A total of £11.5 billion in tax payments from foreign companies for the fiscal year 2022-23 is presumed to be missing, as reported by UHY Hacker Young.
This disclosure has ignited concerns about the fairness and effectiveness of the current tax framework, prompting calls for greater scrutiny and reforms to ensure that corporations contribute their fair share to the UK's public coffers.
The presumed shortfall represents a 14 per cent increase compared to the previous year's figure, resulting in US companies contributing almost half of the total underpaid tax from foreign companies to the UK treasury.
(HMRC) suspects a total of £11.5 billion in unaccounted tax for the fiscal year 2022-23 from foreign companies, marking a seven per cent rise from the £10.8 billion recorded in 2021-22, as indicated by UHY Hacker Young accountants.
Among the suspected contributors to this underpayment, Swiss companies are believed to have potentially neglected to pay £1.2 billion, while combined underpaid tax from companies based in Germany, France, and Ireland is estimated to reach another £1.8 billion.
The HMRC's findings shine a spotlight on the practices of several high-profile US companies, which are alleged to have exploited loopholes and engaged in aggressive tax planning strategies to minimise their tax liabilities in the UK.
The scale of underpayment underscores the challenges faced by tax authorities in tracking the intricate financial structures employed by multinational corporations to optimise their tax positions.
The HMRC believes that the use of complex transfer pricing arrangements and the booking of profits in low-tax jurisdictions have been key tactics employed by these US multinationals.
Seven major US corporations collectively paid £2 billion less in taxes in 2021 than the potential liability if their profits had not been directed elsewhere.
These companies, contributing only £750 million instead of an estimated £2.8 billion, have come under scrutiny for their tax practices.
Notably, Amazon's primary UK sector did not pay any corporation tax in either 2021 or 2022.
Highlighting this trend, Andrew Snowdon, Head of Tax at UHY Hacker Young, said: "Global tax authorities are becoming even more determined to claim all the tax owed from large multinationals."
"Efforts are being made globally to ensure that companies pay an appropriate amount of tax in the countries where their sales are made. Several likely rule changes in the imminent future would make it even harder to divert earnings overseas and subsequently more difficult to underpay tax."
While the specific companies implicated in the underpayment have not been disclosed, tax experts and advocacy groups are urging transparency and accountability.
The call for transparency aligns with broader efforts to address corporate tax avoidance on an international scale, with organisations like the Organisation for Economic Co-operation and Development (OECD) actively working to establish global standards for fair taxation.
The underpayment revelation comes at a time when public scrutiny of corporate tax practices is intensifying.
In recent years, there has been growing public discontent over the perceived lack of contribution from large corporations to the countries in which they operate.
Governments worldwide are grappling with the challenge of creating tax frameworks that balance the interests of businesses with the need for a fair and sustainable revenue system.
In response to the underpayment allegations, HMRC has pledged to rigorously investigate the identified companies, pursue legal action if necessary, and recover the unpaid taxes.
The investigation signals a renewed focus on corporate accountability and a commitment to enforcing tax regulations more robustly.
Tax campaigners and opposition politicians are calling for comprehensive reforms to the tax system, including greater transparency, stricter regulations, and collaboration with international partners to address cross-border tax avoidance effectively.
The debate around corporate taxation is expected to intensify in the coming months, with calls for legislative changes to close existing loopholes and ensure a fair distribution of tax burdens.
