July 31 (Bloomberg) -- British lawmakers called for the government to review its corporate-tax system as well as encouraging the international push to reform global tax rules to fight avoidance by multinational companies.
The House of Lords Economic Affairs Committee said in a report published in London today that better oversight of tax deals between the government and multinational companies is needed. It called for a joint panel of both houses of Parliament to be set up to hear testimony in private from Her Majesty’s Revenue & Customs, the U.K. tax agency.
“There’s a sense that corporation tax is voluntary for some multinationals which operate globally while small U.K.- based businesses go by the book and have to pay,” John MacGregor, the chairman of the committee, said in an e-mailed statement. “That brings the tax system into disrepute and loses much-needed revenue.”
Group of 20 nations meeting in Moscow earlier this month backed a plan to fight tax evasion presented by the Organization for Economic Cooperation and Development and said tax planning needed to be tackled. The Lords panel said today that though the U.K. should continue to back the OECD’s reforms, it must review its own tax rules as the Paris-based organization’s plans may not be implemented within the proposed two-year timescale.
The Economic Affairs Committee said the Treasury should review the way debt and equity are treated as the current system may encourage companies to take on excessive debt in the U.K. to reduce liabilities.
Large companies should also be required to publish a summary of their corporation-tax returns to ensure clarity on what taxes have been paid and to make it clearer when action against tax avoidance is needed, the panel said.
The report also criticized HMRC’s practice of employing staff on secondment from the four largest accountancy firms, and said it should have more officials to deal with tax avoidance.
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