Tax avoidance schemes are not limited to Jersey and at the beginning of 2015 it emerged that Luxembourg was being used by top British companies as part of a corporation tax avoidance scheme. The schemes involve internal loans and interest payments and are used to cut tax bills. Dyson, the vacuum cleaner company had set up companies in the Isle of Man and Luxembourg placing £300 million in them for its UK operations, the interest payments charged in Luxembourg were only 1%.
Corporation Tax Avoidance Schemes in Europe
These corporation tax avoidance schemes are signed off by the European union and are completely legal. As a further example Facebook has not paid any corporation tax in the UK for the second year in a row.
It is using Ireland as part of a corporation tax avoidance scheme to save money on it’s sales which exceed £50 million.
Corporation tax avoidance schemes are becoming quite a contentious issue with firms such as Sainsbury’s being defended by its former chief executive Justin King, he said, “They are not loopholes, they are legitimate tax systems put in place by legitimate governments, legitimately elected”.
There is much discussion about tax avoidance schemes with some criticism of companies who do not pay due to careful management of their finances. There is however, a strong case that these companies bring their business to these shores precisely for that reason, providing employment both directly as employees and indirectly through accounting services and feeder industries.