Business, Economic, Government

HMRC investigating some £25billion in unpaid taxes

TAX AVOIDANCE

BIG businesses could be forced to pay up to £25billion of underpaid tax in a major crackdown on avoidance.

Some of Britain’s largest firms are being investigated by HMRC for potentially dodging £24.8billion of VAT, corporation tax and national insurance payments last year.

It is enough to fund the NHS for nearly three months.

The investigations highlight the scale of efforts by powerful companies to avoid paying their fair share.

HMRC’s probes have snowballed as public anger at fat cat greed grows. The amount of suspected uncollected tax from the year to March is 14 per cent higher than the previous 12 months.

It is 31 per cent more than two years earlier.

Law firm Pinsent Masons, which uncovered the figures, say this means the taxman’s large business directorate is taking a more zealous approach. But tax investigations are the first stage in a tug of war between the exchequer and business and there is no guarantee the money will ever end up in Government coffers.

If HMRC experts have suspicions, they can examine a company’s books and then amass enough evidence to demand it pays up.

But many firms refuse and appeal the decision, leading to lengthy wrangling in the courts. Pinsent Masons said: “HMRC is broadening its horizons and putting in a far wider range of transactions under scrutiny. We are seeing an increasing number of challenges to arrangements that would previously have been regarded as routine and perfectly acceptable.

“The figures represent the amount of tax HMRC considers is underpaid. Not all its investigations will actually result in more tax being paid.” It follows a harder stance on tax from the Treasury after a string of scandals including last year’s Panama Papers debacle, when it was revealed that thousands of well-known figures around the world were stashing their money in offshore havens.

In November, Chancellor Philip Hammond announced plans to raise an extra £2billion by 2020 through a crackdown on tax avoidance.

The law firm said the anti-avoidance efforts were aimed at squeezing employers so ordinary families did not feel the pinch.

“The Treasury faces an unenviable choice – either cut public expenditure and services, or squeeze taxpayers for more money.

“Increasing tax revenue through investigations is often the more politically palatable option, particularly when the focus is on large businesses.

“However, HMRC is putting the affairs of more and more companies under the microscope as a result, increasing the costs for those businesses.”

A so-called “Google tax” was introduced in 2015 to try to stop large firms shifting their cash to overseas havens, and big businesses will soon be ordered to publish their strategies for limiting payments to the revenue.

Around two-thirds of all large companies are under investigation at any one time, and disputes can drag on for decades.

The amount eventually handed to the authorities is typically half of what was initially calculated and asked for.

Big firms handed over a record £49.5billion of corporate tax in the last fiscal year, up 12 per cent on the previous 12 months.

A HMRC spokesman said: “Tax under consideration is not tax owed or unpaid, it’s an estimate of what might be at stake if we didn’t investigate.

“By effectively enforcing the rules, HMRC has since 2010 brought in £53billion that would have otherwise gone unpaid and collected over £8billion from large businesses last year alone.”

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Britain, European Union, Government, Politics, Society

UK firms alarmed over Government crackdown on migrants

IMMIGRATION/BREXIT

BUSINESS leaders have clashed with the Government over Brexit following the pledge by Theresa May to curb the flow of cheap, low-skilled labour from Europe.

Business lobby groups reacted with fury to leaked Government proposals outlining a tough new immigration system after Britain leaves the EU.

Downing Street hit back, saying business needs to end its reliance on cheap migrant labour and do more to train British workers. Mrs May said ministers had a duty to curb immigration after last year’s EU referendum, and restated her pledge to slash net immigration to the “tens of thousands”.

But the Government was in disarray as Cabinet ministers, including Home Secretary Amber Rudd, Chancellor Philip Hammond and Business Secretary Greg Clark are understood to have concerns about slashing immigration from the EU too quickly.

Damian Green, the First Secretary of State and one of Mrs May’s closest allies, is also thought to have misgivings, and believes the plan can be toned down.

It has also emerged that FTSE 100 leaders have refused to sign a letter backing the Government’s Brexit strategy. Downing Street quietly asked executives to sign an open letter saying they wanted to “make a success of Brexit”, and welcoming the Government’s push for a transitional deal.

