David Cameron and George Osborne lament the fact that large and small multinational "operations" can get away with paying just "nominal" tax on their results in Britain ! They can even invoke "tax loss carry-forwards" against a subsequent profit !
The basic rule in taxation is that "one cannot be faulted for avoiding legally to pay tax". False declarations can lead to prison sentences !
The British press has highlighted repeatedly how important multinational "groups of companies" have "arranged" their operations so as to pay "pitiful" income tax on the results of their "controled subsidiaries" !
There are in fact two major ways to reduce the net income of group subsidiaries, -
1) - Invoice the purchase of goods which leaves a minimal profit margin on resales.
2) - Invoice "management fees" from head office or "Royalty Charges".
No amount of "audit investigations" on the validity of inter-company charges can substantially change the national problem which is to collect normal profits tax on operations in the UK by multinational companies !
The only way to tax correctly and to cover "suspicious" charges is to make a fundamental change in taxation laws.
Should George Osborne not introduce a tax based on "turnover" which could be applied when companies blatantly report unrealistic "profit or loss" results ?
This solution could lead to the question of "what is a normal "Gross profit on sales". It does not mean that a change in the approach of how to tax results is not already necessary !
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