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Tax Avoidance By UK Companies Add in library

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Question:

Describe about the Tax Avoidance by UK Companies?
 
 

Answer:

Abstract

Tax avoidance can be termed as a legal management of one’s financial scenario in such a manner that it will lead to minimize the tax liability. The major tools which are used in this regard are tax havens, secrecy jurisdiction in order to accelerate the profit. According to a survey it has been noticed that half of the world trade takes place by dint of tax havens states (ChristianAid, 2008). This paper will put an emphasis on the phenomenon of tax avoidance in UK.

Tax avoidance by the multinationals can be said to be a direct component of transfer pricing which has raised huge concerns in international taxation (Muchlinski, 1999). The multinational operates and rakes the route of transfer pricing in order to evade taxes. It has been witnessed that with the advent in technology and enhancement in the mobility of capital have led to cross border economic activity and has linked each corner of the world. This paper is a strong attempt to show that global value and the wealth chain do not make the same path. The main point of discussion is that the multinational companies in UK navigate various jurisdictions and even place their revenue generating activities in tune with their accounting regulations and policies. Hence, a mismatch is bound to occur and this implies that value is created somewhere and wealth is accumulated elsewhere. With the alarming increment in the tax avoidance methods, the government has become highly apprehensive and has infused a number of methods in order to counter attack the term called tax evasion. It has also been of a high profile nature. The use of method such as retrospective legislation has ensured that the companies don’t evade taxes and cheat the government. The Tax Avoidance Disclosure regime has been implemented and is one of the major weapons to tackle the problem of tax avoidance. The unacceptable tax avoidance is one of the major issues which are unacceptable and hence the authorities are taking this an opportunity to raise revenues in this regard (Avery Jones, 1996). Tax avoidance is not a new method. In the recent years it has reached phenomenal attention in the current years both internationally and also in UK.

List of charts

Type 

Purpose

Chapter

Table 1

Estimation of Treasury Amount

4.3

Table 2

Top 50 UK firms dealing in hardware, software and Internet

6

Image

Tax avoidance by UK companies

10

Table 3

Income and Size of the Accountancy Firm – 2011

11


1. Introduction

1.1. Purpose of the research

The main inspiration of this research arises from the concept of tax avoidance by UK companies. With the due passage of time, this debate has arisen in stature and potential reform is necessary to iron out the matter.  The tax structure in UK is complex and that is evident from the tax law which is in effect. With the help of surveys it is clear as well as evident that the UK tax code is the longest in the world and has even over taken India in this regard. Moreover, it has been noticed that with the due passage of years, the amount and even the complexity has enhanced which makes it complex and tends to raise the compliance cost of the business. This is the sole reason why there has been a huge increase in the tax avoidance. The flat tax rate is one of the paramount reasons why such a matter has been noticed (Forbes, 2005). In the present scenario, a major part of the cross border trade remains in the hand of multinational enterprises, which takes into consideration the major chunk of their transactions within various entities under control which is common. The presence of intra group transaction has given rise to fix the internal price which is less or more than the price which is prevailing in the market. Recent years have shown that the government of UK has lost considerable amount due to the process of tax avoidance. This thesis also stress on the fact that the Tax Avoidance Disclosures Rules needs to be followed which helps in better formulation of tax and even needs to be intimated to the authorities shortly after it is marketed.

1.2. Structure of the thesis

The thesis starts with an introduction to the tax system prevalent in UK and the approach which is undertaken in order to avoid the tax. Further, the tax system of UK and the legislation is studied. The main reason behind the tax avoidance is due to the loopholes which is existence in the system. Evidences of various companies are shown which enables smooth study and also provides a balancing act. Various companies employ different technique in order to avoid tax. Hence, through this study the methods which are opted for exploiting the tax loophole will be studied. Various findings are gathered through this process and help to simplify the problem.

1.3. Importance

Most of the parties who have an interest in the tax system or the companies which are incorporated there have the primary view that the structure is complex. According to surveys it has been clearly indicated that it has the longest tax code in the world and has even surpassed India in this regard. The complexity has increased with the due passage of time and that is the sole reason why there has been a sharp increase in tax avoidance by the UK companies. Considering this case, it has also been noted that the compliance cost of the companies has increased. In this scenario it would be worthwhile to shed light on the tax avoidance scheme and the methods which can be adopted to counter attack those situation. But, little importance has been paid to such situation which has raised this process and tends to be a major problem for the government and the authorities.  The reason for avoidance and the methods which are used for avoidance is the main focus behind this thesis. The thesis covers the concept of tax avoidance and the way it differs from tax evasion. Moreover, the thesis provides a snapshot of the UK rules and legislations which are prevalent.

 

2. Literature Review

Tax avoidance can be said to be a function of the tax base. In other terms it signifies the problem which is involved in defining the legislative terms (Avi-Yonah, 1995). In reality, it is probably the case that creates obstacles for avoidance. The structure of taxation in the United Kingdom incorporates payments from the Central Government (Her Majesty’s Revenue and Customs) and the Local Government. The revenue of the Central Government consists of the various types of taxes such as income tax; value added tax, corporation tax, contributions from the National Insurance and the duties. Local tax consists of the parking fees, grants from the central government’s funds, rates of business prevailing in England and Wales etc. Lots of amendments and modifications were noticed in the taxation of the United Kingdom. In the beginning an individual was taxed regardless of the fact that the income belonged to him but now an individual with an owed income in charged to tax. Many companies backed out when the corporation tax was introduced in the United Kingdom. This thesis put emphasis on the tax structure which is prevalent in US and the way the companies utilize the loopholes in order to abstain from huge taxes (Moffett et. al, 2011). There are various methods which are employed by the companies in order to have the better of the tax laws. Similarly, other countries also undertake this mechanism in order to be away from the tax liability. This thesis refers to tax avoidance and sheds light on the tax practice which is used by the country.  As a matter of fact tax avoidance can be termed as highly subjective and contains the political term. It covers innumerable range of actions. In the current scenario it is not of paramount importance to have the difference between avoidance and evasion. The terms are highly complicated and exaggerated by the use of terms such as acceptable and unacceptable tax avoidance. This raises the question acceptable to whom? Hence, it is crystal clear that tax avoidance is a major factor which has created the so called tax gap that is the gap between what the authorities collected in revenue and what they predict why it should be collected (Murphy, 2012). It is suggested that tax avoidance must be tackled and must be considered at a very fast pace. This can be done only when the cause of avoidance is identified and dealt with preciseness. For this purpose some costs needs to be incurred and this will not only be the revenues which are lost from the avoidance but also the cost of the measures which are undertaken by the tax payers, the authorities as well as the economy in overall.

2.1. Tax Avoidance – An Ethical Issue for Business

As an element of good governance, a company tries to minimize the tax liability through particular tax planning. This provides a great opportunity to the business to take into consideration and use the tools and mechanism such as allowances, rebates, deductions, etc. This entirely depends on the business on how to conduct their operations in the light of all implications which have tax consequences. As a matter of fact tax planning can be treated as a compliant behaviour while tax avoidance is sometimes treated as a grey issue. Generally tax avoidance is legitimate but may be used in an aggressive manner. The procedures which are used may be in a form which is not anticipated by the government.  The manner in which overseas tax haven is utilized is a glaring example. Beyond question the biggest issues of tax avoidance has been seen in UK.

