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Multinationals and corporation tax

If corporation tax was calculated on turnover in a given country would it stop profits being artificially kept low. Surely the likes of Starbucks, Vodafone, Google and Amazon etc are more profitable than their corporation tax bills would suggest.

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13th Nov 2012 11:58

Only South Africa has a corp turnover tax and that's optional...

The recent moral outrage of the Public Accounts Committee aside, the difficulty that we have with Corporation Tax is that if profits are reduced "artificially" by charges to oversees connected entities as Starbucks do with their IP, finance and coffee purchase costs then a company with massive revenues but also massive capital outlay and operating costs can transform a profit of a few hundred million into a slight loss. It takes a great deal of technical knowledge and is subject to challenge by HMRC, but it can be done and the large companies are very good at it.

In fairness to HMRC and governments of both Labour & Tory hues, they've tried to prevent falling Corporation Tax revenues by introducing ever more complex rules around transfer pricing, international financing and anti-avoidance measures.

Although this has mitigated some of the worst excesses, companies have usually challenged the rules on an anti-EU single market / sole establishment basis (as EU treaties effectively trump UK law) or achieved the same ends by different means.

UK VAT is effectively a turnover tax (albeit with different rates and some exclusions) of 20%, but what the UK government are demanding is both a tax on turnover AND a tax on profits.

Only South Africa has a corporate turnover tax and that's an option available to small businesses to avoid the complexities of having to get an accountant to work out the profits for corporation taxes - not exactly the hardest calculation in the world.

The real problem here is that despite the moralization of MP's, taxes are seen as "just costs" to most businesses and the job of a company's management is to keep costs to a minimum to increase profits. If they have to transfer revenues to partner companies elsewhere to avoid profit taxes, then that is what will be done.

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13th Nov 2012 12:06

agree

and what about the VAT ,employers NI and PAYE and employees NI that the staff pay

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19th Nov 2012 12:51

NI & PAYE AVOIDANCE

The Innkeeper wrote:

"and what about the VAT ,employers NI and PAYE and employees NI that the staff pay"

SAD TO SAY IT BUT IN THIS TIGHT ECONOMY WITH FEW NEW JOB AND TRAINING CHANCES(OPPORTUNITIES) FOR ALL AGES LOTS OF EMPLOYERS WOULD RATHER HAVE YOU CASUAL/FREELANCE THAN PAY OUR GOVRENEMNET 30-40% OF ANY STAFF COSTS.-YOU WEREN'Y THE FIRST TO DO IT  bbc?

WE CAN THANK MARGERET THATCHERS BROADCASTING ACT FOR ALL THE FREEELANCERS AT THE BBC.

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By tom123
13th Nov 2012 16:12

Business rates on all the premium retail properties will not be trifles either - certainly for Starbucks

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By DMGbus
13th Nov 2012 16:22

Lots of other taxes paid...

# Business Rates

# Employers NIC

# IPT

# VAT on income

The fourth one clearly is a turnover based tax.

Corporation Tax depends upon applying rules such as correctly drawn up accounts and adherence to transfer pricing rules.    Assuming that HMRC has the ability (and willingness) to apply transfer pricing rules then should be no issues.  

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19th Nov 2012 12:58

david5541

please dont shout - turn the caps off

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06th Dec 2012 15:43

Today it was anounced s/bucks woud be paying £10m Corp Tax in each of the next two years.

 

Have s/bucks been bullied by media into paying corp tax they shouldn't  ?

 

Does anybody know the true position i.e. what profits are according to GAAP and what the correct sales and costs are ?

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