:00:07. > :00:17.Tonight, the secret tax deals some of our best known firms would
:00:17. > :00:23.
:00:23. > :00:26.rather you didn't see. Is there anyone there from Northern and
:00:26. > :00:29.Shell in this building because the sign is up here? This is the
:00:29. > :00:32.address they give. Yes, it's definitely there. In a joint
:00:32. > :00:35.investigation with French TV - the UK companies making massive tax
:00:35. > :00:38.savings in a tiny European State. I've never seen anything like this
:00:38. > :00:40.before, setting out in raw detail how a tax avoidance scheme works.
:00:40. > :00:45.And the accountants, advising political parties on taxation who
:00:45. > :00:48.devised the deals. It comes in the wake of one of the most talked
:00:48. > :00:53.about Budgets in years. I regard tax evasion and indeed,
:00:53. > :00:56.aggressive tax avoidance as morally repugnant.
:00:56. > :01:00.The Chancellor is promising a new law to crack down on tax avoiders.
:01:00. > :01:05.Will it work? It's going to be used to condone tax avoidance rather
:01:05. > :01:08.than to condemn tax avoidance. The Government says we're all in
:01:08. > :01:18.this recession together, but is it giving a green light to big
:01:18. > :01:35.
:01:35. > :01:40.Welcome to Luxembourg. I'm trying to find some Luxembourg cuisine. A
:01:40. > :01:50.tiny country at the heart of Europe. A million people visit every year.
:01:50. > :01:57.This is a Luxembourg speciality. It's a type of champagne. So what's
:01:58. > :02:03.it got to offer? Ask the capital's mayor. We have the Schleck brothers.
:02:04. > :02:13.Who won the Tour de France. Cyclists that's OK. Very, very nice.
:02:14. > :02:14.
:02:14. > :02:17.Luxembourg is home to 500,000 people. It's the proof that small
:02:17. > :02:20.can be beautiful. But its biggest attraction is not the food and wine.
:02:20. > :02:22.Luxembourg has a reputation as a tax haven. Thousands of companies
:02:22. > :02:25.have their offices here. Their tax affairs hidden behind impenetrable
:02:25. > :02:27.codes of confidentiality. Until now. We've got thousands of pages of
:02:27. > :02:37.documents revealing the secret tax deals of hundreds of companies,
:02:37. > :02:40.
:02:40. > :02:43.many world famous multinationals, all negotiated with the taxman here.
:02:43. > :02:48.They were leaked to a French journalist and he agreed to share
:02:48. > :02:52.them with us. The documents involve the most
:02:52. > :02:55.sensitive information for all these companies. The profits, how they
:02:55. > :03:00.move the profits around the world and how they're going to pay their
:03:00. > :03:03.taxes. It's unprecedented. I've never seen
:03:03. > :03:06.anything like this before, setting out in raw detail how a tax
:03:06. > :03:12.avoidance scheme works for the benefit of a tax authority that's
:03:12. > :03:15.facilitating it. That's the beauty of it. We're seeing really with
:03:15. > :03:20.these, for the first time, exactly how companies avoid tax through a
:03:20. > :03:23.jurisdiction that wants to help them do it.
:03:23. > :03:27.Richard Brooks writes for Private Eye magazine but used to be an
:03:27. > :03:32.investigator for Her Majesty's Revenue and Customs. The documents
:03:32. > :03:37.are complex and technical. Richard has agreed to help me get my head
:03:37. > :03:47.round some of them. If I lend you �10 with no interest, that would be
:03:47. > :03:49.
:03:49. > :03:53.a zero coupon bond. Really? we've covered the zero, the coupon
:03:53. > :03:58.and the bond. Are you getting this? The convertible bit is important as
:03:58. > :04:01.well because. The bond is convertible into shares. I'm lost,
:04:01. > :04:04.I'm still owing someone tenner and someone is owing me a tenner. The
:04:04. > :04:09.language used might be difficult to understand, but the end result
:04:09. > :04:13.isn't. It's fairly straightforward. It's to move profits from the
:04:13. > :04:17.country where they are taxed at a normal tax rate which might be 26%
:04:17. > :04:20.or 28%, the kind of levels the UK has, to a country or a territory
:04:20. > :04:28.that has much lower tax rates, where they may be taxed at less
:04:28. > :04:31.than 1%. So who's been getting a tax deal? It might not look much
:04:31. > :04:41.but this is the Luxembourg office of one of the UK's most successful
:04:41. > :04:45.
