Last week the government launched a review into Libor, following the recent high profile cases, in the hope of finding a potential alternative of the rate setting process, which will reform the key interest rate benchmark which is used to help set the price of mortgages and loans.
Speaking during his press conference yesterday, Sir Mervyn King announced the importance of finding an alternative, saying: “What’s become apparent is there is no such thing as the inter bank borrowing rate. The dominant feature in setting inter bank borrowing rates is now the credit risk associated with the potential failure of a bank, and that varies from bank to bank.
“So the idea of having a panel to sort out the inter bank rate no longer makes sense.”
Sir Mervyn King added that the need to find a solution quickly is a must, adding: “Since there is an enormous stock of contracts, getting on for half a trillion dollars in assets which are derivative linked to Libor, then the question is how can you ensure that the Libor system keeps going in order to support that stock of existing contracts”
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Documents filed at Companies House have revealed that the search engine and internet giant, Google, contributed £6 million to the exchequer in 2011 on UK revenues of £395 million.
The latest figures surrounding the corporation tax paid by the company are likely to raise further questions in regards to Google’s tax practices, after it was revealed last year that the UK business paid less than £950,000 of tax on revenues of £2.39 billion.
At the time of the criticism levelled at Google last year, their executive chairman, Eric Schmidt, claimed that the company was obliged to pay the legal minimum in UK tax, saying: “We could pay more tax but we would have to do so voluntarily. There are lots of benefits to being in Britain.
“It's very good for us, but to go back to shareholders and say 'We looked at 200 countries but felt sorry for those British people so we want to pay them more... there is probably some law against doing that.”
Now the latest documents filed at Companies House have revealed that in the six years to the end of 2010, Google paid just £8 million of corporation tax in the UK; whilst in the most recent quarter – to the end of June – Google’s worldwide profits rose by eleven percent to £1.8 billion.
Following the latest figures, a Google spokesperson said: “We comply with all the tax rules in the UK. We make a big contribution to the UK economy by employing over a thousand people, helping hundreds of thousands of businesses to grow online and investing millions supporting new tech businesses in East London.”
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A recent study, which looked at the proportion of total income tax taken in fifty cities, has revealed that some UK cities are paying thirty-one percent more in tax, than at the start of the financial year.
Following the publishing of the results of the survey, it has been revealed that forty-two of the fifty cities involved, saw a rise in the proportion paid in tax, with York seeing the biggest rise – thirty one percent.
At the other end of the scale, Salisbury, Durham and Peterborough were among a handful of cities involved in the survey where the proportion of tax taken fell as income rose.
One of the reasons cited for the slow rise in income tax levels was the increase in people’s personal allowance, which is the amount of money they are allowed to keep before they start paying income tax; with the personal allowance rising between 2007 and 2010 from £5,035 to £6,475.
A spokesperson behind the survey, said of the results: “For the vast majority of taxpayers the effective tax rate fell during the financial crisis.
“The tax bill for someone on a static income of £20,000 will have decreased by about eleven percent over the last three years. Of course, that doesn't reflect the increase in VAT and other indirect taxes.”
They added: “These statistics also show survivor bias of the recession, showing those still working, or self employed or pensioners who are earning enough to pay tax.”
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Last week the European Commission launched a public consultation to collect factual examples of direct tax problems that can arise when venture capital is invested across borders.
Because of mismatches between the tax systems of the 27 EU member states, problems such as double taxation and legal or administrative uncertainty can arise when venture capital is invested across national borders.
The aim of the public consultation is to find concrete examples of direct tax problems and to assess the impact of these problems in terms of additional costs to investors and SMEs in the EU.
The Commission is also seeking suggestions from respondents on feasible solutions to address any such problems. On this basis, the Commission will be able to decide if there is a need for EU-level solutions to remedy the problems and develop the most appropriate policy response by 2013 that will eliminate any obstacles, while at the same time preventing tax avoidance and evasion.
The Commission has invited all interested parties, including individual citizens, businesses and business organisations, tax administrations and tax professionals in academia, to provide their views on this matter by 5 November 2012.
Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said: "Venture capital is an essential source of financing for companies, in particular innovative start-up SMEs facing the costs of developing know-how.
“SMEs are the backbone of the EU's economy and help to generate economic growth and new jobs. It is therefore the collective responsibility of the Commission and Member States to find solutions to tax obstacles that hinder cross-border venture capital within the EU."
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A leading think-tank has suggested that delaying the austerity programme by three years would put 200,000 people back in work and raise the economic growth by £239 billion over a decade.
The National Institute of Economic and Social Research, who published its economic analysis earlier this week, has slashed its growth forecast for the year from zero percent to a contraction of 0.5 percent; although they have suggested that if the government had delayed its austerity programme for this year, the economy would have grown by 1.2 percent.
The latest suggestions from the National Institute of Economic and Social Research is set to add further pressure on the government to respond to the double-dip recession with a new growth strategy; and the think-tank have suggested that even if the government are not prepared to delay their austerity programme, they should look to loosen its debt reduction plans and borrow more to pay for key infrastructure projects.
A spokesperson for the think-tank added: “It remains the case that there is scope for a less aggressive path of fiscal tightening.”
The warnings from the think-tank come after the Bank of England opted to keep interests rates on hold at 0.5 percent and leave the quantitative easing programme unchanged for August.
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