"US companies warn tax avoidance crackdown will hit earnings." That was the headline on the front of the Financial Times last weekend. It seems that 136 large US firms have had to alert investors to the possibility that efforts by global governments to clamp down on aggressive tax avoidance are likely to hit their net profits. We started warning you a few years ago that this would happen. When countries need money, we said, they start showing firms what it means to be sovereign. When they need money, they go where the money is and at the moment, it's on corporate balance sheets.
So last year, the UK introduced its diverted profits tax, a 25% tax on contrived arrangements designed to avoid paying corporation tax here. Linkedin, Facebook and QLogic have all cited this as a risk. This year, George Osborne has announced that tax breaks on interest costs are to be cut. That, says the FT, will shave £1bn a year off corporate profits in the UK alone.
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