MPs torment 'immoral' multinational avoiders

Executives from some of the world's best-known companies struggled to defend their companies’ elaborate tax arrangements when grilled by MPs about alleged tax avoidance this week.

The head of Google UK and top managers from Starbucks and Amazon appeared before the Public Accounts Committee on Monday. All the companies have been fiercely criticised for paying little or no corporation tax in the UK despite large sales.

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments
Paul Scholes's picture

Good to see though wasn't it?    3 thanks

Paul Scholes | | Permalink

I supped my wine, tutted & wagged my finger at all of them in their mini bob diamond moments, and greatly enjoyed it.

I agree with the comments above, I even agree with Mike Warburton although he would say that wouldn't he, I bet he dreads having to go back to doing tax returns.

I hope I'm wrong but given this government's history of watering down or chucking out their best of intention policies I'm not convinced that they'll come up with anything too nasty to force these companies to "do the right thing". I don't see why there shouldn't be the threat of a transaction tax to motivate them.

So it's left to direct action and "people power". You can log into Amazon and tell them you'll not buy another thing through their site till they play properly, I'll even write to Starbucks and tell them I'll not be visiting their shops (even though I can't stand their coffee and haven't been in there for years).

 

 

Just goes to

justsotax | | Permalink

show the only credible competition is Costa....smoother coffee...and a great chocolate brownie.

Pot, kettle, black    2 thanks

ThornyIssues | | Permalink

How Hodge had the gaul to sit there and critise while her family business does the exact same, beggars belief.

She is an MP, why am I surprised.

'immoral' multinational avoiders    2 thanks

mikefleming3028 | | Permalink

Why were these individuals not asked about transfer pricing and thin capitalisation and if their stock answer was "I have no  knowledge of the subject" then issue an order for the Companies concerned to put up someone who can talk to the issue. I am assuming of course that the Public Accounts  Committee has someone who has a good grasp on the subject as well and can weild the knife with the skill of a financial surgeon.

The select Committee missed a chance to expose the financial manipulation engaged in by the Companies concerned more to the point they have failed to engage with HMRC and to ask them for an explanation as to why they are not applying current anti avoidance legislation to stop profit stripping. 

The bottom line is if what these Companies are doing is within the law, morality should not be an issue, the answer is if the law is inadequate then change it. Politicians accusing big business of being immoral is in my view  the kettle calling the pot black and I am awaiting the possible backlash when those who were engaged in the bear baiting suddenly find their own private  financial arrangements subject to review in the press and Google online.

The fall out from this should be interesting!!!

thisistibi's picture

Corporate witch hunt

thisistibi | | Permalink

The anger at multinationals so-called "avoidance" is akin to some sort of witch hunt.  It shows a complete lack of understanding of the corporate tax rules, and how they operate in practice.

Starbucks is a brand.. it's not exceptional coffee.  In my local town in the South East, all the independent coffee shops have closed and Nero, Starbucks and Costa have taken over.  It's in people's nature to be drawn to the names they recognise.  That brand represents intellectual property which was developed outside the UK and there is actually a reasonable basis for the royalties paid by the UK operations (shock horror).  Think about it this way... what royalty would Starbucks charge a third party for exclusive use of the brand in a particular country?  Answer - a hell of a lot.  Would that enterprise actually be profitable after paying such a large licence fee?  Possibly not.

Tax is levied on people, not companies.  Increasing corporation tax through some kind of turnover based tax, or something other than profits.... that additional tax cost will be borne by the shareholders, the customers or the suppliers.  And in the case of Starbucks and Amazon in the UK, you can bet it will come through to customers.  The general public who are arguing for a boycott of these brands are the very people who will be hurt by "fixing" the non-existent problem.

 

hmm only begs the question where

justsotax | | Permalink

was the IP actually developed.....in Holland?!?!.....yeah right....(surprised it wasn't in Luxemburg...or can you not choose)

 

thisistibi's picture

@justsotax    1 thanks

thisistibi | | Permalink

I assume the Starbucks brand was developed in the US, and sold to the Netherlands.  It's up to the US to ensure the sale was taxed at market value...

Her Family Business?    3 thanks

J Lessels | | Permalink

Does she have a substantial shareholding? Is she a director?

Is there anything substantial behind your comment?

She is criticising the tax dodgers because that's what we pay her to do. Its her job. Better than going on !'m a celebrity anyway.

 

Not sure I know of too    2 thanks

justsotax | | Permalink

many businesses that would happily pay IP rights such that they never made a profit....i think they would go out of business very quickly.  However if you are suggesting that the IP rights are set at such a level as to reduce the profits of businesses in countries that are taxed highly in order to reduce their tax bill then at least that is honest....if questionably immoral in some peoples minds.