:04:45. > :04:47.multinationals. GlaxoSmithKline, the pharmaceuticals giant. The
:04:47. > :04:55.company is run from corporate headquarters 300 miles away in
:04:55. > :05:00.London. We've discovered that it ha been avoiding tax on some its multi
:05:00. > :05:08.billion pound profits. Thanks to Luxembourg and its enticing tax
:05:08. > :05:17.regime. Now with the help of these secret documents we can tell you
:05:17. > :05:20.how they did it. For GSK, it was about reducing profits in the UK,
:05:20. > :05:23.which were then taxable at 28% while at the same time taking
:05:23. > :05:28.advantage of Luxembourg's extremely generous tax breaks. It required
:05:28. > :05:37.some clever tricks, all legal of course. GlaxoSmithKline is based in
:05:37. > :05:39.the UK. In 2009, it opened a new subsidiary in Luxembourg. The
:05:39. > :05:47.following year that subsidiary lent �6.34 billion to a GlaxoSmithKline
:05:47. > :05:57.company in the UK. In return, the UK company paid nearly �124 million
:05:57. > :05:58.
:05:58. > :06:05.in interest back to Luxembourg. So that's �124 million gone from the
:06:05. > :06:15.UK company's taxable profits so no longer available to the UK taxman.
:06:15. > :06:16.
:06:16. > :06:18.And the financial magic didn't end there. If the transaction is big
:06:18. > :06:27.enough, the Luxembourg taxman will agree, upfront, an extraordinary
:06:27. > :06:37.deal. Tax, effectively of less than 0.5% of that �124 million. Not bad
:06:37. > :06:39.
:06:39. > :06:42.considering it would have been taxed at 28% in the UK. So that
:06:42. > :06:45.meant the taxman in Luxembourg only took around �300,000, leaving
:06:45. > :06:52.GlaxoSmithKline with a potential saving in UK corporation tax of �34
:06:52. > :06:58.million. Magic. That was year one. The plan was do the same thing all
:06:58. > :07:07.over again in 2011. And it was all approved here at the tax office in
:07:07. > :07:12.Luxembourg. Astonishing, isn't it? This rather non-descript building
:07:12. > :07:15.is the centre of what goes on here. This is where the deals are done
:07:15. > :07:25.which help make this place so desirable for business.
:07:25. > :07:26.
:07:27. > :07:29.Well, there's an unholy alliance here. There's certainly the
:07:29. > :07:32.multinationals that want to reduce their tax bills without incurring
:07:32. > :07:36.any real economic cost. There's a country within the European Union
:07:36. > :07:39.that is exploiting its position as a member of the club to say come
:07:39. > :07:45.here and use us to avoid your tax bills back home. And there's the
:07:45. > :07:49.advisors that are more than happy to do it to help them to do it.
:07:49. > :07:53.So just who was advising the companies in our documents? Price
:07:53. > :07:59.Water House Coopers or PwC. One of the four giants of corporate
:07:59. > :08:01.accounting. They are the biggest tax advisors
:08:01. > :08:09.to multinational corporations in Britain and they are extremely well
:08:09. > :08:12.connected within Government and within the opposition as well.
:08:12. > :08:17.Over the last few years, they've given more than �1 million worth of
:08:17. > :08:23.advice to both the coalition parties and Labour. From their
:08:23. > :08:26.Luxembourg office, they devised all the tax deals in our documents. Tax
:08:26. > :08:36.avoidance or what most people call tax dodging is not illegal. But is
:08:36. > :08:42.it fair? Absolutely without a shadow of a doubt, legal. I'm still
:08:42. > :08:44.able to ask the question, is this acceptable? This is purely
:08:44. > :08:47.artificial structuring which is designed to undermine the tax
:08:47. > :08:49.revenues of the UK. Last year companies paid just over
:08:49. > :08:59.�42 billion in corporation tax, around 10% of the Exchequer's total
:08:59. > :09:04.revenue. Even so, tax avoidance by big business is reckoned by the
:09:04. > :09:08.revenue to be �1.2 billion. Tax investigators say it could be five
:09:08. > :09:12.times as much. What my members see every day is some large businesses
:09:12. > :09:15.are managing to avoid paying their fair share of taxes which means
:09:15. > :09:21.that everyone else has to pay more tax. That doesn't seem very fair.
:09:21. > :09:26.It doesn't seem very ranl. -- reasonable.