2.2. Making Tax Avoidance ethical issue?

Avoidance of tax by moulding the tax system is not illegal, but it should be managed in a manner which goes in letter and spirit of the law. Companies are required to pay taxes according to the legislation which is set (Delanty, 1998). The issue falls under the concept of ethics because business contains an approach to interpret the situation accordingly. In a legal manner, the business tries to interpret the affairs. Tax avoidance has been treated as unethical because it undermines the integrity of the entire tax system. This is also due to the fact that tax is a social responsibility and payment of tax in which the operation is done is one of the major acts. This enhances the goodwill of the company and also helps the public in an indirect manner. Public services such as education, healthcare and infrastructure can be enhanced with ease and flexibility. Beyond question, a cut in the government spending can impact the lives of the people and it is being argued that the multinational companies which avoid tax are not ethical. This behaviour can make a company open to accusations of greed as well as selfishness which damage the reputation and erodes the trust that the public have in them. It is being argued by the directors of the company that it is their responsibility to look after the tax affairs and keep it to a minimum so that the entire class of shareholders gets the benefit (Dastard, 2005). Many allegations have been put forward regarding the companies in UK which pay little or no corporation tax. The estimates speak volume on this matter.Many individual and business companies pay taxes whereas; on the other hand there are few people who tend to ignore to pay taxes. The gap or difference between the expectation of the revenues by the HM Revenue and Customs’ and the revenue collected by them is known as the tax gap.

2.3. Estimates

Tax evasion or avoidance by the individuals or companies, failure to implant reasonable steps to collect taxes, legal interpretation, etc tends to create a larger gap. So the United Kingdom Government is becoming very rigid with the tax payers to make the payment on time. Through the processes i.e. firstly, the taxation laws were mad every resilient for the tax payers, secondly, the customers were made well aware about the approach of avoidance, thirdly, increasing the areas of operation of taxation and etc. There was a huge gap in terms of indirect and direct taxes. For example, the tax gap in the financial year 2010-2011 was estimated to be 32 billion pounds i.e. 6.7% of the total taxes estimated by HMRC, the evaded taxes amounted to 9 billion pounds. The avoidance of tax tends to affect the long term growth of the economy and the delivery of public services. The United Kingdom markets tend to get distorted and the reward gets mismatched with the hard work and the returns.

Since it is very difficult to provide a clear definition of tax evasion, so the Government of United Kingdom have come out with certain mechanisms and strategies. There are various ways to achieve the strategies to avoid tax evasion:-

  1. Through the effective legislations the avoidance would be curbed down.
  2. The customers and the economy would be well aware of the prevailing strategies and the plans.
  3. In depth investigations and analysis would be carried in order to reduce the curbing of taxes.
  4. The non tax payers would be given higher attention and they would be treated as a proportion of high risk.
  5. Various comments and suggestions would be provided on the areas and thinking where the Government finds it ineffective.

After the implementation of the effective strategies the progress would be measured by the:-

  1. Observing any changes in the tax gap.
  2. Examining and applying a qualitative approach.
  3. Effective monitoring of risks associated with the implementation of strategies.

The success of implementation of such strategies would depend upon the joint effort made by the Central Government and the Local Government. The term tax avoidance and tax evasion are separate terms, contains a big dimension. There is clear cut demarcation between the process of tax evasion and tax avoidance. As a rule tax evasion refers to illegal practice which helps to escape from the clutches of taxation. Here the profits, taxable income, etc are concealed and even the source of income is manipulated or overstated. Enterprises indulge in tax evasion so that the tax is eliminated.

Tax avoidance is simply taking advantage of the loopholes which exist in the system of taxation. The companies indulge in such activities which enable to reduce the amount of tax by taking advantage of the tax codes. It can also be termed as a process of strategic planning where the matters are arranged in a manner which helps to reduce the burden of tax. Tax avoidance is not illegal if not used in a manner which is against the policy framed by the authorities.  For example making false comments on the tax returns will be tagged as illegal which will be a matter of evasion and hence subjected to strict action by the authorities.

The current scenario in international trade is market with innumerable development. Firstly, credits to the innovation in technology which has impacted transportation, communication as well as information technology, elimination of tariff and non-tariff behaviour, establishment of trade which is regulated by WTO and cross border movement of capital as well as goods. This has given a huge impetus to international trade. In 1960, the foreign trade in goods and services comprised of 11% of GNP and accelerated to 22% in the year 1982. On the other hand it needs to be noted that a major portion of the international trade is in the hands of big multinational companies. An MNE can be termed as an enterprise which in part or full owns, manages as well as control the assets which generates income over more than a state. It is imported as well as organized in a particular country and conduct cross border transaction apart from the country of origin through the links of branches which may be subsidiaries, affiliates and joint ventures in the nature of partly or wholly owned. Ten years back, MNE comprised for 25% of the world trade and 25% of the world GNP. The same trend is witnessed and continues to rise with the due passage of time. Currently the world is now dominated by 500 MNEs which holds more than 90% of the foreign direct investment and over 50% of the trade.

As a matter of fact tax avoidance is not a brand new phenomenon but with the due passage of time it has received more attention. As shown in the Table 1.1, the measures are termed or stated as protecting revenues or in a wider sense protecting tax revenues which was introduced in the year 2002 and it comprises of more than £4½ billion in 2005. It is clear and evident that some revenue raising methods are always opted and feasible for preventing a huge gap in the existing tax bracket.

Table 1.1.

Estimation of Treasury amount which is being raised through protection of revenues [Budget 2002] (£ billion, 2005–06 )

Announcement

2003-2004

2004-2005

2005-2006

2006-2007

2008-2009

Since Budget 2005

Nil

Nil

0.2

0.5

0.7

2005 Budget

Nil

Nil

0.7

1.0

`1.0

Period between 2004 and 2005 Budget

Nil

0.0

1.0

1.2

1.1

2004 Budget

Nil

0.3

0.8

0.9

0.9

between 2003 and 2004 Budget

0.0

0.2

0.4

0.6

0.6

Budget 2003

0.5

0.5

0.5

0.5

0.5

Between 2003 and 2003 budget

1.0

0.8

0.9

0.9

0.9

Total

1.4

1.9

4.5

5.6

5.7

% of NI

0.1

0.2

0.4

0.4

0.4


Sources: Budgets as well as Pre- Budgets report. Measures which have scored under the prospect of protecting revenues or which protect tax revenues are taken into consideration. The figures are updated to 2005-06

 

