Cutting tax bills is the work of most accountants and a
great budgeting skill for businesses, but exploiting a legal loophole to cut
tax bills is improper and irresponsible. According to a research by a local
newspaper, 30 UK energy companies have exploited a particular legal loophole to
cut bills.
According to The Independent and watchdog Corporate Watch,
the 30 UK energy firms have made use of a “quoted Eurobond exemption” which
allowed them to accept high interest loans using the Channel Islands Stock
Exchange, which proves to be very controversial.
The Independent said that the company racked up huge
interest payments to their parent companies, reduced the bottom line of these
payments and cut their tax bills. The interest payments were international,
allowing them to issue it through the Channel Islands and exit the United
Kingdom tax free.
This allows them to avoid the 20% withholding tax. Many
companies, including a gas company had avoided £72.5m in taxes. Other firms
saved tens of millions of pounds, according to the newspaper.
According to Opposition Leader Ed Miliband, the govenrment’s
failure to take down loopholes in the legal sector is costing the UK citizens
more than they could chew. Miliband said that he was working with the OECD to
address the problems and will consider changing the rules on the treatment of
cross-border transactions.