:09:26. > :09:30.Just over half of the biggest 100 companies listed on the London
:09:30. > :09:37.Stock Exchange have subsidiaries in Luxembourg.
:09:37. > :09:41.GSK is just one of them. And remember that magic formula, get
:09:41. > :09:49.some of your profits off shore in a place like Luxembourg and reduce
:09:49. > :09:56.your UK tax bill. But there was a big problem for big
:09:56. > :10:01.business. UK tax law. And it is controlled by foreign companies
:10:01. > :10:05.rules. These laws that say if you control a company in a tax haven
:10:05. > :10:08.and divert profits into it, we will still tax the profits of that
:10:08. > :10:13.company. Go but two corporate giants,
:10:13. > :10:18.Vodafone and Cadbury Schweppes had other ideas. They argued that the
:10:18. > :10:24.rules breached European law by limiting economic freedom.
:10:24. > :10:29.. It led to battles being fought at the European Court in Luxembourg
:10:29. > :10:33.and the High Court in London. By the time Vodafone's case got here
:10:33. > :10:39.in 2008, it looked like the rules were dead in the water. But the
:10:39. > :10:44.judge said the taxman couldn't examine the company's books.
:10:44. > :10:52.The accountants PDWC were quick to sell this as an opportunity. Our
:10:52. > :11:00.secret documents reveal that afterwards, they devised a tax deal
:11:00. > :11:04.for another major UK company. Northern and Shell. You probably
:11:04. > :11:12.won't have heard of it, but you will know some of the companies it
:11:12. > :11:18.owns like Express Newspapers and Travel Five. The man at the top is
:11:18. > :11:22.Richard Desmond. His companies also got an office in Luxembourg. It is
:11:22. > :11:30.a little tricky to find. That's number 11 and number 12, we are on
:11:30. > :11:40.the right street so we will just see where this takes us.
:11:40. > :11:45.
:11:45. > :11:52.Here we have it. Number 17. This looks like a stamp shop!
:11:52. > :11:56.Here we go, the fifth floor Northern and Shell.
:11:56. > :12:02.Hello. Hello, how are you? I'm fine.
:12:02. > :12:09.Good. Good. I'm looking to speak to someone from Northern and Shell.
:12:09. > :12:19.Right. I don't know who this is. Sorry, my name is Darragh McIntyre,
:12:19. > :12:20.
:12:20. > :12:28.I am a a a reporter with the BBC. This office became the proud owner
:12:28. > :12:34.of of �880 million of company debt. I don't work for Northern Shell.
:12:34. > :12:38.This is a different office. Is there anyone from Northern and
:12:38. > :12:43.Shell because the sign is up here and this is the address they give?
:12:43. > :12:46.Yes, it is definitely there. I am not aware of that.
:12:46. > :12:50.This is the address on their company accounts. Our documents
:12:50. > :12:58.show that before 02 2009 Northern and Shell companies in the UK had
:12:58. > :13:03.been lending each other money. �804 million. There was no obvious
:13:03. > :13:06.tax advantage to be had on these transactions in the UK.
:13:06. > :13:11.So Northern and Shell looked to Luxembourg where it set up a
:13:12. > :13:16.company and transferred the UK loans there.
:13:16. > :13:22.Interest payments left the UK, leaving lower profits available to
:13:22. > :13:27.the UK taxman. In Luxembourg, the same profits got the magic tax
:13:27. > :13:37.breaks. The end result - it looked like Northern and Shell had saved
:13:37. > :13:42.
:13:42. > :13:50.The deal was so sweet, they did it again - this time creating a
:13:50. > :13:57.potential loss to the UK taxman of over �9 million. But you're
:13:57. > :14:00.definitely not Northern & Shell? Hello? Our friend has gone.
:14:00. > :14:04.The company puts its money into Luxembourg and borrows it back. It
:14:04. > :14:07.just sends money round in a circle and picks up a tax break on the way.
:14:07. > :14:11.Just the sort of thing those rules on taxing foreign profits should
:14:11. > :14:13.have been able to deal with. So you would have expected that to end up
:14:13. > :14:16.in negotiations with tax officials? There shouldn't have been any
:14:16. > :14:26.negotiation about it. I mean, that should have been a straightforward
:14:26. > :14:31.
:14:31. > :14:35.I'm now going to try to speak to the main man, Richard Desmond. I'm
:14:35. > :14:41.hoping he's going to be up there. We were told the Northern & Shell
:14:41. > :14:51.chairman was abroad. Richard Desmond didn't want to be
:14:51. > :14:56.
