Concessions planned in the budget will cut the tax bill of some of the UK’s largest companies by billions of pounds, and make it much easier for them to reduce their taxes in developing countries, according to an analysis prepared by ActionAid.
As reported in the Guardian today, Osborne is planning to change the rules on how foreign subsidiaries of multinationals based in the UK are taxed under so called controlled foreign company rules (CFCs), while also reducing the headline rate of corporation tax in the finance bill, which will be presented on 21 March.
The Treasury’s own estimate is that the CFC changes will cost the UK nearly £1bn a year in lost revenue from tax on foreign subsidiaries by 2015. ActionAid estimates developing countries could lose £4bn a year of tax revenue as a result.
Labour strongly attacks the proposals. Labour’s shadow exchequer secretary, Owen Smith, said;
“In last year’s finance bill, Labour urged the government to provide a full impact assessment of the effect of the CFC changes on developing countries,” he said. “In addition to repeating this call, we shall also be asking the government for assurances that the changes won’t cost jobs at home and won’t facilitate tax avoidance abroad.”