Tax Evasion in the UK | Essay

assess lack cock in the UK EssayAn Investigation Into Tax escapism In The British Large CompaniesAbstractThis project looks at the revenue enhancement safety valve in the British large companies and find out the reason of this problem. It aims to break out the methods to control it. As resources find, firstly, appraise loopholes ca usage appraise dodging. Secondly, tax income is so high and effects large companies much. Companies hope to cut costs without holding tax. Thirdly, the leading of companies can not realize they have duty to suffer tax. Finally, the organisation ask companies to buy off double tax which is unfair to companies. Therefore, British Large companies should digest the aw areness of responsibility to pay tax. The Governemt should improve the tax law. The look was conducted by examining previous studies. Two cases study focus on tax nonpayment of Google and amazon in the UK. The results introduce that British large companies have tax default p roblem. Companies use branch offices for transferring British tax bullion to other countries offices which is located at tax heaven. The leaders of companies even are proud of tax evasion. In conclusion, in the UK, tax evasion is quiet serious in the large companies. any(prenominal) ethical and social carcass cause tax evasion problem. The establishment should baffle this situation by improving tax administration and letting heap raise the responsibility to pay tax.1. IntroductionTax evasion is defined as an illegal behaviour that a person, organization or corporation measuredly negates nonrecreational true tax liability. Those caught evading taxes are generally subject to criminal charges and significant punishments (Investopedia, n.d.). Nowadays, with British rescue and finance development, tax evasion has increased form by year. This area is important because wads of British companies, such as Google, amazon, Starbucks and Apple, have tax evasion problem. Britain hav e turned into a tax evasion heaven that cheats itself in the process. The reason is the loopholes of tax evasion system. According to PCS, 90% of tax is effectively voluntary with just few staff to check fly-by-night cases. The National Audit Office hatched that HMRC has doubled the amount of tax debt written off in one year and due to its own mistakesrelatively. Labours embark on chasing tax loopholes was depressing.In 2009, it set up the patent box a vast new tax avoidance vehicle. This governments new enormous tax escape leak is the controlled foreign companies management system, allowing British companies to pay tax in the cheapest country they can find, and none when they bring net profits back (Polly Toynbee, 2014). Furthermore, profit activate companies avoid paying tax to save money for themselves.As hypothesis, because of profit, companies keep away from turning in tax to the government on cadence. In addition, the tax system has the leak so that companies have abili ty not to pay true tax.Therefore, this project aims to discover the reason of tax evasion and find the way to prevent this situation in the large companies in the UK.1.1 Research QuestionDo the profit aims and the loopholes of tax system cause tax evasion?How to deal with tax evasion in the British large companies?2. Literature reviewThe reason of tax evasion in large companies in the UK.In this world, tax evasion is never ethical. It is illegal whenever the century. Companies and individuals all own a duty to the government to pay whatever taxes the state demands. There is no such thing that taxes are too high even though British resident always complain the level of price and taxes (McGee, 2012). However, in this century, tax evasion is such a normal phenomenon. There are some opinions about the reason of tax evasion in the large companies in the UK. Firstly, although the reforms of the tax structures improve year by year, the British tax system still has loopholes (ZodrowFuest, 2 013). Therefore, companies can route around the laws to avoid paying tax. The loopholes cause shadow economy increases. Shadow economy is sooner narrow. It does not need to take results and insights of other sciences into account. It is difficult to control. With shadow economy climbs, it attracts original tax system and creates competition for the official firms at the same time (SchneiderEnste, 2003). Moreover, because of tax system loopholes, in multinational corporations, the extensivephenomenon of income shifting happens frequently. Multi-national and offshore companies have illegal market and inequitable competitive advantages. Tax system loopholes let overseas and offshore companies avoid finance acquiring, asset stripping companies and markets. The effects impact all tax system and supply and value chains (Nicholas, 2013). The offshore economy tends to be around us. Lots of trades are successful through the offshore economy. What is more, entrepreneurs corruption and govern ment expropriation of private resources destroy the balance and interaction between tax and investment. The political structure can not use as effective tool for the original tax system (ZodrowFuest, 2013). Therefore, the tax system loopholes are go on to expand. Furthermore, Endemic avoidance relies on means legitimated by the tax system. Companies exploit tax differences within different places and tax regime and transfer profit to avoid tax. British companies use companies, trusts and partnerships to shelter earnings or assets. (Nicholas, 2013). Secondly, according