With media attacks on multinationals and their tax affairs becoming increasingly frenzied, the UK tax authorities have stepped in to try and introduce a note of calm.
"Multinationals are not paying their fair share of UK tax." Headlines like these have appeared regularly in the UK media this year, with some of the internet giants being the focus of recent criticisms. But many of these news stories ignore the fact that globalisation means that multinationals can legitimately structure their businesses to take advantage of beneficial tax rules in different countries, and that having customers in a particular country does not necessarily create a corporation tax liability there. HM Revenue & Customs (HMRC) felt that it was time for some clarification, and on 11 October 2012, issued a briefing, explaining in clear terms how multinationals are taxed, and emphasising HMRC's commitment to engage in open and cooperative discussions with big businesses and reach an agreement on what is the right amount of tax to pay.
Against the background of HMRC's current drive against tax avoidance, and to raise public awareness of it, this latest intervention is welcome and should put an end to some of the confusion that clearly exists in this context.