He called out boastful bankers that claimed to benefit from lower tax rates than their cleaners, and also multinational firms that redirected profits overseas.
Osborne made an attempt to tackle the large American businesses with UK hubs, such as Google, Facebook and Airbnb, cheating the system during the Autumn Statement. It was dubbed the “Google tax” – a 25 per cent tax on the companies’ British profits that were being pushed out of the country.
“We’ve stopped these blatant abuses that were allowed to flourish, and many others. But we promised the British people we would do more – and find a further £5 billion a year, and I can confirm we have done so,” said the chancellor.
“We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.
“We’re going to change the law to stop the use of losses which abuse our controlled foreign companies regime, and make sure investment fund managers pay the full capital gains tax rate on their carried interest.”
Osborne revealed the corporate giants artificially increasing stock value for tax benefits will be stopped and demanded employment allowances will go to employment. He added that those involved in tax avoidance schemes will be named and shamed and said “these people should have nowhere to hide”.
Seemingly underwhelmed, Stella Amiss, international tax partner at PwC, said: “The anti-avoidance measures for corporates were relatively piecemeal. Tinkering around the edges rather than making a big difference.”
Read more from our summer Budget commentary:
- George Osborne adds more detail to Northern Powerhouse plans
- Compulsory national living wage gets mixed reception
- George Osborne permanently fixes Annual Investment Allowance at £200,000
- Cut in corporation tax welcomed by British businesses
- Apprenticeship levy so firms “get back more than they put in”
- Roads Fund introduced as part of the plan to boost productivity
Elsewhere, Vince McLoughlin, partner at business and tax advisory Russell New, added: “Osborne, and rightly so, had to outline more plans to tackle tax avoidance and aggressive tax planning by the rich. He will face little opposition from the business community – specifically to his plan to raise over £5bn from targeting evasion and ‘aggressive’ avoidance.”
Osborne also discussed the Non-Domicile (non-dom) tax status that lets international workers seek jobs in the UK and contribute taxes to the economy before returning to their home.
He noted their importance in supporting British businesses and said abolishing the scheme wouldn’t be the right choice to make, but said there were distinct flaws in the system, thus they will now be forced to pay the same tax as Brits.
“It is not fair that people who are born in the UK to parents who are domiciled here, can later in life claim to be non-doms and live here. It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax. From now on they will pay the same tax as everyone else.
“And most fundamentally, it is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else. Non-dom status was meant to be temporary, but it became permanent for some people. Not any longer. I am today abolishing permanent non-dom tax status.”
It means anyone who has been in the UK for more than 15 of the past 20 years will pay full British taxes on all global income, with measures coming into effect from April 2017 to generate £1.5bn in this parliament.
Alex Henderson, tax partner at PwC, offered his thoughts on the decision and called it an unexpected game changer.
“Non-doms who face tax rises or complications as a result of the changes have a simple choice: get their affairs in order or prepare to leave the UK,” he said.