But this was not welcomed by some, with one executive reportedly saying: “There is no way we could sign this given the current state of chaos surrounding the talks.”

It is understood the letter, drafted by No. 10, was due to be made public as Mrs May tries to create support for the legislation going through Parliament about our EU withdrawal.

The row followed the leak of a Home Office document setting out plans to curb immigration from the EU after Brexit.

The Prime Minister said: “Immigration has been good for the UK, but people want to see it controlled as a result of our leaving the EU.

“The Government continues to believe it is important to have net migration at sustainable levels, particularly given the impact it has on people at the lower end of the income scale in depressing their wages.”

Defence Secretary Sir Michael Fallon said: “We have always welcomed to this country those who can make a contribution to our economy, people with high skills.

“On the other hand, we want British companies to do more to train up British workers, to do more to improve skills of those who leave our colleges. So, there’s always a balance to be struck. We’re not closing the door on all future immigration but it has to be managed properly and people do expect to see the numbers coming down.”

The document, which has caused uneasiness among some ministers, suggests low-skilled workers from the EU would only be allowed to stay for a year or two, and EU citizens would be barred from moving to the UK to look for a job. Ministers are also considering a ‘direct numerical cap’ on the numbers who come here from Europe after the UK leaves in March 2019.

Big businesses reacted angrily to the proposals. The chief executive of the British Hospitality Association said the proposals would be “catastrophic” for the industry, one which relies heavily on cheap EU labour.

The executive said: “We understand the wish to reduce immigration but we need to tread carefully and be aware of the unintended consequences – some businesses will fail, taking UK jobs with them.”

A spokesperson for the Confederation of British Industry, said: “An open approach to our closest trading partners is vital for business, as it attracts investment to the UK. It also helps keep our economy moving by addressing key labour shortages.”

The Institute of Directors said business leaders would not welcome the proposals and its members would be hoping for changes in the Government’s final position.

The National Farmers’ Union said a cut in migrant workers could cause “massive disruption” for the industry. Its deputy president said 80,000 seasonal workers a year are needed “to plant, pick, grade and pack over 9 million tonnes of fruit, vegetable and flower crops”.

But Migration Watch, a think-tank, said ministers were right to pressure businesses to wean themselves off cheap foreign labour.

In a statement, it said: “We want to encourage employers to train local people and make more of an effort to prepare for a time when there won’t be all these people coming in with readymade skills prepared to work for lower wages.”

The leaked document was a draft of proposals due to be published this autumn.

Sources said a further six drafts have since been produced and it has not yet gone to ministers for approval. Senior figures in Brussels raised concerns about the document.

Gianni Pittella, leader of a large group within the European Parliament, said it revealed the “nasty side of Theresa May’s Government”, adding: “Should the British Government follow the position outlined, it will certainly not help the negotiations. It adds uncertainty and confusion.”

German MEP Elmar Brok, an ally of Angela Merkel, said he was “shocked by the language and content of this paper”, adding: “I think we are in a situation that EU citizens are seen as an enemy for the UK. This is not an atmosphere where you can find solutions.”

. How other countries control their borders

In the United States immigration law provides for an annual worldwide limit of 675,000 newcomers, with certain exceptions for close family members.

The Immigration and Naturalisation Act allows a foreign national to work and live lawfully and permanently in the States.

Each year it admits foreign citizens on a temporary basis. Annually, Congress and the president also determine a separate number for admitting refugees.

Immigration to the States is based upon the following principles: the reunification of families, admitting immigrants with skills that are valuable to the US economy, protecting refugees and promoting diversity. In Australia, a tough immigration points system is credited with keeping numbers under control while ensuring the economy has the skills it needs.

Extra points are given for factors such as experience, qualifications and age. But critics argue there is no guarantee it would bring numbers down, pointing out that Australia has proportionately higher immigration than the UK.

