In Forbes, Tim Worstall explains why a company that has paid full corporate taxes on its income has no further legal or moral obligation to pay more:
Read that through again: they’re saying that the company has already paid full corporation tax on that money. And we don’t tax dividends going to people in foreign countries. Whatever the tax rate is there, we simply don’t tax them. Because of course that’s up to the country where the money goes to to tax: it’s not actually something that is taxable in the UK. For, obviously, they’ve already paid the full corporation tax due.
But it does actually get better. Those dividends, paid out of post tax (and do please note, post tax) profits wouldn’t be subject to further corporation tax in the UK either:
The general rule is that dividends paid by a UK company to another UK company out of post-tax profits are exempt from further taxation.
That the recipient corporation is in the British Virgin Islands thus makes not one whit or iota of difference to the amount of corporation tax payable. So this is all really a rather strange complaint. Perhaps the newspaper has just got caught up in the frenzied atmosphere over the subject.
[. . .]
As to why this story is being blown up allow me to offer some speculation. There’s a group of people who are quite vociferous in their demands that the corporate tax system must be radically changed. Richard Murphy (who just for complete disclosure, used to write here at Forbes) is one of the leading lights of that group. Various members of the loose knit group have been behind all sorts of claims about Vodafone, Boots, Starbucks, Google, Apple and a number of other companies. The problem with the claims is that none of them have really stuck. There’s been absolutely no finding of illegality anywhere.
The claim has thus moved onto, well, OK, so it’s not illegal: all of these companies are indeed obeying the law. But we still don’t think they’re paying enough tax. Therefore the law must be changed simply because we think they should be paying more tax. Which is, when you think about it, a fairly extreme claim. Companies should pay more tax because a group of 20 or so people demand that they should be doing so?