to ThomasSowell (2012), tax cut for the rich. Tax effects rich companies greatly. Because the total amount of money deliver by someone in the large companies is often larger than the total amount of money saved by someone in small companies. With the high tax, the more money companies have, the more tax they need to pay. All People desire to have more money. By tax evasion, companies can save lots of financial reven ue. Thirdly, leaders of companies think government does not give them or society tangible benefits and value. It wastes their paid tax money. So, companies do not want to pay tax to the government. Maybe, companies give money to charity that is better than paying tax to the government. The former can bring more social value and popularity to the companies (DSouza, 2012).Finally, because the government asks British large companies to pay double tax, companies believe that it is unfair to themselves. Therefore, British large companies do not pay tax to the government (Baekdal, 2013).The approach for preventing from tax evasionIn the UK, tax evasion situation is serious. Here are some methods to help to solve the problem. Firstly, British government should set law to limit or remove the legal standing of companies or ownership from jurisdictions with cannibalistic tax and secrecy regimes (Nicholas,2013). Secondly,the large companies tax standards need to be updated to prevent loophole s from being abused. Companies haveability to use new data and advanced technology to control fraud and evasion risks.The government has also set up a new centre of system within HMRC to enhance expertise forsolving offshore tax evasion (Gov, 2014). Thirdly, British companies should raise their ethical and legal responsibility to pay tax for developing British society and country.3. Case StudyCase StudyGoogles tax evasionGoogles current situationGoogle, as a large beau monde, uses its dominant business office for own economic goals with tax avoidance strategy escape financing of government and public infrastructure (Baekdal, 2013).From 2006 to 2011, although Google has 18 billion pounds revenue in Britain, the company describe only 16 million profit for taxes to British authorities (Reuters, 2013). In 2011, Googles UK unit just paid six million pound to the Treasury and turned over of 395 million pound (Barford Holt, 2013).The reason of tax evasion in the GoogleGoogle operates its European branch companies out of approving tax jurisdiction on purpose. Google own the companys non-US intellectual property rights in the tax haven of Bermuda. The leader of Google company believe that enterprise has the duty to shareholders to denigrate its costs by avoiding paying tax (BBC News, 2012). The chairman of Google even said that he is proud of his companys tax evasion scheme. As the report said that he even thinks the tax evasion of 2.5 billion pounds in Google is capitalism (Kumar Wright, 2012). In Ireland, Google has a branch office which should pays fee to isolated Dutch company. Google establish Dutch company purely for the purpose of reducing the taxes (BBC News, 2012). As Googles executive chairman Eric Schmidt said that he does not agree on UK tax debate. He thinks that it is political decision instead of economical issues if the company must comply that the tax laws is changed by British system. It is not fair that companies should pay more tax when the t ax rate climbs up (BBC News, 2013). Therefore, The reason of tax evasion in Google company is that the holders are not conscious of having responsibility to pay tax for the government and society. It desires to reduce the costs in order to achieve their economic aim by avoiding paying tax.Case study amazons tax evasionviragos current situationAccording to the report given by the Guardian, Amazon earned more than 3.3 billion pounds profit in the UK last year without paying any corporation tax to the tax authorities. In 2011, Amazon, which has earned about 3.35 billion pounds in the UK, only reported a tax expenditure of about 1.8 million pounds (BBC News, 2013). Now it is under investigation by the UK tax office.The reason of tax evasion in the AmazonThe tax structure loopholes are used by Amazon company. Luxembourg country is well cognise as tax heaven. The tax rate in Luxembourg is much less than the tax rate in Britain. According to the report, the goal that Amazon company estab lish deliberately branch office in Luxembourg is to round around the British tax laws. Tax system loopholes are used by Amazon to transfer billions of pounds profit from British customers to Luxembourg. Then, Amazons profit is used Luxembourg s law to pay the tax which is much less than paying in the UK. This behaviour aims to payinvisibleBritish tax (BowersWintour, 2013). down the stairs current laws, Amazon has 4.2 billion revenue annual years in the UK, which rely on a network of eight grand warehouses across Britain by routing through Luxembourg. (Bowers Wintour, 2013). According to Ibtimes website (2014), Amazons accounting strategies have been attacked by John Lewis and other high street stores, which they think give Amazon an unfair advantage by using the Luxembourg loophole to shield its profits from the tax authority in the UK.4. DiscussionAccording to the resources, in the UK, tax evasion in the large companies is known as the fault of the companies. There are three reas on of tax evasion. The first is that tax system has loopholes which is used to transfer the profit from high tax rate place to low tax rate