Since 1967, most immigrants to Canada have been admitted on purely economic grounds. Each applicant is evaluated on a nine-point system that ignores their race, religion and ethnicity and instead looks at age, education, skills, language ability and other attributes.

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China, Government, North Korea, United Nations, United States

The West’s options in dealing with North Korea

NORTH KOREA

Intro: President Donald Trump says, “all options are on the table”. But which would neutralise Kim without risking a world war?

NORTH KOREA, a small, poor but reckless and belligerent nuclear-tipped country is testing not only the resolve of President Trump and the United States, but the UN Security Council, which has continued to meet in emergency session.

It is one thing for global leaders to say, “all options are on the table”, quite another to choose a line of action that stops North Korea without setting off a nuclear war in East Asia – and, quite probably, World War III.

But at some point, President Trump – and his four generals in his top team – must act to teach North Korea and any other rogue regime with nuclear capabilities or aspirations not to push it too far.

The Kim dynasty has invested everything it has to obtain nuclear weapons to safeguard its regime.

Some in Washington have begun to think the unthinkable. For the moment, however, other options that stop short of triggering Armageddon are more likely. This article looks at what those options are:

. Diplomacy

For some analysts, Kim Jong-un’s provocative actions are what a psychiatrist might call a ‘cry for recognition’. He is a small boy behaving very badly so that the biggest boy on the block, the U.S., will take him seriously.

Treat North Korea as an equal not a rogue, say these analysts.

The problem is that both Kim’s grandfather (Kim Il-sung, who led the invasion of South Korea that started the Korean War of 1950-1953) and father (Kim Jong-il who turned North Korea into a nuclear power) charmed delegations from Washington into reporting back on their plans for reform, when what they were actually doing was relentlessly pursuing their nuclear agenda.

Appeasement has a poor track record in Pyongyang.

In any case, the Trump administration would demand a verifiable halt to further missile development – and Kim won’t willingly give up his only card.

. Sanctions

If Kim can’t be sweet-talked into seeing sense, then even tougher economic sanctions would force him to choose between North Korea’s economic viability and its nuclear prowess. The UN Security Council, which includes China and Russia, has backed sanctions repeatedly since Pyongyang started its nuclear and missile tests a decade ago.

Last month, the UN beefed up existing sanctions with an international ban on key exports from North Korea amounting to $1billion. China and Russia are North Korea’s lifeline to the outside world and could strangle the regime if they acted in tandem to cut all trade and transport links.

However, with more than 90 per cent of North Korea’s trade going through China, the Chinese would take a hit financially, while a chaotic economic collapse in North Korea could see millions of refugees heading for the Chinese border.

A desperate Kim might even, in a last act of defiance, turn his fire on Beijing and Moscow itself.

Even if prepared for that outcome, Presidents Xi and Putin would demand a high price from Trump for that kind of high-risk help. And, the U.S. has recently imposed mandatory sanctions of its own on Russia. Would Congress swallow its pride and repeal them to get Putin on board?

In reality, sanctions are slow to deliver. Decades of sanctions were needed to prod Iran into doing a deal, which Trump and Israel still don’t trust. Would a North Korean deal be any more believable?

. A Limited Strike

A10

A-10 warplanes lined up for takeoff from the United States Osan Air Base in Pyeongtaek, South Korea. The U.S. has been conducting joint exercises with Seoul in the Korean Peninsula.

The U.S. has a range of airbases in South Korea, Japan and on the Pacific island of Guam from which to strike, with B1 bombers, cruise missiles, bunker-busting bombs, plus its fleet of nuclear aircraft carriers (each with more attack planes than the entire RAF).

While this firepower would, ultimately, destroy much of North Korea’s military nuclear infrastructure and 10,000 artillery sites, the country is more prepared than ever against an air attack.

It has mobile launchers to move and hide missiles, while the newer North Korean missiles are solid-fuelled (not liquid-fuelled) so can be launched much more quickly in retaliatory strikes at Seoul, the capital of U.S. ally South Korea, where 10 million people live.

