Letters: A simple answer to corporate tax avoidance

These letters appear in the print edition of The Independent, April 29th, 2013

As a qualified accountant, I am baffled as to why the authorities are incapable of preventing tax-avoidance schemes when the solution is so simple (Letters, 27 April). They grapple with “transfer pricing” in the knowledge that this is a mechanism used to avoid both corporation tax and VAT (effectively a tax on profits as you only pay tax on value added), but is impossible to police.

The solution is to introduce a “sales tax” at the rate of 5 per cent on sales excluding VAT, but in addition to that tax. It would be charged on all retail sales in this country and on all invoices sent to a UK address. Against this new tax, companies could offset any corporation tax they have paid or were due to pay. For example, in the two years ended 1 March 2012, Whitbread plc would have incurred £168.88m in sales tax, but as they paid £168.1m in corporation tax, they would owe only £780,000 to HMT. On the other hand, foreign companies such as Amazon and Starbucks would now have to pay their fair share.

Malcolm Howard, Banstead, Surrey

The problem of corporate tax avoidance arises not so much from the complexity of our tax laws, as from a lack of attention to the actual behaviour of the corporations at the centre of this scandal.

I spent many years as an Inspector of Taxes in the Inland Revenue and a major part of my work involved the scrutiny and investigation of accounts submitted by the self-employed. If a trader showed losses for several years in succession, as Starbucks have for example, the first question to be asked was always “why?”

The rationale for this was that it was not logical behaviour and that, accordingly, it could be assumed that the continuing trading activity reflected the fact that profits were being made and being hidden from scrutiny. I never experienced any trader using the accounting excuse that his or her business was subject to huge interest or rent payments to third parties which reduced the profits to zero.

The answer to this problem lies in addressing the more benevolent tax regime which applies to incorporated concerns. It specifically permits artificial costs payable to connected companies to be used in the process of calculating the trading profits of any particular company. The matter could be addressed quite simply by changing the law so that any such connected company must itself be resident and taxable in the UK. Thus there would be no hiding place as all of the profit generated would lie within our borders.

Barry Butler, Birmingham

If high-earning accountants from the Big Four are so valued by HMRC for their help in devising or refining new tax laws, and those accountants (and everybody else) agrees that our system of taxation is far too complicated, why not pay them to simplify tax law? Then, 10 years later, pay them a bloody great bonus if it’s been effective in preventing tax avoidance by individuals and companies. Those would be bonus payments well-earned and not resented by anyone.

Patrick Cosgrove, Chapel Lawn, Shropshire

How I wish I’d been vaccinated

I am a pensioner now. When I was a child I got measles, which led to encephalitis and paralysis down my right side; I nearly died. For years I went to physiotherapy to get walking and being able to move and use my right side again.

I missed a lot of school and when I was there I was bullied because I was weak. I found work hard, because I have to do everything with my left hand; I can’t hold even simple things with my right hand.

Even as a pensioner I still can’t use my hand, so please love your child and give her/him the measles vaccine.

Sheila Hale, Stafford

The announcement of a catch-up campaign to increase MMR vaccination in children and teenagers comes not a moment too soon (“Measles outbreak: race to give a million children MMR jabs”, 25 April). While attention has rightly been focused on the number of measles cases, it is important to remember that the vaccine also protects against mumps and rubella.

The founders of Sense were parents whose children were born deafblind as a result of congenital rubella syndrome and we believe that urgent action is needed to prevent outbreaks of rubella, as well as measles. Indeed, last year saw the highest number of rubella cases since 1999. If contracted by a woman who is pregnant, rubella causes babies to be born with combined sight and hearing loss, along with life-threatening heart conditions and a long list of other health conditions.

It is important that MMR is offered beyond childhood.

Joff McGill, Lead on Rubella and Immunisation Sense, London N1

Given the antipathy of many swathes of the American population to government interference in matters of choice, it is, perhaps, somewhat surprising that states mandate that prior to entering the public-school system, evidence must be provided that a child has received all his or her shots including MMR inoculations. What is to prevent this eminently sensible policy being adopted here in the UK?