 

 

 

thisistibi's picture

@justsotax

thisistibi | | Permalink

Yes of course, but that is where conventional transfer pricing rules fall apart - an independent business would not pay all its profits to Starbucks to use their brand.  But it WOULD make sense for Starbucks to operate at a loss in the UK, if it generated significant royalty income for use of its brand.  In itself that it not immoral.  It is only immoral if they cannot justify the royalty rate with the correct supporting documentation - something which no MP seems to care about.

Sec. 482 of the United States Internal Revenue Code

JC | | Permalink

Section 482

'.. In any case of two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in the United States, and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the Secretary may distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among such organizations, trades, or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades, or businesses. In the case of any transfer (or license) of intangible property (within the meaning of section 936(h)(3)(B)), the income with respect to such transfer or license shall be commensurate with the income attributable to the intangible ..'

It will be interesting to see how the French get along with sending Amazon a EU200m+ bill for back/current taxes

Also there is an argument that states - the quality of life of the individual in the country 'loosing out' is detrimentally affected by transfer pricing. In this respect they have to possibly forego enhanced NHS, education, benefits, infrastructure and 'money flow' so that corporations can 'offshore' the money whilst potentially using some of the facilities without making any contribution to their upkeep

 

isn't that the point....

justsotax | | Permalink

the IP value used is clearly not based upon reality.  I assume they can 'justify' it, but quite clearly any 'normal' business wouldn't touch the starbucks brand with a barge pole based upon the track history of stores in the UK and their inability to make profit.

 

listerramjet's picture

just a bit more hot air

listerramjet | | Permalink

where they really trying to defend anything?  If there was any struggle then it was to remain polite during the hodge offensive.  What did we usefully learn?  Not much more than that they suffer the same level of intrusion from HMRC as everyone else, and for the most part their tax affairs are compliant.  More worrying is just how little our MPs seem to understand how business works, and why being tax competitive might be important.  Anyone remember the moral of the story about the goose that laid the golden eggs?

Witch Hunt?

Metrobrit | | Permalink

Firstly may I say how glad I am to see these matters aired, and if nothing else we should thank Margaret Hodge et al for the front page news.

But of course disappointed that no-one on the  committee seems to have even an inkling of financial knowledge about taxation, as has been demonstrated in the witch hunt from them and the newspapers about the use of personal service companies, I know I am not alone in wincing every time they talk about paying 20% tax rather than 40%.

Especially disappointing, was when one them (Starbucks I think) stated that rents and lease where 15% higher and we have raised prices 20% above worldwide norms to reflect this. No-one seemed to understand they were still better off.

And I'm not sure about the golden egg scenario; the point here is that they are taking advantage of the UK economy by selling to our consumers, not basing companies here which they may move to a more favourable tax environment. They want to keep the sales and ALL of the profit, and not contribute to our economy at all. I do not think that they wish to lose those sales, and if the UK consumer ends up paying more to pay for their taxes, then we have a choice we can go to Costa, or John Lewis Online rather than Starbucks or Amazon.

I think transfer pricing needs challenging, and I think it's right and proper to perhaps thinks about a industry specific turnover tax which decreases with the overall percentage of Corp Tax paid scaled against an industry norm. So Starbucks, you will pay 1p in the £ turnover tax sliding down until your corp tax payable is the same percentage of turnover as Costa for example. Would have to think carefully about capital investments of course with that. 

@metrobit

pauljohnston | | Permalink

A turnover tax is about as good as it gets.  The tax will just be seen as an additional cost to the Company and it will probally add the cost in its next price increase.  This the man in the street is paying the tax, just like VAT.

These companies do pay tax, mostly employer's NI and if other countries are offering a special deal on corporate taxes then perhaps this is the way forward for us.  Any extra tax we collect will be an increase in what the UK gets now.  As a nation we have to accept that if we want to keep up with the world we have to change whether we like it or not. 

stratty's picture

GST

stratty | | Permalink

Maybe some form of General Sales Tax is the way forward.  

Time for MPs to play hard ball...

louisVW4 | | Permalink

The UK cannot afford to subsidise other EEA Countries' economies (+ Switzerland), and who knows how the addition of Croatia, etc will impact this. So I welcome the idea of boycotting Starbucks (and Amazon, et al) but many Starbucks are franchises, and if their profitability is hit, they claim they will go out of business and put people on the dole.

Of course, that's similar to the argument about bankers and footballers pay... if they don't pay top talent top whack, then they'll go elsewhere. So, let them do so. There are only so many banks and top clubs, and a glut of top talent with more being produced every year, just as there are already far too many coffee shops. In my personal opinion, Starbucks sells awful coffee anyway!

If Starbucks values its 'loss-making' UK business, then it will do something to protect it.

Time for MPs to play hard ball, using the US vernacular!

Paul Scholes's picture

Ethics & the Law    2 thanks

Paul Scholes | | Permalink

Seems strange to have to remind some that laws have always followed the ethics of a society, it's how it enforces "doing the right thing" (or not doing the wrong thing) and, "the right thing" changes across time & cultures.

