Taxpayer confidentiality 1: who is the taxpayer?

April 25, 2014

Taxpayer confidentiality  used to be a bedrock principle of HMRC.  I noticed it had acquired some quote marks and become “taxpayer confidentiality” in places in the consultation on flogging off our data to the credit reference agencies so I wonder how long it will be before it becomes “so-called taxpayer confidentiality” or some such?

Anyway, let’s think a bit today about taxpayer confidentiality without the quotes.  First of all, who is the taxpayer?

People pay tax.  Or, rather, “persons” pay tax: that can be “natural persons” i.e. human beings, individuals.  And it can also be “legal persons” like corporations.  Companies pay tax, but they aren’t people: they are legal constructs.  Do companies have the same rights as people?  Should they be able to sue for libel?  Should they be able to litigate against national governments (as in the hotly-disputed investor-state dispute settlement mechanism)?

Do they, in fact, have any rights to privacy?

Well, one of the trade-offs for limited liability protection for investors is that the accounts of companies have to be published.  Should their tax returns be published as well?

Why?  Or why not?

After all, much of the furore over Vodaphone, Starbucks, Google et al was public concern at publicly available information about entirely legal activity.  Would the furore over the enormous cost of breast cancer drug Kadcyla have been lessened if we could have looked at Roche’s accounts in more detail and seen how much they spend on the necessary research and development to produce a new drug?

Or would a little journalistic googling have revealed that the drug, which costs £90,000 for a course of treatment in the UK, costs  $94,000 in the US (around £56,000, I make it, if a dollar is worth around 59 pence).  Put that alongside the fact that the UK government has given away £320m this year in research and development tax credits (TIIN for Research and development tax credits reform: above the line: 2014-15 figures of $240 and £80 million totalled) and another £720 million this year in the special rate for profits from patents (TIIN for Corporation Tax Reform: Patent Box, 2014-15 figures)

If Roche were compelled to publish their tax returns and we could see whether they had had any of the billion pounds the UK government will use to incentivise research and development and patentable drugs this year, would we feel any differently about them?

Is a corporation a taxpayer with an expectation of taxpayer confidentiality?  See what I mean?  It’s not as simple as you might have thought.

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