MPs consider 'radical' shake up of UK corporate tax system

MPs have launched an inquiry into the UK’s corporate tax system in an effort to address the vulnerability of the country’s tax base.

The Treasury Committee announced that it would consider whether a radical shake up of the tax system is required to address the problem of the UK’s shrinking tax base after controversy over the amount of tax paid by Google.

Andrew Tyrie MP, chairman of the Treasury Committee, said the complexity of tax law had turned the straightforward principle – that everybody should pay the correct amount of tax – in to a “piece of elastic”.

The inquiry is not directed at Google or its settlement of back taxes with HMRC, but will examine how successful HMRC has been in tackling tax avoidance and whether it, along with the Treasury and OTS, have performed adequately is setting tax policy.

“A corporation’s duty to shareholders will be to minimise its tax liability. It should be the duty of those making tax policy to find better ways to limit the elasticity. Google may be the symptom, but it is not the cause,” Tyrie said.

The committee has also asked for written submissions whether any OTS simplification measures need examination; whether the merger of the Inland Revenue and Customs and Excise been a success, and if there have been too many reorganisations within the department.

It will also assess the adequacy of government plans for Making Tax Digital. Advisers have already outlined their fears towards the digital system, telling Accountancy Age that millions of taxpayers will struggle to get online, let alone access their online tax accounts.

The committee will also consider whether the government should be looking at alternative forms of corporate taxation and whether tax advisers should be regulated.

“There is a lot the government could be doing. Tax policy must be made more practicable and the tax system more coherent. Tax needs to be fair. It needs to provide more certainty and stability. There is a lot to do and a lot for the Committee to examine,” said Tyrie.