Brian Moores, Emeritus Professor Manchester University

Iain Duncan Smith vs human nature

Iain Duncan Smith, the Work and Pensions Secretary, is encouraging those better-off pensioners, who don’t really need their winter fuel allowance etc – to give the money back. Any observer of human behaviour or student of psychology knows that self-interest will render this a useless gesture and that very little money will be returned to the Exchequer.

Let the press regulate themselves. Let the police police themselves. Let people decide whether or not to repay any unneeded welfare benefits. Naive or what?

John Boaler, Calne, Wiltshire

Fracking won’t reduce UK gas bills

It is good to see that the Conservative co-chair of the Carbon Connect, Charles Hendry, is able to understand the clear evidence that has escaped George Osborne – that going for a gas-based energy future for Britain is an expensive alternative to developing our rich renewable energy resources (“Fracking ‘unlikely to give UK cheap gas,’ report says”, 22 April).

As the group’s report says, Britain, unlike the US when fracking started, is closely connected to the global gas market – and the price of any gas that we did manage to extract from the rock under our feet, mostly likely at great environmental cost – would be the world price.

And we’ve already seen how that has hit British households hard, with about 47 per cent of the recent leap in energy bills due to rising wholesale gas and electricity prices – while “green” measures, including insulation, have only contributed around 9 per cent.

It’s clear that we need to get serious about investing in our rich renewable energy resources, and in energy-conservation measures that can create large numbers of jobs, tackle fuel poverty and cut carbon emissions.

Natalie Bennett, Green Party leader, London NW1

Your report rightly stated that shale gas development in the UK will not prove a panacea. This understanding of the potential impact of shale gas on price is nothing new – the Committee on Energy and Climate Change’s report made clear.

As Prime Minister David Cameron said in December 2012, if we ignored shale gas completely “we could be giving our economy much higher energy prices than would otherwise be necessary”. This is very different to claiming shale gas will be a silver bullet to reduce the price of gas; rather, shale gas will largely replace dwindling North Sea supplies to mitigate potential price rises.

Furthermore, price is not the only merit of shale gas. As the LSE’s Grantham Institute on Climate Change and the Environment report recently concluded, the “UK should use natural gas, including from unconventional sources such as shale, to help decarbonise its power sector by replacing coal over the next few years, but should not assume that its price will be low.”

Mónica V Cristina, Shale Gas Europe, Brussels

BP’s sponsorship of arts is shameful

Two artists are competing for this year’s BP portrait award. But that is not the real story. The real story is institutionalised greed and arrogance. The National Portrait Gallery, like the Tate and other recipients of BP largesse, are publicly funded arts institutions. They accept BP sponsorship knowing that the company was guilty of one of the worst ecological disasters of the modern era, and for the death and injury of hundreds of people. The arts have learned to live without money from slavery, tobacco and alcohol; it’s now time to remove the oil stain from art. Even at a time of austerity and cuts, BP’s sponsorship of the arts is an expedient too far.

Nick Reeves OBE, Executive Director, Chartered Institution of Water and Environmental Management, London WC1

Paying for privacy in hospital

Mary Dejevsky asks for motel-style rooms in hospital (24 April). She may be too young to remember “amenity beds”. These allowed patients to pay for a private room but still receive NHS free treatment, so people with modest means could afford a bit of privacy. Barbara Castle got rid of them when she was Minister of Health, probably as they were considered elitist.

John French, London SE21

Roman misconceptions

I am afraid that Alasdair Riley has repeated a commonly held misapprehension (“Dinner at the Pompeii takeaway”, 25 April). He implies that a vomitorium was provided to allow diners to evacuate their stomachs. In fact, a vomitorium was an exit passageway beneath or behind a bank of seats to allow rapid egress for large crowds from a stadium or an amphitheatre. The confusion arises because the word derives from the latin vomeo, vomere, vomitum, meaning to spew forth, as would occur with a large number of gladiator or football supporters all exiting at once.

Chris McDermott, Crewe, Cheshire

Far-flung flowers

I was surprised to discover (report, 24 April) that snakeshead fritillaries “grow only in a very specific habitat: hay meadows in lowland flood plains”. I have just counted 59 of them in my garden. I know the lawn needs mowing, but even so...

Dr David Bartlett, Ilkley, West Yorkshire