2.4 The process of Transfer pricing

In case of international trade the majority of transactions take place between entities which are related within MNEs and which do not pass through the market which is neutral as well as independent.  This helps them to tune the internal prices of goods as well as services in accordance and flexibility of their own. These are called transfer prices. It can also be termed as the price where goods as well as intangible properties are transferred or services which are provided between the related enterprises do not portray a true and real nature of the prices of the transactions. Transfer pricing is one of the main weapon of the companies which are located in UK and denotes an idea of manipulation which happens between the enterprises which are related. Beyond question the transfer price is dealt in the light of market or arm’s length price which can be said to be the price of similar transaction which takes place between the third parties which are unrelated (Pagan & Wilkie, 1993). In case of UK companies, transfer pricing happens between the related enterprises such as parent and subsidiaries and between the same parents. In this scenario it happens between parents and foreign affiliates. The transactions which appear in transfer pricing includes transfer of tangible goods, capital assets and other assets which are tangible, providing services, arrangement of lease, letting out properties, etc. Hence, the transfer pricing manipulation is done entirely for the increment of total after tax profit of the MNE and elimination of before tax declared profit. Transfer pricing enables to transfer the funds to an entity which lacks in liquidity. It is used as a powerful tool by the UK enterprises which help the concern.  The transfer pricing mechanism was used in the case of Librium and Valium in UK where the price was significantly high (Emmanuel & Mehafdi, 1994). After establishment of the parent company Hoffman-La-Roche the prices were manipulated on transactions where the Roche products were ordered which reduced the price of Librium by 40% and Valium by 25%.

2.5 Avoidance in UK

The Companies in UK indulge in tax avoidance practices due to various reasons. Firstly, the taxation is of paramount importance and is not liked by the business enterprise. The desire as well as interest to avoid tax has been the common instance from a very long time. The tax fraud has been estimated at 5 to 6 times as much as the total of all orthodox crimes put together. Tax avoidance is not an easy task rather it requires specialized knowledge and needs to bank on the loopholes which are created by the government. There are plenty of tax reduction methods but only the ones which are reliable and consistent are taken into consideration. Beyond question the methods hovers around shifting income from higher tax to lower ones or to tax havens (Dharmapala & Hines, 2009). The following are the methods which are mainly opted by the companies in UK in order to shift the tax or to avoid it:

2.5.1  Shift of Profit

This is one of the strategies which are attained by limiting the operational activities in the state where the tax rates are high. Then the related income is moved to a subsidiary which is present in a state where the tax rate is low (Neville & Mailk, 2012).

2.5.2 Corporate Debt Equity

The entities which are located in the lower tax states provide intercompany loans and advances to the higher tax bracket companies. In this scenario the interest income is passed to the lower tax state. This method diminishes the profit in the higher tax country. This profit is further reduced when the interest rate or the level of debt goes up.

2.5.3 Intangibles payment

A group company which falls under the lower tax environment with company IPR ownership rights, charges the other group entity which is situated in a higher tax rate for the use of such intangibles which may be in the form of technology, licenses, royalty, brands, etc. In this scenario the pricing must showcase the technology value, that is how important is the technology for creating the profits. Usually the MNC’s in UK owns its IPR in a country which has no tax certainty on the license fees and charge affiliates for using it.

2.5.4 Shell Holding companies

This is one of the procedures which help the UK companies in tax avoidance. These are found in the jurisdiction which has a huge tax network and offers a low rate on dividend as well as capital gain. The holding company may be a shell company where no real trading or production happens but may be related to some other activities. Shell holding companies are utilized in various manners for the purpose of tax planning.

2.5.5 Hybrid entities

These mainly hover around obtaining a deduction of the same cost pattern which is in the form of loan interest. This will happen from two different countries and would depend on the structure of the affiliate’s company. The same thing is witnessed when countries are allowed to have companies of dual residence. For example, company in UK will have a tax haven in Bermuda.

2.5.6 Specific Tax rulings

At times the countries like UK, Cyprus, Netherlands, etc provides a negotiation in direct terms with company and the tax authority. Hence, it needs to be noted that different tax treatment may exist in various countries which attempts to attract FDI.

Illustrations

Many renowned MNCs have been spotted for their level of corporate tax. They include the following:

Adobe – the average tax rate on the overseas profit of below 7%. The Irish undertaking generated 80% of the income which was non-US. The local units of Adobe around the world contained a tax residence in their markets but not as a seller of software but as a service provider which is termed as a support function. This is basically known as the ServicePE model.

Amazon - According to the reports it was seen that Amazon paid little or no UK corporate tax in the time period ranging from  2009 and 2011 considering the fact that the company has a massive sales of £7.7 billion. Amazon UK which had a staff of more than 15000 is known for its service operation to the Luxembourg based company (UK Corporate Tax, 2013).

Apple – it reported an n effective rate of tax which was in the range of 2% in the current time on the profits which was on the non US profits. Around 60% of the sales happened by way of Irish subsidiaries. According to a research it was clarified that the tax strategy of Apple was done in such a fashion which do not reflect its business.

Google – It contained an effective tax rate of 2.4% in the year 2009 which was on the non US profits with the fact that major chunk of the Google non US sales was billed in Ireland. The service which was provided by the1400 staff was paid by Google Ireland in UK and majority of the sales was channelized from Ireland (Warman, 2012).

The initial step in Google taxation grid is the manner in which it conducts the search on licenses and advertises the technology.  The products as well as technologies of Google are developed in the US, the home base being the United States.  According to the IB taxation theme, the profit which is generated from the activity will be around 35% of the corporation tax, being a statutory tax rate in case of US (Ebrahimi, 2012). Being an innovative and technology oriented company most of the products of Google are seen in the innovation as well as novel developments to which the IPR are attributed. The IP rights holder will become the profit benefactor which is being derived from products sell.  The initial step which is taken by the Google to optimize the tax is to license to IP to a subsidiary which is located in Ireland. The reason for such acts will be discussed further and it is of significant importance that the arrangement will enable Google to attribute the profit of overseas to a subsidiary in Ireland as it is an IP rights holder from where the sales proceeds. Hence, this transfer of IP rights is provided by major components which happen in the US tax code. In case of US tax code, corporations are subjected to federal tax which happens on the worldwide income (Darby and Lemastar, 2007). Another major part of this US tax code is the access of wealth is not taxable until it gets recognition by the tax payer. In short the taxation does not happen till the time income is not sent to the United States. From the Google’s Annual Report of 2011 (Google Inc, 2012) it can be seen that 46% of the income of Google coming from all the world (USD 37.9 billion) is generated by the customers who are based in US. Being a centre of innovation it has to pump huge finance on staff, research, marketing, administration, etc

Table 2.2. Top 50 UK firms dealing in hardware, software and Internet

Fixed Establishment

No

Overseas ($ m)

Tax %

 

 

Income

Tax

 

Ireland

19

79730

4568

5.7%

In major markets

13

22115

5538

25%

Switzerland

8

3724

377

10.1%

Netherland

5

4324

239

5.5%

Unclear

4

3800

942

24.8%

Luxembourg

1

-338

22

-


Source: Reuters 2013 article, Company Accounts

Tax Avoidance planning is one of the important component in the tax planning structure.  There are certain principles which help in the successful tax avoidance planning (Stiglitz 1985). This is useful in the following manner:

  • Postponing the future period taxes
  • Different streams are arbitraged which helps in different tax treatment
  • Different tax rates arbitrage (rate-based)

