03292017Wed
Last updateFri, 24 Mar 2017 12pm

 

Autumn Statement: Multinationals to be hit by new 25% tax on profits

Tax


The chancellor has announced a new 25 per cent tax for multinationals in a bid to battle tax evasion.

The new Diverted Profits Tax, to be introduced on 1 April 2015, will cover profits generated by multinationals from economic activity in the UK, which up until now had been "artificially shifted out of the country".

In his Autumn Statement speech, chancellor George Osborne laid out the plans, dubbed 'Google tax', and said it is to help the crackdown on tax avoidance and tax evasions by these large corporations.

"That’s not fair to other British firms. It’s not fair to the British people either," Mr Osborne said.

"Today we’re putting a stop to it. My message is consistent and clear. Low taxes; but taxes that will be paid."

The chancellor said that the new tax will raise over £1 billion over the next 5 years.

However, Jim Meakin, head of tax at Baker Tilly, said that the projected revenue from the new tax is "miniscule".

He explained: "Measures to clamp down on tax avoidance by large corporates will be seen to be a popular move, but the amounts of revenue these are projected to raise is miniscule.

"And one wonders how these will be implemented ahead of the co-ordinated tax avoidance work currently being carried out by the OECD. Could this be a case of the UK just baring its teeth ahead of any official measures announced by the OECD?"

Toby Ryland, partner at HW Fisher & Company, added that the new tax is unlikely to give the average multinational much cause for concern.

"The chancellor said this will raise a billion over five years, but ultimately this is a tiny proportion of the profits the multinationals he has in mind are generating," Ryland said.

"In reality, many of the UK's double tax treaties with other countries dictate where profits can be taxed. Sweeping measures like this often come to nothing.

"The chancellor has made the right noises, but most multinationals will be able to side-step these new rules without breaking into a sweat."

 

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