Maya Forstater

The point is simple: if I’m a US company making $100 profit by selling to a UK customer, then your report assumes I should pay tax on the $100 in the UK. But that’s wrong.

The report raises the valid question of whether reported U.K. profits are too low. It does so by using a simplified form of formulary apportionment, based on sales. As @DanNeidle says, that’s not how the system works at present. 1/n

It’s absolutely valid to use a benchmark such as average profit margins compared to sales to raise questions. But remember that HMRC already has this data, and more, and can (and does) ask those questions already. 2/n

So IMO there are 3 possibilities: 1. HMRC are not doing their job properly, & are collecting less than they should. Possible, but unlikely to be anywhere near £1bn pa IMO. 3/n

2. The estimate of tax “dodged” is overstated and the true figure is less than £1bn. Quite likely, in my view. International TP is complex & big companies generally put a lot of effort into complying with existing rules. 4/n

3. The international rules don’t work well, and need updating. Absolutely, but it won’t be easy. Eg see my recent article in @tax_journal https://www.taxjournal.com/articles/self-s-assessment-what-s-wrong-digital-user-tax-24102018 … 5/n

So where does that leave us? Yes, tech MNCs probably exploit current rules, and HMRC could collect some more tax. But IMO not as much as £1bn pa. 6/n

Finally, the report keeps referring to £5bn. But that’s over 5 years; the annual figure is £1bn or about 0.14% of total U.K. tax revenues (and about 2% of CT). That’s not to say we should ignore MNCs and CT - but I think more focus on other areas would be more productive. 7/7