:14:56. > :14:58.interviewed, but his company later told us... That the Board considers
:14:58. > :15:01.it entirely proper that Northern & Shell endeavours to structure its
:15:01. > :15:03.tax affairs in a tax efficient manner it says it has an open,
:15:03. > :15:05.honest and positive working relationship with HM Revenue and
:15:05. > :15:07.Customs and that where there are differing legal interpretations
:15:07. > :15:09.between ourselves and tax authorities, we will engage in
:15:09. > :15:19.proactive discussion to bring matters to as rapid a conclusion as
:15:19. > :15:21.
:15:21. > :15:24.possible. PricewaterhouseCoopers say that all their advice and
:15:24. > :15:26.assistance is given in accordance with UK and European tax laws.
:15:26. > :15:29.Their client relationships are strictly confidential and they
:15:29. > :15:35.cannot comment on individual cases. And it says it provides limited and
:15:35. > :15:38.fully disclosed technical support to the main political parties.
:15:38. > :15:45.By 2010, more than 150 companies were in dispute with the taxman
:15:45. > :15:49.over whether they should pay UK tax on their foreign profits. But the
:15:49. > :15:57.tide was turning. The Court of Appeal ruled that the taxman could
:15:57. > :15:59.go after the foreign profits of UK companies after all. Rather than
:15:59. > :16:04.pursuing companies through the courts, the taxman started doing
:16:04. > :16:10.deals. But were the companies paying enough? Parliament didn't
:16:11. > :16:13.think so. We asked the National Audit Office
:16:13. > :16:21.to undertake an inquiry into the settlements that HMRC were reaching
:16:22. > :16:25.with the corporations. There's big money at stake here. In fact both
:16:25. > :16:35.the National Audit Office and HMRC say that up to �25 billion could be
:16:35. > :16:36.
:16:36. > :16:42.One of the deals that troubled the MPs was Vodafone's. The company had
:16:42. > :16:49.set aside �3.1 billion in case it lost the dispute. In 2010, Vodafone
:16:49. > :16:51.eventually settled with the taxman for less than half that amount. It
:16:51. > :16:56.was suggested in Parliament that Vodafone actually owed much more,
:16:56. > :16:59.�6 billion. Her Majesty's Revenue and Customs described that figure
:16:59. > :17:07.as absurd, but refused to discuss how they settled the case, citing
:17:08. > :17:10.taxpayer confidentiality. Because of the veil of secrecy
:17:10. > :17:13.surrounding all these decisions around tax - and we're talking big
:17:14. > :17:16.numbers here - lack of transparency means that we, on behalf of the
:17:16. > :17:26.taxpayer, cannot be certain that this was a good, honest, proper
:17:26. > :17:30.
:17:30. > :17:33.Vodafone told us that it complies with the law in all the countries
:17:33. > :17:39.where it operates and that it discloses all relevant facts to all
:17:39. > :17:41.relevant tax authorities. Her Majesty's Revenue and Customs says
:17:41. > :17:50.large business settlements are carried out according to the law,
:17:50. > :17:53.clear codes and practices. We know Vodafone did a deal, but who else?
:17:53. > :17:58.Pharmaceuticals giant GlaxoSmithKline did one, too. We
:17:58. > :18:03.know because their man in Luxembourg says so. I've just
:18:03. > :18:08.spoken to the manager of GlaxoSmithKline Luxembourg. He
:18:08. > :18:18.tells me a deal was made with the taxman back in 2011. GSK refutes
:18:18. > :18:22.
:18:22. > :18:26.any suggestion of wrongdoing. It told us... Both the UK and
:18:26. > :18:30.Luxembourg authorities are agreed that we have paid all the taxes
:18:30. > :18:34.that are due. We take very seriously our duty to pay tax. But
:18:34. > :18:38.we have a duty to our shareholders to be financially efficient, so
:18:38. > :18:42.that we can maximise returns to investors and fund for the
:18:42. > :18:46.development of future medicines. GSK agreed to close down the �6.34
:18:46. > :18:53.billion loan operation through Luxembourg. We asked how much tax
:18:53. > :18:56.they had to pay. But they didn't answer that question.
:18:56. > :19:05.When we are talking about the tax affairs of large corporations, they
:19:05. > :19:12.should be totally open, totally So what does the Government plan to
:19:12. > :19:15.do about tax avoidance, to make every tax penny count?
