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International Companies UK Tax Avoidance

A common area where large multi national companies seek to reduce their tax liabilities is by the shifting of profits from countries having higher tax rates to countries having lower tax rates.  This can be achieved by inflating the prices charged for services provided from one company in a group to another company in a group.

The significant amount of tax avoidance involved can be illustrated by the example of Ireland.

The corporation tax rate in Ireland is currently 12.5%, which compares to 25% in the UK.

Currently the Irish Government records significant budget surpluses.  The Irish Times has stated that the budget surplus for 2024 will be approximately 13 billion euros. The BBC has reported that the Irish government is forecast to have a budget surplus of £56 billion by 2027.

Ireland is home to the European headquarters of many multinational business including Amazon, Airbnb, Paypal, Twitter, Ebay, Linkedin, Facebook,  Microsoft and Google.

In 2022 HMRC estimated that the UK could have lost in excess of £9 billion in tax income due to the profit shifting in tax year 2020/21.

HMRC has undertaken work in this area and has managed to recover only £70m in additional tax revenue.