Moreover, the effective tax planning needs three important considerations:

  • Implication of tax in all transactions to all parties.
  • Explicit as well as implicit taxes
  • Implementation of costs

According to (Scholes and Wolfson 1988) it is implied that the strategies of tax avoidance incur huge non-tax costs. For example, when it comes to HR flat tax, tax liabilities can be postponed by way of borrowing so that the equipments can be purchased and may lock into unfavourable ones which may be costly to reverse. Moreover, the tax avoidance cannot impact cannot be evaluated by a single taxpayer because the liability of other tax payer may increase. There are some well noted strategies which can be implemented by considering five main areas which are:

  • Accounting methods
  • Financial transactions
  • Structure as well as losses of the business tax
  • Transactions of international nature
  • Small businesses

2.6 Accounting methods

Most of the companies in UK use the scenario of cash flow to determine the taxable profit. As a matter of this is against the current accounting landmark in the UK which require that the accounts needs to be prepared on accrual basis (Christian, 2008). Accounts which are prepared on cash basis can be easily manipulated by delaying or attracting payment close to the end of the year and both of this impact the liability the companies.

2.7 Accounting policies and periods

According to (Weisbach, 2000) it has been noted that there has been a major debate over the timing of transaction. The date of transaction is an important consideration and influences the income tax. Hence, it is crystal clear that complexity which is generated by dint of accrual is removed. But, this can be easily manipulated by way of postponement of taxes. It is because of the fact that the postponement of tax will lead to cash flow based tax and it depends on the sales income arising from the current year and can be delayed to the next year which can be either due to customer collusion or delay in issue of sales invoice. In case of a growing business it portrays the deferral of tax. On the contrary under the system of accrual accounting such plans are not effective. It needs to be noted that the scheme has certain problems and this depends on the payment pattern as well as the business. Companies which are incurring losses and under pressure may like to defer the payment but the cost of transaction as well as interest adjustment to carry forward may be an issue.

2.7.1.  Accelerating purchases

Generally the purchases are eliminated from income in order to reach the taxable profit which helps in the reduction of the liability of the company for the particular period and provides a benefit of cash flow. This can be said to be the opposite of the above strategy and needs the agreement of the other party in consideration. To undertake such agreement implicit taxes may become a factor which may force to negate the strategy.

 

2.8. Financial transactions

2.8.1.  Reclassification of income

The tax scenario remains vulnerable to the strategic planning process. This is because of the fact that many sources of income are exempt under the provisions of tax. The exempt includes investment as well as other incomes so there is an incentive in this regard. Hence, this propels the UK companies to take the process of strategic planning and avoid the taxes. The current tax system of UK is complex and helps to differentiate between the financial return and services. In this scenario it needs to be noted that the flat tax structure needs to be more equipped in order to have a strong enforcement.

2.8.1. Converting sales to interest income

The interest income is exempted which happens from the sale of goods and the services are taxable.  Under the current existing system both are taxable. This provides a good exposure to companies to treat the income as interest which can be done with ease and flexibility using the financial instruments by a simple straight forward planning. Sales income may be converted to interest income by providing the buyer a sales price which is lower and in consideration for a high rate of interest on an instalment which was paid in the next tax year. But, the success of this plan rests on the transaction party.

2.9. Conversion of interest payment for purchase of goods

In case of flat tax, both purchases of goods as well as capital assets are eligible for deduction but not the interest payment (Fuest, Peichl & Schaefer, 2007). On the other hand both are deductible under the current system of UK. Hence, this becomes a very lucrative option to treat the interest payment as purchases.

Since it was noticed by the Government of United Kingdom that many people and companies

Through effective collaboration of work, proper technical analysis and investigations would be made by the experts in order to reduce tax evasions. The technical testing would assist the experts to identify the vulnerabilities which lead to tax evasion. Areas requiring a higher attention would be forwarded to the Ministry the government would assure that the strategies and the schemes were well understood by the individuals and the economy. The disclosure of rules would increase the transparency and the general knowledge. Proper consultations would be carried by HMRC and HMT with the tax practitioners to develop new ways to create a hindrance. New databases and the Enterprise Resource Planning activities would be carried out in order to enhance the programming activities of the system.

An extensive research would lead to a greater transparency and this further would lead to recognition of high risk tax payers. The Government would assist the payers of tax in meeting their needs and obligations. The moment Government finds anything fishy it would incorporate its steps to analyze the areas of fault and evasion.

HMRC would develop an aura where the tax evaders would undergo a tremendous investigation and would set out a resolution policy which would help the tax payer on a long term growth. The evasion which may face dishonesty and criminality would be further processed as criminal investigations. With the assistance of project management techniques and mechanisms the tax payers of the same category or linked with agreements with evasion would be identified. Defensive strategies and techniques would be applied to get rid of tax evasion or the tax pending cases. After a proper consultation and suggestions the HMRC would take a conclusion as to how the tax collection would be maximized. Various schemes and mechanisms adopted may not make a huge difference so it is further suggested that a massive “Even Up” campaign should be push out by the people to remove the inequality associated in the country, so that the rich don’t become richer and poor gets a fairer and a better share.

2.10. Approaches to Counter Tax Evasion

Few approaches which are used in the current scenario to overcome tax evasion are:

2.10.1. Legislative Approach

The legislative approach deals in two manners, firstly, legislation undergoes an alteration along with an alteration in tax and secondly, anti tax avoidance rules are forced upon the exiting legislation. Due to the first approach, the underlying information is looked upon while covering the loop holes, so few changes rather increase the potential of tax avoidance (Gammie, 2008). This approach failed due to being more reactive than proactive.

2.10.2. Judicial Approach

It has been seen that the cases under judicial approach required parliamentary pressure or exertion over the truth of the transactions of the tax payer. This approach was mainly applied to determine the legality of the approach as whether the particular transaction fitted to the case the parliament holds. This purposive approach set out its limits for the anti tax avoidance schemes. This approach gained less importance as various cases were unanswered by the parliament and the wrong implement of the pressure created harassment for the tax payers.

2.10.3. Administrative Approach

This approach created a relationship between the HMRC and its tax payers i.e. individuals or large business corporate. Under this approach, “Risk Rating Approach” has been applied where the companies are given a rating by the HMRC and this factor determines the degree of involvement the company calculates from its taxation affairs and the process of working linkage between HMRC and the companies. This approach motivates the tax payers to increase the transparency and to curtail the activities which lead to tax avoidance. Many a times it is noticed that the companies tend to exhibit themselves as fair and transparent, but this may not be the case many a times. This takes place when the companies believe that the judgment of HMRS is not in line with the legislation and the case is not fair. Due to this the large corporate companies tends to get a cost benefit analysis done where a company does not consider the benefits of a decreased involvement of HMRC and a much fairer working linkage to move ahead of the costs associated, then it would not change its behaviour. An ongoing consistency and transparency is required to apply this approach as many companies depend blindly on the laws and the approaches set out by the HMRC.