place. The Second is the leader of companies may not realize they have responsibility to pay tax to the government and society. They just desire to achieve the economic goal. The third is that tax rate is so high and tax effects the rich more. As cases of Google and Amazon show these reasons have been be. The leader of Google was proud of tax evasion and desired to reduce costs to achieve their economic goal. Amazon company used branch offices which is in tax heaven country to transfer revenue for avoiding paying tax. However, there has other agreement that government is greedy to ask companies to pay double tax. by and large speaking, because government put tax money on social infrastructure and companies have a lot revenue, companies should raise the awareness of duty to pay tax. Moreover, government is probably the one that should improve t he tax system and establish the law to punish these illegal attitudes. Furthermore, comparing to other countries, Tax authority should control tax rate and keep balance between each area in order to prevent companies to transfer profits to branch offices in other countries.5. closingAs resources found , in current century, tax evasion situation is much serious in the large companies in the UK. There are quadruplet reasons of tax evasion. Firstly, although the reforms of the tax structures are developed year by year, the British tax system still has loopholes. Therefore, companies can route around the laws to avoid paying tax. Companies use branch offices for transferring British profits to other countries which is located at tax heaven. Secondly, tax effects rich companies much. The companies are more rich, the tax money they should pay to the government and society. Companies desire to save costs for economic goal. Thirdly, leaders of companies might not have sense of responsibil ity. Two cases of Google and Amazon have proved the most of people believe that tax evasion should due to British large companies themselves. However, a few people think government causes tax evasion because it asks companies to pay double tax which is unfair to companies. According to discussion, companies have responsibility more than the government because the government puts tax money to society with developing euphony system , charity and others.5.1 RecommendationsAccording to the research, British large companies should be enthusiastic with paying tax to the government and society. .In addition, the government might better to develop British tax laws to control tax system loopholes. In the future, with society, economy and technology development, the situation of tax evasion would be changed. British people should continue to research tax evasion.5.2 Limitations and scope for further researchAs the place and time limited, research was limited in two British large companies in late(a) years. If the research carried out in several companies and researched the situation of tax evasion in 10 years, it could has more accurate results.(Words 2015)6. ReferencesAmazon Facing Fresh UK Tax Avoidance Row. (2014). Retrieved from http//www.ibtimes.co.uk/amazon-facing-fresh-uk-tax-avoidance-row-1449978Amazon UK paid 2.4m tax last year, despite 4bn sales. (2013). Retrieved from http//www.bbc.co.uk/ intelligence operation/business-22549434Baekdal, T. (2013). The Other Side of Amazons, Apples and Googles Tax Evasion. Retrieved from https//www.baekdal.com/opinion/the-other-side-of-amazons-apples-and-googles-tax-evasionBarford,V. Holt, G. (2013). Google, Amazon, Starbucks The rise of tax shaming. Retrieved from http//www.bbc.co.uk/news/magazine-20560359Bowers, S. Wintour, P. (2013). Amazon told time is up for tax avoidance. Retrieved from http//www.theguardian.com/business/2013/jul/19/oecd-tax-reform-proposals-amazonDSouza, J. (2012). Terrorist Financing, Money Launderi ng And Tax Evasion Examing The Performance Of Financial Intellgence Units. Boca Raton, Fla CRC.Factbox Apple, Amazon, Google and tax avoidance schemes. (2013). Retrieved from http//www.reuters.com/ obligate/2013/05/22/us-eu-tax-avoidance-idUSBRE94L0GW20130522Googles Eric Schmidt perplexed over UK tax debate. (2013). Retrieved from http//www.bbc.co.uk/news/business-22676080Kumar, N. Wright, O. (2012). Google boss Im very proud of our tax avoidance scheme. Retrieved from http//www.independent.co.uk/news/uk/home-news/google-boss-im-very-proud-of-our-tax-avoidance-scheme-8411974.htmlMc Gee, R. W. (2012). The Ethics Of Tax Evasion Perspectives In Theory And Practice. New York Springer.Nicholas, C. (2013). Twelve steps to stop tax avoidance. Retrieved from http//www.newstatesman.com/business/2013/09/twelve-steps-stop-tax-avoidanceReducing tax evasion and avoidance. (2014). Retrieved from https//www.gov.uk/government/policies/reducing-tax-evasion-and-avoidanceSchneider, F. Enste, D. H. (2 003). The Shadow Economy An internationalistic Survey. Cambridge New York Cambridge University PressSowell, T. (2012). Trickle Down Theory And Tax Cuts For The Rich. Stanford, Calif Hoover Institution PressStarbucks, Google and Amazon grilled over tax avoidance. (2012). Retrieved from http//www.bbc.co.uk/news/business-20288077Tax Evasion. (n.d.). Retrieved from http//www.investopedia.com/terms/t/taxevasion.aspToynbee, P. (2014). This farcical tax system is cheating us out of billions.Retrieved from http//www.theguardian.com/commentisfree/2014/jul/29/farcical-tax-system-cheating-billions-chase-avoidersZodrow, G. R. Fuest, C. (2013). Critical Issues In Taxation And Development. Cambridge, MA MIT Press.