Because they sometimes to often demand rather more than the law requires:
However, rather than seeing money returned, the ruling by the European Court of Justice means that HMRC now faces paying out billions of pounds to companies.
British American Tobacco, along with other litigants thought to include BA’s pension fund scheme, have been fighting a class action lawsuit against HMRC both in the UK and in Europe since 2006.
The claimants – which are headquartered in the UK – say they have been taxed unfairly by HMRC for decades.
The case rests on the tax treatment of dividends received by UK-resident companies from companies in other EU member states. Under the advance corporation tax rules, which were abolished by Gordon Brown in his first budget, companies had to make an advance payment of tax when they distributed dividends to shareholders. A company receiving a dividend from a UK subsidiary was able to treat it as “franked investment income” which it could offset against its advance corporation tax. But if a UK company was receiving dividends from an EU subsidiary it was not entitled to that relief. This, the claimants said, amounted to double taxation.
Not sure about double taxation. But it’s certainly a breach of the single market stuff.
Which leads us to a very interesting though about Ritchie’s “tax gap” calculations. Yes, of course, we do know that there is tax dodging. However, as this shows, we also know very well that too much tax is sometimes demanded and paid. Over and above what the law requires.
So Ritchie’s figures (or anyone else’s for that matter) need to be downgraded by that overpayment don’t they? We need a net figure, not a gross one.