2.11. Reasons for Tax avoidance by UK companies


There are many reasons for tax avoidance. In order to create methods and tools for fighting avoidance it is essential that the authorities get an in depth understanding of the underlying problems. The reasons are as follows:

2.11.1.  Low level of tax compliance

The willingness to pay taxes by the companies varies from one country to another and cannot be said to be a tax burden. Empirical research has provided a clear indication that taxpayer can pay more taxes if there is a proper tax system and which provides self enforcement. But, tax morale is not easy to build. Since, UK has a deep rooted culture and hence the willingness to pay taxes is influences by several factors:

2.11.2.  Tax system and concept of fairness

Some studies has revealed that higher rate of taxes is the main reason behind tax avoidance as well as evasion. The main concept behind such thinking is that higher rate of taxes increases the burden of tax and diminishes the disposable income of the tax payer. The rate of taxes in case of UK is high and as a result of it, the companies try to escape the structure of tax and start finding way of tax avoidance.

2.11.3.  Low accountability as well as transparency

Lack of accountability as well as transparency in the utilization of public funds provides contribution both to the public distrust in terms of tax system as well as the government.  This in process enhances the will to evade or avoid taxes (Kirchler et al., 2007).

2.11.4.  High level of corruption

Level of corruption also has a huge impact and impact the process of tax avoidance. Tax avoidance is done in order to skip the taxes. Till the time legitimate action is taken to avoid the taxes it is feasible but once the process turns into an illegal one it hampers the smooth operations. Corruption in case of companies increases once the board officials bribes the auditors and gets a false report. In case of UK too, it has been witnessed that material misstatements has been produced in order to avoid taxes.

High Compliance Cost

Compliance costs are the cost that the company needs to bear in order to have the proper information, filling out forms etc can be one of the potent reason for the companies to avoid tax.  Compliance cost tends to burden the company and various rules and regulations needs to be followed. By ensuring proper compliance the tax structure tends to increase considerably and viewing this company tries to negate this. In all probability, the companies in UK tends to have high compliance cost and as a result of it, the avoidance is higher. Such situation leads to worry and creates an administrative burden which each and every company tries to eliminate at every possible cost. It has been noticed that small as well as medium sized enterprises are more vulnerable to the compliance costs. A survey done on UK firms on the regulatory costs provides a clear cut indication that taxes, VAT in general, are the most problematic which is followed along with labour legislation.

The tax avoidance machine is being operated by professionals who are highly paid on a grand scale. According to some experienced observers it is being stated that the tax revenues of British corporation are vulnerable to attacks from innumerable companies and accounting firms who have mass production and establishment of tax avoidance. A legislator stated to the UK House of Lords that the companies have an army of bankers, lawyers as well as accountants who ensure that the law which are formulated and implemented is being respected and at the same time, the tax is avoided. To hide the true meaning, new ways are developed which does not mean that new and varied techniques are adopted rather it means that the business is registered in a tax haven and then enjoy the tax benefits. Accountancy firms such as PricewaterhouseCoopers, Deloitte, Ernst & Young, KPMG are known as the Big four are the main force in the making of a complex structure which helps to avoid taxes. Their operation takes from many countries and has more than 80 offices in offshore tax havens which do not impose income and corporate taxes or at times even do not need to file the audited accounts.

Table 3 Income and Size of the Accountancy Firm – 2011

Firm

Global Fee US$bn

Employees Countries

 Offices

PricewaterhouseCoopers

29.3

168,610

157

770

Deloitte & Touche

28.9

183,000

150

690

Ernst & Young

22.8

153,000

140

700

KPMG

22.6

137,000

150

718


Source: Annual Review published by firms

The Big Four accounting firms have huge gross global annual revenue which consists of US$103 billion (£68 billion) through the process of audit, tax and other consultancy services which makes it the 54th largest economy worldwide.  A chunk of £8 billion comes from UK. It is to be noted that secretive firms do not portray the fees which is earned through the process of tax avoidance. In the year 2005 an internal HMRC study provided estimation that the UK offices of the Big Four accounting firms generated fees of £1 billion through the process of commercial planning and schemes of artificial tax avoidance.

It has been widely noted that the number of cases in UK has increased rapidly and has been referred to tax tribunals. The entire process relates to tax avoidance schemes.  The disputes arising out of tax avoidance schemes reached a galloping 22,100. Every year it has been witnessed that around 40% of the UK Finance Bill attempts to manage the abusive schemes. Due to this, the UK Finance Act 2004 was put into implementation and the Disclosure of Tax Avoidance Scheme (DOTAS) came into operation. The practice of tax avoidance by the firms is due to the accounting firms which are into action. This will give an overview of tax avoidance strategies which are established by the accountancy firms. There has been many claims of ethical conduct which are continuously involved in tax avoidance as well as evasion (Sikka, 2010). KPMG received immense exposure when the collapse of WorldCom which was a huge US communication corporation. For a fee of US$9.3 million KMPG advised WorldCom to enhance its profits by creation of management foresight which is known to be intangible asset. As a matter of fact management foresight is more than just providing multiple services. The asset was linked to a subsidiary which was present in a low tax jurisdiction and this licensed it with other companies in the WorldCom group for payments of annual royalty. The payment of royalty by subsidiaries qualified as an expense which is deductible whereas the income which appears in the hand of the receiving company attracts lower tax rate. In all probability, no cash was leaked or out flowed from the group. This arrangement was a big approach and hence enabled WorldCom to avoid taxes between US$100 million and US$340 million in terms of taxes. The case of KMPG was clearly evident from the 2007 UK case of John Astall and Graham Edwards v Her Majesty’s Revenue and Custom. The case revolves around two huge and well off entrepreneurs who shielded almost £5 million from UK income tax. In this scheme, specially created trust was loaned huge cash and then the IOUs were traded at the banks at a relative loss. On the other hand, the loss was neutralizing by offsetting against the personal tax bills. This enabled KMPG to earn a profit of £15 million from the entire scheme.  The Special Commissioner rejected the claims because the losses were no real and did not stand in the phase of economic losses. The Case reached to Court of Appeal, but the judgment which was original was upheld. This case was of paramount importance because of the fact that innumerable millionaires purchased the blueprints of the particular schemes so that around £156 million can be protected with ease and flexibility. On the other hand mass marketed scheme of KMPG provided companies as well as their employees to keep at bay National Insurance Corporation (NIC) and income tax by dint of payment to directors through the debts of the company instead of original cash. This scheme was later eliminated by Special Commissioners.

Ernst & Young has a past history of creating ingenious schemes of tax avoidance. Once enabled Phones 4U directors to pay in terms of gold bars, fine wine and sponge of platinum. This helped to avoid the National Insurance Contribution. When the strategy was defeated Ernst & Young devised another plan. The plan provided higher pay to employees as well as directors of Phones 4U which avoided NIC as well as income taxes by securing the payments through an offshore employee benefit trust. The main plan of this scheme was that as long as the transaction appears in the form of loan for example by way of interest, tax will be avoided and skipped by the company as well as employee. It was held by the House of Lords that the contributions which are provided by the company to the structure of EBT are emoluments in potential form and hence liable to NIC as well as income tax. The Ernst & Young factory devised another scheme of avoidance which was done in order to avoid the VAT and ultimately enhance the profits. The outward sign of the scheme contained a statement which was printed on the credit card receipts of the customers. It was written that I agree 2.5% of the above computed value will be payable to DCHS (Debenhams Card Handling Services Ltd, a wholly owned subsidiary of Debenhams Retail)  for the purpose of card handling. The total amount which is paid remains the same and the price which was paid by the customer of the credit sale will be same as the cash sale. The financial service was exempted from VAT Debenhams claimed that 2.5% of the extract were not subjected to VAT and hence the output tax which is payable to the Treasury will be low.

