Abstract

This project looks at the tax evasion in the British large companies and find out the reason of this problem. It aims to discover the methods to control it. As resources find, firstly, tax loopholes cause tax evasion. Secondly, tax is so high and effects large companies much. Companies hope to cut costs without paying tax. Thirdly, the leaders of companies can not realize they have duty to pay tax. Finally, the government ask companies to pay double tax which is unfair to companies. Therefore, British Large companies should raise the awareness of responsibility to pay tax. The Governemt should improve the tax law. The research was conducted by examining previous studies. Two cases study focus on tax evasion of Google and Amazon in the UK. The results show that British large companies have tax evasion problem. Companies use branch offices for transferring British tax money to other countries’ offices which is located at tax heaven. The leaders of companies even are proud of tax evasion. In conclusion, in the UK, tax evasion is quiet serious in the large companies. Whatever ethical and social system cause tax evasion problem. The government should prevent this situation by improving tax system and letting people raise the responsibility to pay tax.

1. Introduction

Tax evasion is defined as an illegal behaviour that a person, organization or corporation purposely avoids paying true tax liability. Those caught evading taxes are generally subject to criminal charges and significant punishments (Investopedia, n.d.). Nowadays, with British economy and finance development, tax evasion has increased year by year. This area is important because lots of British companies, such as Google, Amazon, Starbucks and Apple, have tax evasion problem. Britain have turned into a tax evasion heaven that cheats itself in the process. The reason is the loopholes of tax evasion system. According to PCS, 90% of tax is effectively voluntary with just few staff to check suspect cases. The National Audit Office reported that HMRC has doubled the amount of tax debt written off in one year and due to its own mistakesrelatively. Labour’s record on chasing tax loopholes was depressing.In 2009, it set up the patent box – a vast new tax avoidance vehicle. This government’s new enormous tax escape leak is the controlled foreign companies management system, allowing British companies to pay tax in the cheapest country they can find, and none when they bring profits back (Polly Toynbee, 2014). Furthermore, profit motivate companies avoid paying tax to save money for themselves.As hypothesis, because of profit, companies keep away from turning in tax to the government on time. In addition, the tax system has the leak so that companies have ability not to pay true tax.Therefore, this project aims to discover the reason of tax evasion and find the way to prevent this situation in the large companies in the UK.

1.1 Research Question

• Do the profit aims and the loopholes of tax system cause tax evasion?
• How to deal with tax evasion in the British large companies?

2. Literature review

The reason of tax evasion in large companies in the UK.

In this world, tax evasion is never ethical. It is illegal whenever the century. Companies and individuals all own a duty to the government to pay whatever taxes the state demands. There is no such thing that taxes are too high even though British resident always complain the level of price and taxes (McGee, 2012). However, in this century, tax evasion is such a normal phenomenon. There are some opinions about the reason of tax evasion in the large companies in the UK. Firstly, although the reforms of the tax structures improve year by year, the British tax system still has loopholes (Zodrow&Fuest, 2013). Therefore, companies can route around the laws to avoid paying tax. The loopholes cause shadow economy increases. Shadow economy is quite narrow. It does not need to take results and insights of other sciences into account. It is difficult to control. With shadow economy climbs, it attracts original tax system and creates competition for the official firms at the same time (Schneider&Enste, 2003). Moreover, because of tax system loopholes, in multinational corporations, the extensivephenomenon of income shifting happens frequently. Multi-national and offshore companies have illegal market and inequitable competitive advantages. Tax system loopholes let overseas and offshore companies avoid finance acquiring, asset stripping companies and markets. The effects impact all tax system and supply and value chains (Nicholas, 2013). The offshore economy tends to be around us. Lots of trades are successful through the offshore economy. What is more, entrepreneurs’ corruption and government expropriation of private resources destroy the balance and interaction between tax and investment. The political structure can not use as effective tool for the original tax system (Zodrow&Fuest, 2013). Therefore, the tax system loopholes are continued