THE TREASURY yesterday refused to back down on plans to reform corporation tax for multinational companies, despite accusations from backbench MPs and charities that it will severely harm developing countries.
In March George Osborne said that UK firms would no longer pay “top-up” tax on income earned in countries with low-tax regimes. The aim was to convince multinational firms to remain domiciled in – or return to – Britain.
As a result advertising giant WPP immediately decided to relocate its HQ from Dublin to London.
But this week a report by the House of Commons international development committee called for the plans to be dropped, citing figures from the charity ActionAid that developing countries may lose “up to £4bn” of revenue as the new policy allegedly incentivises the use of tax havens.
“The UK’s controlled foreign company rules protect UK tax revenues and were never designed to protect other countries’ tax revenues. Their reform will encourage investment and drive growth in the UK,” said a Treasury spokesman.
“It is not sustainable for developing countries to protect their revenue using our tax rules.”