The paper attempts to raw into action the theme of tax avoidance. In considering this, the other factors such as quality of life, social justice as well as survival of the democracy needs to be handled. The avoidance of tax by the companies in UK creates a big dilemma for the normal citizens. Avoidance of taxes results into wealth transfer and to have a clear path. It has been noticed that major accounting firms are associated with the global tax avoidance. There are pressures from economic class, government has even reduced the corporate taxes and rate of income tax but this has not been a great device for curbing the tax avoidance. It has been due to the activity of the Big Four firms that the tax avoidance scheme has gone at an alarming rate (Castells, 2008). They have always been willing to make private profit at any cost and hence have added wings to the scheme of tax avoidance and has even turned out to be major reason for tax evasion. Some of the partners are sent to prison and some are fined but this never raised the sense of alertness.  The UK tax law isn’t unable to counter attack the tax avoidance scheme with ease and flexibility due to the back dated practices. Hence, it is very much essential that a new social settlement is needed. The tax return for all the companies above the median income should be available to the public which will help in transparency.  The fear of public exposure can help in reduction of such schemes. Economic transactions should be taxed at the place of occurrence. Hence, companies should not be allowed to generate the transactions in the UK and book the profits in offshore tax havens.

2.12. Tax Avoidance Disclosure

The major landmark which was seen in the legislative front concerning tax avoidance has been the arrival of Tax Avoidance Disclosure (TAD) rules which was brought by Finance Act, 2004 ad many other Statutory Instruments, this is one of the framework which provides early estimates to the tax authorities of planning which falls under some pre determined heads. The main reason why this scheme was introduced was due to the scheme of Gilt Scripts which eliminates tax on big bonus payments. The occurrence of this and other major planning provided the tax authorities as well as government in the UK that the battle was being lost against tax avoidance and moreover, huge revenues were in danger.  The presence of TAD is a big help to the authorities because there are several rules which are needed to be followed. Promoters need to disclose marketed schemes within five days before making them available. Moreover, the process of tax planning needs to be disclosed within 5 days of starting so that it can be implemented. Disclosures are needed only if an employment product or financial product is involved. Keeping into consideration disclosures of VAT will also provide a safe route. The disclosure of VAT will provide proper planning and the value shifting can be easily shifted. Secondly, planning with hallmarks or sharing of VAT saved information will also provide a huge boost. The main aim of the disclosure regime is to have innovative ideas. It is important to witness that disclosures is not only suited to marketed schemes.  Another attempt which can be made by HM Revenue & Customs is to raise awareness among the senior management of the companies who are under scanner (HM Revenue & Customs, 2012).  This needs to be intimated that if the company are caught under the process then it will fall in big trouble.

2.13. General Anti – Avoidance principle

This is one of the anti – abuse rule which makes UK more attractive to multinational companies. Still considering this decision the government rejected the opportunity to introduce a General Anti – Avoidance Principle which aims at tackling tax avoidance, elevate revenue and enhancing the equity of the tax system by declining the opportunities for the well off individuals and large corporations to minimize their tax contribution (Castells, 2000).

3. Research Methodology

The entire process through which an attempt is made to solve the problem is known as research method. It is a well planned and carefully executed activities in order to solve a problem or to shed light on a topic which demands intense study. Research encompasses the steps of inquiry, investigation, evaluation and experimentation. In this particular project the research needs to carry on with proper objective and rationally. The end result can be noted to justify the research topic. This helps in decision making and finding a rational answer to the research topic.

The research methodology in this scenario consists of both qualitative as well as quantitative methods. A mixed blend of qualitative as well as quantitative is used because it provides a balanced result. As a matter of fact qualitative can be termed as exploratory in feature which enables to gain an understanding of the notions, principles which are underlying (Creswell, 2008). Moreover, it helps to develop a hypothesis for a well developed quantitative research. Since the topic in focus is that of tax avoidance by U.K companies special emphasis needs to be provided on thoughts as well as idea which will help to decode the trend. The semi structured method is used in this particular scenario. Here, observation is used as a main tool and various companies in U.K were observed which helped to cover this assignment.

Quantitative method is utilized to project problem by building of data which are numerical inform or which can be easily converted into statistics. Beyond question it this method quantifies the behaviour, attitude, etc. In this particular topic various measurable data was used which enabled to formulate patterns (Creswell,2008). The main use was that of online surveys and discussions. The use of qualitative as quantitative can be termed as the best approach because it helps in creating a feasible and unbiased situation. It makes the study easy and free from any flaws. Depending on a particular method will tend to create biasness and will ultimately question the integrity of the project. Since, tax avoidance by U.K companies is a vast concept and needs a lot of analysis both in terms of original data as well as past study; the need of both the methods is required. A mixture of both will provide answers from both the angle. The discovery of answers can be expected from such method. Two sorts of answers can be generated from this concept, one being the real time study and the other being the answer derived from past data.

A disadvantage which is attached to both the method is that both are mutually exclusive and hence generating an answer which can be compared easily is difficult. Both the method will generate different set of answers and comparison on these is difficult to gain. Therefore, when it comes to comparison and discovery of the difference it is difficult to be established in this scenario. Various methods are adopted by the companies in order to evade taxes but the point of differentiation in the manner of choice between the methods by considering the qualitative as well as quantitative approach is difficult to establish.

Case studies research method can be apt in this particular scenario because it involves study of the companies in U.K which wants to evade the taxes. As a matter of fact case studies involve in-depth analysis of similar situation in other organization where the nature of the question or practice is similar to that of the current situation (Gauch, 2003). Since, the dealing is with the topic tax avoidance by U.K companies and stress is on the tax avoidance methods therefore the case study method will help to gather data and a hypothesis can be generated by the study of various organizations. Case study is particularly chosen here because the tax evasion topic is same and hence the study can be uniform in this scenario. This is critical for problem solving and will help in the establishment of facts and figures.

Secondly, action research can be used in this particular case study which will help to implement the changes. Since the problem is already defined, the relevant data is gathered so as to provide a solution to the problem on the tentative basis (Greenhalgh, 2002). The dealing is with the tax evasion method and the study will help in providing an answer that what are the consequences following such courses of action.  Hence, action research can be said to be a continuous evolving project with free interplay among the effects and ultimately the solution (Kara, 2012).

There are certain problems while setting up of such methods. It may be difficult to consider such vast data. As the question is on tax evasion by U.K companies there may be many methods which are taken into consideration. Hence, studying the impact of all may be cumbersome and time consuming. Furthermore it might be difficult to ascertain the pros and cons of each methods due to which the exact answer of the research will be difficult to ascertain.

