The reason it is so "complicated" is the court ruling I mentioned above along with its progeny - narrow interpretations of tax laws (i.e. a strict "letter of the law" interpretation that the UK has followed) necessitates more lines of law in order to achieve a desired result. However the more words and sections in a law, the more complex it becomes, and after a certain point it leads to a great deal of conflicts.
So yes, I think the tax laws need to be better written - but it's very difficult to do so given the historical developments and judicial attitude towards tax.
>So yes, I think the tax laws need to be better written - but it's very difficult to do so given the historical developments and judicial attitude towards tax.
I think you're hanging too much on the courts. The quote you provided is what courts are supposed to do. The fact that they don't do it in other cases is more of an attestation to the lack of justice available to those accused who lack economic and political power than to anything wrong with what they do with tax law.
The real trouble is that profit-based tax accounting is highly subjective. If it costs you $90 to provide a service that you sell for $100 then you're supposed to pay tax on the $10 of profit. But things only cost what you pay for them. If you're selling for $100 and buying your raw materials from a corporate sibling in a lower tax jurisdiction, what is the "cost" of those materials? The customers are willing to pay about $100 for them; that seems like a reasonable total for the sum of your costs -- if you were making anything more then your powerful multinational supplier/franchisor could squeeze it out of you if you were independent, so the same goes for you as a subsidiary.
Take an example: Suppose you're a franchisee who owns a coffee shop. You have to pay Multinational, Inc. to use their trademark and fly you to their location to get some training. They're in Ireland (or whatever) and pay tax on that money there. By the time you pay them and pay your employees and rent and utilities and all that, you have just enough to pay your own salary. Then you have nothing left as taxable income for Starbucks on Third Street, Inc., but that's perfectly alright with you because you're happy to be making a steady salary, so indefinite corporate break-even is a stable equilibrium.
If Starbucks International then comes in and offers to buy your franchise, it makes no sense for that to change your now-subsidiary's corporate tax liability. And if it did, it just wouldn't happen -- instead of having subsidiaries they would continue to have franchisees "owned" by managers who make no more from the franchise than they could be expected to draw as salary from the manager position.
They call this problem "transfer pricing" -- you get to deduct costs from taxable income, and you get to decide (within reason) how much your costs are. But when profit margins are thin, a (very reasonable) couple of percentage points difference in the cost paid to a corporate sibling can easily erase all of your in-country profits.
I haven't heard anyone come up with a reasonable solution to it, other than to stop trying to tax profit and tax something else instead.
Do you have a source for this? I have never heard this and I very much doubt it is true. If you look at the "Paying Taxes Report" from the world bank + PWC, the UK has a yearly time to comply of 110 hours - versus 175 hours USA, 207 hours Germany, 330 hours Japan... Time to comply isn't a perfect metric of course, but all the classical "easy tax" countries like Switzerland, Luxembourg, Singapore, HongKong, Ireland have even lower numbers than the UK, so there is at least a correlation. (If you control for economically comparable factors)
The PWC report includes time spent determining state and local taxes, which can be quite complex in the U.S. (for companies operating in many states) but which are nonexistent in other nations.
