Richard has picked up on my previous post about Margaret Hodge’s examination of HMRC leadership at the Public Accounts Committee and, reliable and well informed as ever, has shed more light on matters. The information he provides serves to show up Hodge’s ignorance as even deeper than we originally believed.
Richard explains how the Inland Revenue has already run a test case of the type Hodge was demanding in such ill tempered, playing to the gallery fashion. This was the Thin Cap Group Litigation, with a ruling on 13 March 2007 from the European Court of Justice.
In that case, based on the tax arrangements being used, the European Court of Justice (ECJ) found that EU law “precluded legislation of a Member State” which restricted “the ability of a resident company to deduct, for tax purposes, interest on loan finance granted by a direct or indirect parent company which is resident in another Member State or by a company which is resident in another Member State and is controlled by such a parent company”. You can read Richard’s post in full and in glorious technicolour over on EU Referendum. It’s an education in itself.
In summary, Richard explains that to charge tax therefore – in the way Hodge is cajoling HMRC to do – would be contrary to EU law, but with a limited proviso – that this does not apply if it can be proved that the loan is a “purely artificial arrangement, entered into for tax reasons alone”. Proving that particular point is nigh on impossible as companies can provide a multitude of reasons for establishing their European HQ in a particular location.
Hodge is chasing her own tail, to no purpose, at the expense of a public that is being misinformed and deceived by her ill informed and pathetic political grandstanding. If Hodge wants the law pertaining to this area of taxation to change, she needs to push for the UK to withdraw from the EU. That won’t happen this side of never. So her continual hectoring is a waste of everybody’s time.
Now, a question. Why is it the media – with its powerful reputation for accuracy – is incapable of researching this story and explaining this? Why is it that to understand the facts we have to resort to reading what a hard working blogger has published on his particular piece of electronic pub gossip? Answers on a postcard to Brian Leveson, courtesy of:
1, Passed Over for Lord Chief Justice
Guardianista Chambers
Establishment Mews
LONDON
WC1 GMG
Autonomous Mind 
AM, if you really believe that companies, by corporation taxes, or individuals, by PAYE, bear any real burden of taxation then carry on with your delusion. How do companies derive their income if not wholly out of the pockets of individual consumers at the end of the supply chain? All the taxes incurred in supplying goods and services can only be paid out of that income. The end consumer necessarily bears the whole cost of government and all the other “taxpayers” are merely intermediaries in the process of delivering the tax raised underhand from consumers to HMRC.
Politicians are naturally concerned when their carefully constructed system breaks down and the intermediaries are found not to be such a reliable channel for tax collection as expected.
Our taxation system is deliberately created to hide the true personal cost of government from the voter by inflating the costs of goods and services by the backdoor. The insidious nature of the system is a fundamental obstacle to full democracy in that no voter can appreciate his real tax burden. He is persuaded by this or that political party that someone else should be paying their fair share of tax and he swallows it as fact. It is a distraction, to obscure the real picture, that you should mind.
Letting us know the truth would be too terrible for our politicians to contemplate. That truth would be known only if consumption was taxed in full view. It is the tax system itself that needs radical reform.
EForster – if the EU should has a hand in determining UK tax policy, how is it possible then to reform the tax system?
Richard North,
Many thanks, that is true. Of course, we should seek EU exit and self determination, when the public finally sees that there is no other option.
” how is it possible then to reform the tax system?”
Persuade the EU to change its mind? >:p