Using such methods is of great advantage which will help in the sensible and realistic problem definition. Moreover, the study can be done in-depth which will help to get the problem resolved. Moreover, case study implementation is relatively easy therefore analysis can be easily and without much problem. This will also tend to provide great solidity to the practical application and hence there will less flaws in the approach.

To ensure that adequate data is gathered it needs to be noted that the methods are used exclusively and all the process is in tune with the project. To gather data it needs to be noted that the study is done exclusively considering the methods in an in depth manner. The data collection can be divided into various other plans such as primary and secondary research. This will help to attain the needful data required for the purpose. The primary as well as secondary approach will help to accumulate data which can be very useful in ascertaining the answer and finding a reliable answer.

Keeping into consideration the needs of the thesis and the manner in which it can be presented, the research is done with the help of literature which is available. This contains papers from academic journals, various books, reports, websites, etc. To keep the thesis in a genuine position, criticism and evaluation of the literature from various authors has also been included. This has provided a great balance to the entire project as all the elements is properly included in the project.

4. Analysis and Discussion

According to the research and studies it has been noted that in order to stop the flourish of tax avoidance scheme, strong reforms are of utmost importance. It has been noticed that much of the revenues are lost due to the process of tax avoidance which is indirectly by dint of the presence of tax havens. This happens either by shifting profits into jurisdictions which have low tax or using secret methods to keep the tax authorities at bay.  From the scheme and practice of tax avoidance it can be said that issues relating to tax havens as well as secrecy will need international cooperation. Then only UK can act in a better way and ensure that the process of tax avoidance is eliminated. UK can even act in this regard on a unilateral basis that will help to tackle and control the network of Overseas Territories and Crown Dependencies like the Cayman Islands or the Channel islands which are the main region of the tax avoidance. The government must act with a sense of urgency so that the process can be brought to a grinding halt.  Moreover, it needs to be noted that the corporate tax system needs a major overhaul which can uplift the entire tax system and provide a speedy relief to the authorities.

From the study it is observed that tax avoidance is a complex procedure and it is arrived at by utilizing the loopholes in the tax procedure. The process of tax avoidance in UK is of alarming nature as it erodes the revenue earning capability of the government. This does not allow the government to earn in huge amount because a major chunk is being eliminated by dint of tax avoidance.  Hence, consider this the UK government must plan accordingly and ensure reform which will help in adequate planning. Tax avoidance can be said to fundamentally unjust as it provides huge advantage to rich individuals as well as the multinationals companies which shortens their tax bills which is never wanted by the government. Tax avoidance undermines the skills of the tax system to meet the core purpose, to enhance the revenue, to fund the public services and the impact of reduction in public spending is being witnessed. Moreover, evaluation of tax avoidance is not an easy task for the authorities. This brings a wide tax gap into effect. UK as well as other countries is working so as to make proper calculation and estimate the tax gap. But, it needs to be noted that such estimates serves only as proxies and comparison is not feasible here. This is because of the fact that technique of estimation as well as the data which is being used differs to a considerable extent. Considering the claim that higher corporate tax and personal tax rates demotes investment and also gives wings to tax avoidance, successive UK governments have lessened the rate of corporation as well as income taxes. The corporation tax has diminished from 52% of taxable profits in 1982 and reached a huge low of 22% in the year 2014. The top marginal rate of income tax has reduced from 83% in addition to 15% surcharge on the investment income in 1978-79 to 15% in 2012. The government has moved taxes to labour, savings and consumption through the process of national insurance contribution, enhanced VAT and the defeat of allowances which are tax free in nature and even the band of income tax to keep in tune with inflation.  Due to this, in 2011-12 somewhere 8, 00,000 middle income earners became subjected to 40% tax rate and the number increases by leaps and bounds in the year 2014. Overall, the share of national income in UK in the form of tax as well as insurance contribution reduced from 39% in 1982-83 to 34% in 2009-10. The movement of tax burden and the decline in the tax led to stimulation of the entire economy. Moreover, it needs to be considered that even though the government as well as authority has made the rules friendly yet the process of tax avoidance by companies are still into operation. It is difficult to estimate the tax which has been avoided as it is entirely upon the economic models which in turn relies upon various sources of data. The knowledge and news of underground economy is very slippery. The estimation of the UK Treasury indicates that every year £40 billion of tax revenues cannot be collected (HMRC, 2010). On the other hand, the leaked papers of government show that the amount of tax which is avoided by the companies ranges between £98 billion and £150 billion. According to various economic models it is estimated that around £100 billion (Lyssiotou, Pashardes and Stengos, 2004) and probably £122 billion (Murphy, 2010) of the revenues in terms of tax are lost each and every year which is huge enough to cover the yearly cost of operating the National Health Service. According to a UK government report ( National Audit Office, 2007) it is revealed that in the year 2005-2006 around 250 of the 700 biggest companies paid no corporation, and on the top of it 210 companies paid less than £10 million individually, 12 of the major companies eliminated all liabilities in 2005-2006 and claimed more than tax losses.  In the year 2009, Barclays Bank declared a whooping profit of £4.6 billion but paid only £114 million in UK corporation tax, the effective rate was 2.5%. In the year 2012, the UK government introduced the concept of retrospective legislation which stopped two tax schemes which enabled Barclays to keep at bay around £500 million in corporate taxes. Viewing such case the Treasury referred this case as highly abusive and the new regulations were brought into effect so as to avoid the process of tax avoidance. The UK’s 100 top listed companies on the London Stock Exchange contain more than 32,000 subsidiaries as well as joint ventures. Around 7,000 of these are located in the tax havens which offer low tax rates or need limited disclosure to other tax authorities. 97 of the FTSE 100 companies have their location in tax havens.

 

5. Conclusion and Recommendation

The government’s proposed anti – abuse rule will have a little impact on tax avoidance and gives a go signal to large businesses and companies to engage in activity what has been termed as tax avoidance.

Recommendation I –The government should try to curtail its plan for anti – abuse rule ad introduce provisions of General Anti – Avoidance Principle which is based on the concept of fair and equitable tax system.

Recommendation II – The government must put an end to the cuts to HMRC staff and should ensure that investment is done in a strong as well as effective workforce which will help to curb tax avoidance.

The tax avoidance by the companies in UK is entirely due to the outdated tax system in practice which treats the national subsidiaries of a multinational company in the same manner as individual companies, rather than establishing the fact that they accelerate as a global company. Hence, bringing a new model where companies are based on tax on which they function will check the tax avoidance methods of the companies and hence profits cannot be shifted to the low tax jurisdiction without tax payment. It is only by dint of such reforms that the tax system can counter the impact of tax avoidance and uproot it from the economy.  The tax risk can also be a huge weapon in increasing uncertainty among the tax payers. If the reputational risk is high then the companies will not be willing to take the scheme of tax avoidance. Stringent rules will provide a clear cut impact and will rank high on the transparency factor. The government should look into the prospect and must ensure that the plans are designed in manner which will help to eliminate the process of tax evasion as well as tax avoidance.

