Energy and eco-handouts funded by tax avoidance crackdown, says Osborne

Moves to cut energy bills by £50 and energy efficiency grants of £1,000 for homebuyers to come in autumn statement

A fresh crackdown on tax avoidance will fund £1,000 grants for homebuyers to improve energy efficiency, George Osborne has said.

The chancellor said the coalition would keep the public finances under tight control as he gave details of a shake-up of green levies that could see £50 shaved off energy bills.

He said on the BBC's Andrew Marr Show that his autumn statement on Thursday would stick to the task of delivering a "responsible recovery". Despite signs of a sharp upturn in growth, he said there were still "lots of risks" for the economy and increasing borrowing would be "disastrous".

Asked how the energy efficiency grants and cuts to environmental levies on bills would be funded, Osborne replied: "The money will come from additional taxes that we will raise from dealing with tax avoidance."

Danny Alexander, the chief secretary to the Treasury, said he hoped the coalition's proposal would persuade Labour to drop its "barmy idea to con the public" with a 20-month energy bill freeze should it win the 2015 general election.

He said the new measures paid for by "tax dodgers" would also "not sacrifice a single gram of carbon" that the coalition was already aiming to save.

Speaking on Pienaar's Politics on BBC Radio 5 Live, Alexander said: "We are just doing it differently. So, rather than saying that billpayers should pay all these costs for other people to insulate their homes, we're saying instead that tax dodgers should pay that because we're going to use the taxpayer to pick up some of those costs and use that money to give people extra financial incentives.

"So, if you like, we're helping to take money off people's bills through the energy companies and we're paying people to take action to cut their own bills further."

But the shadow chancellor, Ed Balls, claimed the coalition's new energy announcement would not last 24 hours, and said the lack of answers from Nick Clegg and David Cameron made them look "a bit naked today".

He told 5 Live: "I think by Thursday George Osborne will have to come up with something more but this is not going to be good enough."

Balls added: "What's happened today is David Cameron and Nick Clegg, in a rather bizarre joint article in the Sun, have decided they're going to try and engage Ed Miliband on Labour's territory – pointing out the cost of living crisis, the failure of action on energy prices, the fact that most people are worse off not better off compared to 2010.

"But they've raised the issue and they've not got an answer and therefore … I think David Cameron and Nick Clegg both look together a bit naked today."

To laughter, Balls added: "That was not intended to be more than a metaphor."

As part of the package of changes to green levies, the energy company obligation (ECO) scheme will be halved by giving the big six power firms two years longer to hit targets. Other policy charges will be funded from general taxation in future.

EDF welcomed the move – expected to trim average bills by £50 a year – and indicated that it was not now likely to hike prices again before 2015.

In addition, anyone buying a home will be eligible for the £1,000 grant for energy efficiency measures, such as installing insulation or replacing the boiler. The sum could be even higher if the property needs a great deal of work.

Osborne dismissed the idea that energy companies would pocket the reduction in government levies without bringing down bills. "We are absolutely insistent that this is passed on … I am pretty clear with you that it is going to happen," he said.

He refused to give details of the tax avoidance crackdown but said people were wrong to be sceptical about whether such action really raised revenue. "This government has taken step after step and the amount of tax we collect from people who were previously avoiding their tax goes up by billions of pounds over this parliament," he said.

The chancellor attacked Labour's energy price freeze pledge, which has been dominating the political agenda since Miliband announced it in September.

"We are doing it in the way that government can do it, which is controlling the costs that families incur because of government policies," he said. "We are also doing it in the way that is not going to damage the environment or in any way reduce our commitment to dealing with climate change."

He went on: "It is all about providing people with carrots not sticks and I think that is the right way for this country to go green. By taking these additional measures we can afford to help the vast majority of people who do pay their taxes, have expensive electricity and gas bills and therefore want to have relief from the government."

Article Source : http://www.guardian.co.uk
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Apple chief calls on US government to slash US corporate tax

Tim Cook warns Congress that he would refuse to repatriate $100bn stashed offshore unless US severely reduced its 35% tax rate

Apple has called for US corporate tax rates to be slashed after it admitted sheltering at least $30bn (£20bn) of international profits in Irish subsidiaries that pay no tax at all.

In a dramatic display of how threats from multinational corporations are driving down taxes across the world, chief executive Tim Cook warned Congress that he would refuse to repatriate a total of $100bn stashed offshore unless it acted to slash the 35% US rate.

Cook said the tax rate for repatriated money should be set "in single digits" to persuade companies to bring it back. Standard tax for US profits should be, he said, in the "mid 20s".

