Does one UK tax go too far?

BY MARK BEVINGTON

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Offshore Receipts in Respect of Intangible Property. Or ‘ORRIP’: the UK’s bold assertion of a right to tax anywhere.

ORRIP’s rationale invites sympathy. Some central trading hub jurisdictions still allow royalties to be ‘stripped’ to offshore havens – a legacy of US tax rules that incentivised the offshore holding of US developed intangibles. If such royalties relate to UK sales, why shouldn’t the UK tax them? Is it wrong to incentivise companies to own and tax intangibles where they’re developed?

However, there are problems. Ambiguous legislation invites debate on whether outright transfers are taxed. If so, ORRIP incentivises against behaviour change it should encourage. ORRIP is also levied on gross income yet global tax reform should skinny haven’s profits to a routine capital return.

Which takes us back to principles. Through impatience to see multi-nationals comply with reformed global rules, the UK is prepared to break them. Shouldn’t rules be for everyone?