In viewing this, the process of transfer pricing comes to the forefront. However, each and every transfer pricing incidence does not lead to tax avoidance. It is to be noted that transfer pricing may be entirely for business consideration but it may have some impact of tax avoidance. Tax authorities are strict only when it is doubted that transfer pricing leads to avoidance of tax. Beyond question, the sight of tax officials as well as MNEs is totally different. An MNE thinks form a broader perspective while the tax officials thinks on a smaller view. An MNE thinks from a global perspective which helps to determine the global profits and operations on the other hand the main view of tax authorities is national spending all the effort to ensure that the country is not devoid of the share in the tax. If this particular needs to be controlled then the only provision which is available is to make proper adjustment on the basis of arm’s length principle. It is to be noted that the methods are not totally perfect but the means can be utilized for getting a suitable result.

6. Appendix

Compliance cost

Source: The World Bank, World Development Indicator “Time to prepare and pay tax in hours”, 2008

Google

The effective rate consisted of 2.4% in 2009 and this was on the non US profits. The profits which accrued were billed in Ireland and the entire scheme is presented below.

Manner in which Google evaded taxes.

Estimates

 

Tax Avoidance

GAAP (%)

GAAP revenue

Avoidance

5

22.5

1.1

Legal Interpretation

4

22.5

0.9

Total

9

 

2.0

 
The above estimates can be used in and can recover between £2bn and £5.5bn every year from corporate as well as individual tax avoidance.

 

7. References

Aaronson, G. (2011) GAAR Study: A study to consider whether a general anti-avoidance rule should be introduced into the UK tax system.

Adam Chris and Graham Peter (1999) Transfer Pricing: A UK Perspective, Butterworths London, Edinburgh & Dublin.

Avery Jones, J. (1996) Tax law: rules or principles? Fiscal Studies,17(3), pp. 63-89

Avi-Yonah, R. (1995) The International Implications of Tax-Reform. Tax Notes.  12(2), pp. 913

Bair, J. (2005) Global Capitalism and Commodity Chains: Looking Back, Going Forward. Competition and Change, 9(2), pp. 153-180

Baldacchino, G. and Bertram, G. (2009) The Beak of the Finch: Insights into the Economic Development of Small Economies. The Round Table. The Commonwealth Journal of International Affairs. 98(2), pp. 141-160

Bryman, A. (2001) Social Research Methods. Oxford: OUP Oxford

Creswell, J. W. (2008). Educational Research: Planning, Conducting, and Evaluating Quantitative and Qualitative Research. Upper Saddle River, NJ. Pearson Education, Inc.

Castells, M. (2000) The Rise of the Network Society. Oxford: John Wiley and Sons Ltd.

Christian, Aid (2008) Death and taxes: The true toll of tax dodging.Oxford Press.

Christian, Aid (2013) Who pays the price? Hunger: the hidden cost of tax injustice. Mosby-Year Book.

Cooper, G. (1993) Themes and issues in tax simplification.  Australian Tax Forum. 31(2), pp. 417-460.

Dalsgaard, T. (2005) U.S. Tax Reform: An Overview of the Current Debate and Policy Options.  IMF Working Paper. 9(2), pp.22-45

Delanty, G. (1998) Social science: beyond constructivism and realism. Open University Press

Dharmapala, D. and Hines, J. (2009) Which countries become tax havens? Journal of Public Economics.  93 (2), pp. 1058–1068  

Ebrahimi, H. (2012) Starbucks, Amazon and Google accused of being ‘immoral’. Telegraph. 23(2), pp. 44-58

Ebrahimi, H. (2012) Starbucks, Amazon and Google accused of being ‘immoral’. Telegraph. 12 November, p.16

Emmanuel, Clive R and Mehafdi, Messaoud (1994) Transfer Pricing, Academic Press Harcourt Brace and Company, Publishers. 

Forbes, S. (2005) Flat Tax Revolution. Regnery Publishing.

Fuest, C., Peichl, A. and Schaefer, T. (2007) Is a Flat Tax Feasible in a Grown-up Welfare State? IZA Discussion Paper. 7(2), pp. 221-232

Gammie, M. (2008) Tax simplification. 2nd ed. Green Budget.

Gauch, Jr., H.G. (2003). Scientific method in practice. Cambridge, UK: Cambridge University Press.

Greenhalgh, T. (2002) Integrating qualitative research into evidence based practice. North Am. 

HM Revenue & Customs (2012) General Anti-Abuse Rule. HM Treasury. Available from: https://www.hmtreasury.gov.uk/d/general_anti_abuse_rule.pdf

HM Revenue & Customs (2012) Measuring Tax Gaps 2012. HM Revenue & CustomsKara, H (2012) Research and Evaluation for Busy Practitioners: A Time-Saving Guide, Bristol: The Policy Press.

Moffett, M. Stonehill, A. and Eiteman, D.(2011) Fundamentals of Multinational Finance.4th edition

Muchlinski, Peter (1999) Multinational Enterprises and the Law. Cambridge USA.

Murphy, R. (2008)  The Missing Billions: The UK Tax Gap. TUC.

Murphy, R. (2012) Why are they increasing the tax gap? Public and Commercial Services Union. 2(1),  p. 10-22

Neville, S. & Mailk, S. (2012) Starbucks wakes up and smells the stench of tax avoidance controversy. Guardian. 12 November, p.33

Pagan, Jill C.  and Wilkie, J. Scott (1993) Transfer Pricing Strategy in a Global Economy, IBFD Publications

UK Corporate Tax (2013) Corporate Tax rates in the UK. Web page. URL: https://www.hmrc.gov.uk/statistics/ct-receipts/corporation-tax-statistics.pdf (first accessed June, 2013)

Warman, M. (2012) Google pays just £6m in UK tax. Telegraph. 8 August, p.32

8. Bibliography

Department of Business Innovation and Skills (2013) Report on the affairs of Phoenix Venture Holdings Limited, MG Rover Group Limited and 33 other companies, London: TSO.

House of Commons Committee of Public Accounts (2013) Tax Avoidance-Google, accessed through a web page, URL:

https://www.publications.parliament.uk/pa/cm201314/cmselect/cmpubacc/112/11202.htm

Lyssiotou, P., Pashardes, P., and Stengos, T. (2004) Estimates of the Black Economy Based on Consumer Demand Approaches, Economic Journal, July: 622-640.

National Audit Office (2007). Management of large business corporation tax. London: NAO.

STARS IRS (2008) Banks test US IRS anti-tax shelter weapon in STARS wars. Web page. URL: https://www.reuters.com/article/2013/08/11/us-usa-tax-stars-idUSBRE97A0CF20130811

UK Office for National Statistics (2011), The effects of taxes and benefits on household income, 2009/10, May 2011, London: ONS.

US Senate Joint Committee on Taxation (2003). Volume 1: Report of the Investigation of Enron Corporation and Related Entities regarding Federal Tax and Compensation Issues, and Policy Recommendations, Washington DC: US Government Printing Office

US Senate Permanent Subcommittee on Investigations (2006). Tax haven abuses: The enablers, the tools and secrecy, Washington DC: USGPO.

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