:19:15. > :19:22.I regard tax evasion - and indeed aggressive tax avoidance as morally
:19:22. > :19:24.repugnant. So not just evaders, you'd be forgiven for thinking that
:19:25. > :19:27.the Chancellor's Budget speech was bad news for tax avoiders, too,
:19:27. > :19:37.like those companies using legal ways to wriggle out of paying the
:19:37. > :19:38.
:19:38. > :19:40.taxman. Big UK companies involved in tax
:19:40. > :19:44.avoidance schemes, would you in theory find such schemes morally
:19:44. > :19:47.repugnant? Do we think that companies and individuals should
:19:47. > :19:50.pay the tax that they are legally required to do, consistent with the
:19:50. > :19:56.way in which Parliament has legislated and with the intention
:19:56. > :20:00.of Parliament? Then yes, we think companies and individuals should
:20:00. > :20:06.pay that tax. This government is determined... Is it morally
:20:06. > :20:12.repugnant? Well, yes, but... Yes, absolutely. Yes. But that depends
:20:12. > :20:15.on, you know, exactly what a company's doing.
:20:15. > :20:19.The Government says it is committed to introducing a new anti-avoidance
:20:19. > :20:23.rule. They say it will only work if it focuses on the most serious
:20:23. > :20:31.cases of abuse. But the union which represents senior tax investigators
:20:31. > :20:34.It will only catch the really most objectionable case, and the vast
:20:34. > :20:37.majority of avoidance will not be caught by it. And indeed, anything
:20:37. > :20:41.that is not caught by this will now be treated as reasonable tax
:20:41. > :20:51.planning. It's rather as if you legalised murder and then said that
:20:51. > :20:51.
:20:51. > :20:56.So where does all this leave the companies in our documents and
:20:56. > :21:00.their Luxembourg tax deals? Remember those "controlled foreign
:21:00. > :21:07.companies" Rules, the ones meant to stop multi-nationals avoiding tax?
:21:07. > :21:12.Well, the Chancellor has relaxed them. Deals designed to avoid tax,
:21:12. > :21:14.by draining profits out of the UK should be caught by the taxman. But
:21:15. > :21:24.from now on, profits created by the overseas subsidiaries of UK-based
:21:25. > :21:27.
:21:27. > :21:34.companies should face little or no That's good news for another big UK
:21:34. > :21:37.company - Pearson, which owns the Financial Times and Penguin Books.
:21:37. > :21:46.Again, a company with subsidiaries in Luxembourg and a dispute with
:21:46. > :21:50.the UK taxman. I'm looking for Boulevard Grande Duchess Charlotte.
:21:50. > :21:53.Here's what Pearson were doing, according to their company accounts.
:21:53. > :21:59.In 2004, Pearson in Luxembourg were lending almost $1.5 billion to its
:21:59. > :22:05.operation in America. Over seven years, almost $500 million in
:22:05. > :22:08.interest flowed back to Luxembourg. Because of a loophole in the old
:22:08. > :22:12.controlled foreign companies rules, profits appeared to escape UK
:22:12. > :22:17.taxation. But in 2008, that loophole was closed, so profits
:22:17. > :22:21.could be taxed after all - something Pearson well knew. No
:22:22. > :22:28.sign of their name, though. By 2009, company accounts revealed that �26
:22:28. > :22:30.million in tax had not been paid. The reason? Pearson, like Vodafone
:22:30. > :22:40.before it, believed that the controlled foreign companies rules
:22:40. > :22:41.
:22:41. > :22:47.breached European law, and so they No brass plate but just a copy of
:22:47. > :22:51.the Financial Times. We asked if they paid up. But they wouldn't
:22:51. > :22:55.tell us. They did say that Pearson pays all tax legally required in
:22:55. > :22:57.all jurisdictions in which it is subject to tax. And it
:22:58. > :23:03.categorically refutes any suggestion that it "refused to pay"
:23:03. > :23:06.any tax for which it was legally liable. Now that the Chancellor
:23:06. > :23:08.only intends to tax the UK profits of big companies, that Pearson
:23:08. > :23:18.scheme involving America and Luxembourg would probably face
:23:18. > :23:21.little or no tax. Those changes are effectively
:23:21. > :23:28.exempting a whole range of income that is moved into tax havens by
:23:28. > :23:38.British-controlled companies. They will be taxed far more lightly, if
:23:38. > :23:40.
:23:40. > :23:47.at all, than they were under the No wonder it was smiles all round
:23:47. > :23:50.when big business got together with government last month.
