Osborne bid to fight tax avoidance ‘may empty, not swell, state coffers’

British chancellor George Osborne’s promise to clamp down on a tax avoidance loophole widely used by multinational technology companies could actually result in a reduction in the amount of money the government takes in, the Chartered Institute of Taxation has warned.

Patrick Stevens, the group’s tax policy director, admitted the effect of the Chancellor’s attempt to tackle the so-called “double Irish” arrangement used by some firms is difficult to predict but claimed that large technology companies could pay more corporation tax but other sectors would pay less, making the overall effect negative.

Mr Osborne’s move was instantly nicknamed the “Google tax” because the arrangement — involving payments between different parts of a company to shift profits from higher-tax countries to those with lower taxes — is widely used by technology firms.

Mr Stevens told a fringe event at the Tory Party conference: “My personal opinion is that our net corporate tax take would go down a bit, not a huge amount.

“It also depends of course how multinational groups would change their way of business; whether they are put off by doing some of their business here or not. “It’s always hard to predict.

“On the assumption nothing much happens in commercial ways of doing business, my personal view is we may well take a bit more money off Google — I’m only quoting them because it was in the newspapers quite a lot as a result of the changes announced yesterday, so please don’t think I’m having a go at Google — but there is an exact equivalent and opposite going the other way.

Meanwhile, Treasury Minister David Gauke drew laughs when he revealed that Treasury staff had nicknamed a chart showing Labour’s spending increases while in power “the scissors of doom”.

Mr Gauke said Labour pursued healthy tax and spending policies until around 2004 when discipline was lost and spending overtook tax receipts, then increased rapidly.

The resulting graph depicting spending and tax receipts as a proportion of national income shows a scissors shape, leading to the Treasury jibe.