The Treasury Committee has slammed the proposed diverted profits tax and warned that it could derail international efforts to address tax avoidance.
In its report on the 2014 Autumn Statement, the committee said an international response to the issue is currently taking place in the form of the OECD’s base erosion and profit shifting project, which could be destabilised if the so-called Google tax is enforced.
The committee’s chairman Andrew Tyrie MP commented: “Tax avoidance needs to be tackled vigorously, in the long run by tax simplification and reducing loopholes created by complexity. But the imposition of a tax by the UK on diverted profits could be at odds with the OECD’s international work in this area.”
The committee also noted that the draft legislation is “long and highly complex”, which it said is likely to be a source of uncertainty.
Andrew Hubbard, tax partner at Baker Tilly, agreed with the concerns expressed by the treasury committee, and said the current international tax system is not fit for purpose. “The issues transcend national borders which is why we support the OECD’s coordinated international approach,” he added.