Posted June 03, 2020 16:04:28For the past six years, the United States has been embroiled in an international debate over how to clamp down on the practice of holding offshore profits in tax havens.
The topic has been raised with the US president Donald Trump, who recently ordered the Internal Revenue Service to start cracking down on tax havens for the first time in nearly 50 years.
Since he became president, Mr Trump has directed the IRS to review offshore tax shelters and take action to stop them.
Mr Trump has also appointed former US Treasury Secretary Jack Lew to lead a review of tax shelters in the US, but a report released last month by the Tax Justice Network, a tax advocacy group, said Mr Lew’s plan to review tax shelters would have no impact on the US.
There is also the issue of who is to blame for the tax havens that have emerged over the years.
It is believed the US and UK governments, along with some other nations, are responsible for billions of dollars of offshore profits.
In 2016, the US Treasury announced a $3.6 billion plan to curb the use of offshore tax-havens.
But it was unclear what would be done with those funds, given that the plan was largely directed at countries such as the Bahamas, which have no official position on the issue.
Meanwhile, some European countries have also been accused of not doing enough to clamp-down on the use offshore tax avoidance.
According to the Tax Office, the UK is one of only two countries that do not impose an annual corporate tax rate of more than 15 per cent.
At the same time, it is estimated that some 40 per cent of British companies pay little or no tax in the country.
Many European countries are also facing a global tax evasion crisis.
For instance, the European Commission says more than half of all global tax revenues are derived from the UK, and it has warned that there could be a tax crisis in the UK if it does not take action.
A new report by the Institute for Fiscal Studies has also said the UK’s current tax system will not survive in the long term.
“There is no prospect of the UK surviving a decade of the economic downturn in the wake of the Brexit vote,” it said.
While the government has said it would not allow the UK to become an “in-betweener” with the rest of the EU, it has been forced to make some concessions in recent months.
As part of the deal with the EU that brought the UK into the bloc in 1973, it agreed to reduce the UK tax rate from 35 per cent to 15 per per cent by 2020.
This reduced rate is now set to expire in 2021, but Mr Trump’s administration has indicated it could extend it.
Critics have also questioned the Government’s commitment to the European Single Market.
They argue the UK has a trade deficit of around £100 billion with the bloc and has been a beneficiary of the Single Market as it has become a member of the customs union.
Another criticism is that the UK was granted a free trade deal with Australia after the EU referendum, and is now one of the most expensive countries in the world to do business with.
Australia has been accused by the EU of having been a “gift to the rich” in the deal.
One of the biggest issues that has been debated over the past year is whether Australia should be able to maintain a preferential tax rate on overseas profits.
In January, the Government announced it would be making changes to the way it collects and pays tax on overseas income.
Under the proposal, the country would retain a preferential rate of 25 per cent on overseas profit income over the first five years of an individual’s taxable income, while all other foreign income over those five years would be taxed at the rate of 20 per cent from the first year.
If an individual had overseas income of £1 million, that would be £2 million, and the preferential rate would apply to income earned overseas for at least 10 years.
The proposal was welcomed by the International Monetary Fund (IMF), which warned it would “make the UK less competitive” in attracting investment.
Last month, Mr Lew announced a new review of the tax shelter industry, with a goal of making the United Kingdom a “tax haven first, tax shelter second”.
However, he has also called on other nations to act more quickly to crack down on offshore tax evasion.
He said: “There is a lot more work to do before we can truly close the loophole.”
But some experts are not convinced.
Stephen Pannone, a partner at law firm Latham & Bacon, told the ABC: “It’s hard to see how the Government is going to make a significant dent in the issue unless it really moves to clamp things down in a