Apples Oversight, Stupidity or Greed?
Despite earning approximately £6bn in the last financial year, Apple has been accused of paying only £10m in UK corporation tax. HM Revenue & Customs (HMRC) are allegedly investigating this tax avoidance.
Tax Avoidance Schemes
Tax evasion is illegal and involves the concealment of taxable activity. Tax avoidance, on the other hand, is a legal activity. Tax-avoidance schemes refer to tax management in which a company or individual aims to minimise the amount of liability.
One of the most common forms of tax avoidance is to change the tax residence to a tax haven. Apple has done this by registering their patents in tax-haven countries, while the research and development of their products is conducted in the United States. Another form of tax avoidance is to set up an entity into which assets can be transferred and then transferred back once capital gains are made.
The best way to ensure a tax-avoidance scheme is implemented is to employ an accountant. It’s possible to find excellent accountants in Liverpool, London and across the UK. A good accountant will ensure that the illegal activity of tax evasion does not occur. There may be some hesitation, however, in many accountants when it comes to organising a tax-avoidance scheme. Recently, there has been more and more pressure on corporate accountants to file tax returns ethically.
Tax avoidance is a form of tax non-compliance, which is described as a range of activities that are unfavourable to a country’s tax system. Many would ask the question: is tax avoidance immoral? From a business point of view, it is deemed an effective way to boost profits, which ultimately helps to sustain and secure a company’s future. On the other hand, tax avoidance has implications for the whole economy and among the wider population. Many would argue that companies have an ethical duty, if not a legal one, to pay their fair share of taxes.
The Implications of Tax Avoidance
It is estimated that tax avoidance costs the UK economy £69.9 billion a year, which represents over 50% of the country’s total healthcare spend. It reduces government revenue and can lead to increased spending cuts in public services.
Campaigns have been launched to highlight the impact of tax avoidance and they aim to have this issue recognised more prominently in political agendas.
The recent recession hit the UK economy hard. Politicians have maintained that reducing the deficit is the number-one priority. If companies paid the appropriate amount of tax, this would be one way to ensure that the deficit is brought down to a manageable level. One way of tackling the problem of tax avoidance is to implement stricter corporate tax-disclosure rules.
If companies are given permission or sanction to proceed with tax avoidance, it means they are being given a tax advantage that governments never intended them to have. Tax-avoidance sanctions will encourage companies to engage in artificial transactions that serve no other purpose than to reduce their tax liabilities. In essence, this undermines the tax system and affects the wider economy.
This post has been written on behalf of Mitchell Charlesworth who is a leading payroll accountancy company. For more information please visit our site.