There is no safe or full proven way to neutralise Kim Jong-un’s nuclear warheads by a massive airstrike. Simultaneous special forces’ attacks would be required – and all-out war might well result.

. Full Invasion

Despite being far better equipped than North Korea, the U.S. would require the bulk of its military manpower to be deployed to Korea to ensure a rapid and decisive win, leaving it exposed elsewhere in the world.

War in Korea would tie down the U.S. army and marines – unless South Korea’s 650,000 troops also took part. But South Korea is reluctant to engage in a pre-emptive war that would threaten Seoul with instant destruction.

China is a factor, too. It is vehemently hostile to the U.S. Terminal High Altitude Area Defense (THAAD) missile defence system that was recently deployed in South Korea.

Beijing’s fear is that the real target of any American military action in the region is ultimately China. For the U.S. to act without being sure of Chinese neutrality runs the risk of a wider and far more perilous conflict.

Even if China was ready to accept the fall of the Pyongyang regime, a conventional invasion would not be swift enough to stop Kim Jong-un’s regime launching some kind of nuclear strike, as well as firing off his stockpile of chemical and biological weapons.

According to U.S. intelligence, North Korea has between 20 and as many as 60 nuclear bombs. If only a couple were successfully launched at South Korean cities, the scale of the casualties would be horrendous.

. Assassination

Taking out Kim Jong-un and his commanders in a so-called decapitation strike is arguably the cheapest and least devastating option in terms of military and civilian casualties.

Unfortunately, a successful assassination wouldn’t stop a barrage of artillery and rockets being fired in instant retaliation against South Korea and Japan.

It might also require a U.S.-South Korean occupation of North Korea that would be faced with guerrilla resistance deploying Kim’s stockpile of chemical and biological weapons. Nor would China – faced with the prospect of millions of refugees heading to its territory – be pleased by a speedy collapse of Kim’s regime.

And if it failed, Kim’s revenge would be indiscriminate attacks aimed at South Korea, Japan and any U.S. bases within range. In reality, a decapitation strike would probably mean all-out war.

. A U.S. Nuclear Strike

The ‘first strike’ option is the “unthinkable” that some in Washington are now considering, using America’s massive nuclear superiority to “eliminate” North Korea.

North Korea Test Sites

Map indicating recent test sites from within North Korea.

But such an attack would kill millions of North Koreans, alarm America’s European allies, and trigger massively increased defence spending by nuclear superpowers China and Russia.

. Pressure on China

China’s rivalry with the U.S. has been a key determining factor in its relationship with North Korea in recent years.

North Korea has served a useful purpose because its nuclear antics required Washington to go cap in hand to Beijing in the hope it would restrain its protégé and stop the region exploding into war.

And China has done well out of its dealings with North Korea. In return for hard currency – which it uses to buy components and expertise for its nuclear programme – North Korea provides cheap labour and raw materials to Chinese businesses.

China, however, has been finding increasingly that the Kim dynasty is not a cosy client. The grisly slaughter of Kim Jong-un’s uncle – reportedly fed to dogs – who had been the regime’s pointman with Beijing back in 2013, was a warning that there were limits to what China could make Kim do.

Without the Chinese support, Kim Jong-un’s militarised economy would suffocate quickly, so why doesn’t China do more than cut oil supplies and stop buying Kim’s coal?

The truth is that Beijing is wary. Kim’s nuclear deterrent can be pointed at China, too; while a regime collapse would mean a flood of refugees into Chinese territory.

Worse still, an American invasion of North Korea might advance to the Yalu River border with China, as it did briefly in 1950. Such a humiliation could turn Chinese nationalist sentiment against their Communist rulers.

Nor does China want U.S. bases in North Korea. It wants a neutral Korean peninsula and for the U.S. to back off from challenging Beijing’s claims to big swathes of the South China Sea.

Only if Washington can offer China a cast-iron deal would Beijing risk pulling the plug on Pyongyang. But can Washington swallow such concessions?

Rex Tillerson, the U.S. Secretary of State, has hinted he could live with some concessions. But can he persuade Trump? Kim is betting there will be no deal with China.

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