HM Revenue and Customs (HMRC) has today confirmed it is working with five other tax authorities to share information about how digital multinationals might be shifting their profits to tax havens.
Information from the ‘E6’ project will feed into how HMRC applies the new Diverted Profits Tax, which is being introduced next month. The tax is set at a rate of 25% to target multinationals that avoid paying tax on profits from UK activity by shifting them to countries where they’ll go untaxed.
This work is part of a package of measures aimed at ensuring multinational businesses pay their fair share of tax that are being taken forward by the government.
David Gauke, Financial Secretary to the Treasury, said:
“Multinational digital businesses should pay the tax that is due, just like everybody else. By sharing information internationally we are making sure this happens.
“HMRC’s work in this area is already paying dividends, as next month’s introduction of the Diverted Profits Tax shows, and the government will continue to work tirelessly to change the global landscape of corporate tax avoidance.”
The E6 project is another example of international collaboration on tax avoidance. HMRC is already part of the Joint International Tax Shelter Information Collaboration (JITSIC) – a group of more than 20 tax administrations that collaborate and exchange information on complex tax avoidance schemes and structures involving multinational enterprises and high net worth individuals.
The UK is also working with the Organisation for Economic Cooperation and Development (OECD) to reach international agreement on how the global corporate tax system can be reformed to remove opportunities for avoidance.
Notes for Editors
1. HMRC continues to build on its work to counter tax avoidance by multinationals by sharing information under the terms of the UK’s treaties with five international partners about multinational businesses operating in the digital economy. The UK is using the knowledge gained from this project, which began in August 2013, to identify and challenge the risks that multinational digital businesses present to the UK tax system.
2. With the expansion of the Joint International Tax Shelter Information Collaboration (JITSIC) network to more than 20 tax administrations, the UK will build on this model and work closely with other administrations to share information on, and identify suitable challenges to, the threats posed by other multinational business sectors.
3. The Diverted Profits Tax will be introduced on 1 April 2015 with a 25% rate. It will target multinationals that use contrived structures to circumvent the international tax rules on permanent establishment and transfer pricing, such as by routing expenditure through group companies in other countries so their UK profits go untaxed. HMRC is setting up a special task force to ensure these multinationals pay the new tax.
4. HM Revenue and Customs and HM Treasury are actively engaged in the OECD Base Erosion and Profit Shifting (BEPS) project. This is looking at strategies which exploit loopholes in the tax rules of different countries to make profits ‘disappear’ for tax purposes or shift profits to locations where little or no real economic activity takes place but taxes are low.
5. Earlier this month, HMRC revealed that multinationals faced £1.1 billion in extra tax demands last year as a result of successful challenges to the prices charged by companies in the same group for goods and services. More information on this work can be found here: https://www.gov.uk/government/news/multinationals-face-11-billion-in-extra-tax-after-hmrc-challenges-transfer-pricing
6. For more information on how the UK is at the forefront of international collaboration to tackle aggressive tax planning go to: https://www.gov.uk/government/publications/issue-briefing-taxing-multinationals-tackling-aggressive-tax-planning/issue-briefing-taxing-multinationals-tackling-aggressive-tax-planning
7. Follow HMRC Press Office on Twitter @HMRCpressoffice
8. HMRC's Flickr channel www.flickr.com/hmrc.gov.uk
Issued by HM Revenue & Customs Press Office
HM Revenue & Customs (HMRC) is the UK’s tax authority.
HMRC is responsible for making sure that the money is available to fund the UK’s public services and for helping families and individuals with targeted financial support.