He also revealed that Apple had struck a secret deal with the Irish government in 1980 to limit its domestic taxes there to 2%.

Three subsidiaries based in Ireland are also used to shelter profits made in the rest of Europe and Asia but are not classed as resident in any country for tax purposes – a tactic dubbed the "iCompany" by critics.

Cook's testimony to a Senate sub-committee investigating multinational tax practices largely confirmed its findings that Apple had taken tax avoidance to a new extreme by structuring these companies so they did not incur tax liabilities anywhere.

Phillip Bullock, the California company's head of tax, estimated that just one of these subsidiaries – Apple Operations International – had channelled $30bn in global profits over the last five years without filing a single income tax return.

Lower, lower: Apple CEO Tim Cook testifies before senators about his company's tax affairs.

The only taxes paid were on the interest earned by the cash pile and small sums in local markets. Senate investigators allege a total of $70bn has been sheltered this way in four years.

Despite heated exchanges with committee chairman Carl Levin, Apple largely shrugged off criticism of the practice, insisting it was acting "in the letter and the spirit of the law".

An independent tax professor, Richard Harvey, testified that its tax avoidance was "probably legal" and could have been much more aggressive.

The Apple chief used his appearance to renew lobbying for Congress to cut a deal with multinationals to encourage them to bring back, or repatriate, the billions of dollars kept offshore to avoid tax.

Cook said he had no plan to bring back the $102bn built up by Apple at current tax rates, and recently opted to return money to shareholders by borrowing money instead. "I have no current plan to do so at the current tax rates.

"Unlike some technology companies, I am not proposing a zero rate," he said. "My proposal is that we have a reasonable tax for bringing back money from overseas.

"A permanent change is materially better than a short term tax holiday."

Cook said he "personally doesn't understand the difference between a tax presence and a tax residence".

He was even defended by some members of the committee who accused Levin and Republican John McCain of "bullying" Apple. "I am offended by the tone and tenor of this hearing," said fellow Republican and presidential hopeful Rand Paul.

The hearing was seen as a watershed in the increasing tense clashes between governments and multinationals, particularly technology groups such as Apple, Amazon and Google.

Edward Kleinbard, professor of law at USC Gould School of Law, said: "Apple is not an outlier in its efforts to produce 'stateless income' – income that is taxed neither in the United States nor in the countries where its foreign customers are located – but it is an outlier in the baldness of its strategies. Apple shifted tens of billions of dollars of income without even breaking into a sweat.

"The hearing will forcefully remind policymakers that international tax reform will require the implementation of really thoughtful anti-abuse rules, ideally developed in conjunction with other OECD member states.

Every country is the worse off when they facilitate multinationals aggressively pursuing stateless income strategies, just as every country is worse off when they all engage in trade wars."

Corporate tax expert Jennifer Blouin at University of Pennsylvania's Wharton business school said the Apple revelations were "extraordinary but not surprising".

"We have seen versions of this with Microsoft and with Google," she said. "I hope it gooses the notion that we need to fix the worldwide system."

She said Apple was working within the law but that the law was written before huge profits could be made by companies that trade not in goods and manufacturing but in ideas.

"I have worked in this area for years and it's been largely an obscurity. But it's at the forefront now, and it needs to get fixed."

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Article source : http://www.guardian.co.uk

MPs criticise accounting firms on tax avoidance

Corporate tax avoidance has risen to the top of the political agenda in Britain in the past year following reports which showed some major companies paid little or no tax in the country by shifting profits to tax havens.

While the four biggest accounting firms, KPMG , Deloitte , Ernst & Young and Price water house Coopers said they no longer advised on aggressive tax avoidance plans, the Public Accounts Committee said: "They are still devising complex schemes that look artificial".

It went on to say the accounting firms were still prepared to recommend tax arrangements which had as little as a 50 percent chance of being successful if challenged in court.

The report also questioned the way staff from the "Big Four" were seconded to the government to help draft tax rules.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," Committee chair Margaret Hodge said.

But the firms said they behaved ethically and that the complexity of tax law was largely to blame for any appearance to the contrary. They welcomed the committee's calls for the rules to be simplified.

"We perform an essential function in the UK economy by helping our clients navigate this complexity," Bill Dodwell, Head of Tax Policy at Deloitte said.

The committee called on companies to disclose more information about their tax affairs. The government has also called for more disclosure but has said it wants this to be done on a voluntary, rather than a mandatory, basis.

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Article Source : http://uk.reuters.com