:23:50. > :23:54.The tax regime in this country is now competitive with virtually
:23:54. > :24:00.every country in the world. There is no better place from which to
:24:00. > :24:10.run a multinational corporation in tax terms. I believe that fervently,
:24:10. > :24:13.
:24:13. > :24:16.and it's the result of 10 years of And among those doing that hard
:24:16. > :24:26.work, GSK and Vodafone, two of the companies who had been in dispute
:24:26. > :24:36.with the taxman. The coalition invited them and others to consult
:24:36. > :24:36.
:24:36. > :24:41.Your question was, is the influence disproportionate, does somehow
:24:41. > :24:44.business somehow have a backdoor key to Downing Street? I'm not
:24:44. > :24:47.saying big business had a backdoor key. I think the front door has
:24:47. > :24:51.been wide open. I'm saying it's blatantly clear that big business
:24:51. > :24:53.has had disproportionate influence on government policy. I reject that.
:24:53. > :24:56.I don't think they've had disproportionate influence on
:24:56. > :25:03.government policy. Government makes its own decisions. They don't take
:25:03. > :25:05.a lecture from the CBI or from me. Obviously the interests of
:25:05. > :25:08.businesses are ones that the Government has to take into account,
:25:08. > :25:13.quite particularly when they are so concerned about the weakness of the
:25:13. > :25:22.economy. It matters less if you've got great prosperity, a booming
:25:22. > :25:28.The Treasury reckons relaxing the rules on taxing foreign profits
:25:28. > :25:31.will cost over �800 million in the next few years in lost revenue.
:25:31. > :25:37.Worth it, says the Government, because it will boost investment
:25:37. > :25:40.and encourage more companies to move their HQs here. And they're
:25:40. > :25:46.already coming. The world's largest insurance company, Aon, is moving
:25:47. > :25:50.its HQ here from Chicago. When it's finished, this building will become
:25:50. > :25:57.home to some of the 6,000 Aon staff who already work here, and the new
:25:57. > :26:01.arrivals from the States. So what exactly will the UK get out of it?
:26:01. > :26:05.Well, not a lot. Only seven top executives and a small group of
:26:05. > :26:15.support staff will actually be moving to London. All told, just 19
:26:15. > :26:18.
:26:18. > :26:20.people. Aon says that... Although relatively small in number, those
:26:20. > :26:26.moving to London represent the executive decision making within
:26:26. > :26:30.the firm. There are lots more new jobs on the way. But they will be
:26:30. > :26:33.in Chicago, not London. My guess is that the benefits of
:26:34. > :26:37.this for the UK economy are pretty trivial. We'll get a little bit of
:26:37. > :26:42.revenue from the people who were brought over, but the impact on our
:26:42. > :26:46.economy is going to be very small. Moreover, this is a global
:26:46. > :26:56.competition. Other counties will be trying to do the same thing. We may
:26:56. > :26:57.
:26:57. > :26:58.feel that we lose more than we gain in this. Aon told us... That while
:26:58. > :27:04.their decision provides them with increased financial flexibility,
:27:04. > :27:07.their resolution to move to London was primarily a strategic one". But
:27:07. > :27:09.in the small print of Aon's disclosures filed with US financial
:27:10. > :27:13.authorities, tax was a major motive for the move.
:27:13. > :27:15.Look, these are difficult times, but if we want to see growth, if
:27:15. > :27:18.we're really determined about seeing growth in this country, we
:27:18. > :27:21.have to have a competitive tax system.
:27:22. > :27:27.Business in the UK now pays a lower rate of corporation tax than most
:27:27. > :27:35.of the world's biggest economies. But what are the consequences of
:27:35. > :27:39.this competition to attract companies by taxing them less?
:27:39. > :27:47.At the core of this, I think, is a race to the bottom on the taxation
:27:47. > :27:49.of profits and capital income. What is fundamentally clear is, as the
:27:49. > :27:51.tax revenue can be generated from the corporate sector diminishes
:27:51. > :27:54.under this long-term downward pressure of tax competition,
:27:54. > :28:04.somebody else must pay more to support the functions of the state
:28:04. > :28:10.
:28:10. > :28:17.or the functions of the state Whether or not the Government
:28:17. > :28:23.attracts more businesses by asking for less tax remains to be seen.
:28:23. > :28:26.And if they do come, what will ordinary taxpayers get out of it?
:28:26. > :28:33.What the secret tax deals in Luxembourg reveal is just how far
:28:33. > :28:36.companies will go to avoid paying their fair share.