexity of the tax and legal system to try and endlessly reduce their tax payments,’ he said.

‘Now of course it’s right for companies to be able plan and to have predictability but they should be paying a fair tax rate. I think that’s particularly true when the government has made the commitment – at some considerable cost – to give Britain the lowest rate of corporation tax in the G8 by the end of this Parliament.’

'Optional extra'

Nick Clegg had told the BBC’s Today programme that millions of hard-working people who ‘play by the rules and pay their taxes’ were ‘quite rightly angered when they feel there is a wealthy elite, or large businesses, who pay an army of tax accountants to get out of paying their fair share of tax – basically to treat paying tax as an optional extra, where you pick and choose the taxes you pay’.

He added: ‘That’s why I insisted that we write into the coalition agreement a commitment to clamp down on tax avoidance, including working up longstanding Liberal Democrat ideas – for instance to apply a new general anti-avoidance rule.

‘There should be a general rule that you can’t play the system, you can’t abuse the system. Graham Aaronson’s report to the Treasury says that what he calls a general anti-abuse rule is feasible.

‘I very much hope – I’m not going to write George Osborne’s Budget for him – that we can make progress on that because we’ve got to make sure the tax system is fair and seen to be fair.’

Responding to Cameron’s remarks, Owen Smith, the Shadow Exchequer Secretary to the Treasury, said large companies ‘should not get special treatment at the expense of small businesses and individual taxpayers’. Smith claimed that Ministers had ‘stood by while HMRC cut a sweetheart deal with Goldman Sachs and other big corporations.’

‘It is imperative that the UK's political and business culture changes so that rich individuals and corporations treat tax avoidance as taboo,’ said 17 MPs, union leaders and tax campaigners in a letter to The Guardian on 21 December, in response to the Public Accounts Committee’s report on HMRC’s handling of tax disputes.