I don't care if it's a witch hunt or that it's being lead by a dodgy sector of our society, as metrobit says, it needs airing to guage whether the public agree that the behaviour is right or wrong.

With regard to a transaction tax, it's simple and may only need to be a threat, it would only apply to those who clearly were employing "shifting" behaviour to avoid tax and, if it went ahead and Starbucks passed on the cost to consumers then we'd go next door, for a better & cheaper cup.

should_be_working's picture

Not Qualified    2 thanks

should_be_working | | Permalink

Given the shambles that is the current tax system that MPs collectively have legislated into being, I don't think they are at all qualified to comment on anyone's tax affairs.

The bottom line is that it's not the companies paying too little tax that is the issue, but those of us that are still paying too much.

As for still bringing 'morality' into any debate about (the necessary evil of) tax ... strewth!

Robbas's picture

What A Joke

Robbas | | Permalink

The whole committee is a complete joke. They try to take a moral high ground yet obviously have little idea of the real world. What a difference it would have made if any of them had actually tried to run a business instead of being an out of touch politian. The tax system permits this because the legislation has been poorly drafted by civil servants. The tax system is too complicated and until it is rationalised this use of it to minimise tax liabilities will continue. It's no good the MP's trying to be moral as they still abuse their expenses.

Farce!    1 thanks

The Black Knight | | Permalink

a complete Farce.

It is sad that those making the rules know so little about them.

Even the article above refers to reporting losses when there was a profit? how did that work then? or have we got confused with accounting profit and tax loss which I doubt was caused by a transfer pricing issue.

It does show that if we lowered the tax rate we would get some business perhaps......but this seems to be a concept too far for celebrity T.V. show makers.

My question to the committee would be...

If you knew these rules (the law that is) to be morally repugnant then why did you have them written in such a manner and why have your underlings (HMRC) subsequently agreed the practical application?

 

Glad to see they're on the ball though...

markfd | | Permalink

...I mean, Irelands 10% corporation tax rate has only recently been introduced.  On a geological time scale that is.

Ethics & the Law (Part Deux)    4 thanks

vstrad | | Permalink

Paul, it seems strange to have to remind you that, while your point that laws follow the ethics of society holds good for things like the subjects of the Ten Commandments (Thou shalt not kill, etc.), it falls down when applied to a complex web of tax law attempting to cope with 21st century multi-national trading. As was famously said by Loius XIV's Finance Minister, "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing". It has little to do with ethics and, indeed, many of the current era's greatest woes have arisen from the propensity of Governments to use the tax system as tool for social engineering rather than as a means of obtaining revenue.

The current tax law as it affects Starbucks et al is not handed down by God, it arises by aggregation from the (often cursory) consideration given to the annual Finance Bill by MPs whose own ethics and morality has been found seriously wanting in recent years. Its standing as an authentic and consistent statement of the nation's ethical standards in 2012 is therefore dubious, to say the least. Some of this complex web of laws has an ethical origin, some is "goose-plucking" and much is of an origin lost in the mists of time. If tax law is to be "ethical", whose ethics should apply? Is it feasible to have a tax code that accurately repesents the nation's ethics at any and every moment in time? Obviously not, unless it is much, much, much simpler than the code we have now.

In these circumstance, the only tax that an individual or a company is ethically obliged to pay is that tax which he or it is legally obliged to pay. If you feel that this is too little in your own, individual circumstances, there is nothing to stop you writing a cheque to HMRC for the difference. The current approach of Starbucks et al is simply the inevitable result of the interaction between the tax laws created by the (flawed human beings who are) politicians in the UK and the (FHBWA) politicians in, say, Luxembourg. Are the UK's politicians more ethical, more worthy, more just than their counterparts in Luxembourg, thus implying we have more right to Starbuck's money than the Luxembourgians? Who can say. Is such a comparison a feasible basis for a bi-lateral taxation treaty? Hardly.

The remedy for the current situation is quite simple - a change in the law. The Government will have to decide whether it can frame a measure (a turnover tax for example) that will raise more revenue than it loses by deterring companies from operating in the UK. Given the scale of the (presumably profitable) sales that Starbucks et al make in the UK, I'm sure it is possible to arrive at a level of taxation that achieves this aim. But let's be clear - this is an exercise in goose-plucking, not moralising.

 

thisistibi's picture

@vstrad

thisistibi | | Permalink

Great comment, well said....

mr. mischief's picture

they all need urgent treatment for amnesia!    2 thanks

mr. mischief | | Permalink

Troy Alstead, the chief financial officer (CFO) for Starbucks, recently told the UK Public Accounts Committee that Starbucks’ UK shops were loss-makers.  In my view, he urgently needs to see his doctor as he appears to be suffering from severe amnesia.

His presentations to investors in previous years, far from using terms such as loss-makers, described the UK results as “profitable” and “very pleasing”.  In fact his amnesia also appears to completely blank out the results from years such as 2007 and 2008, when his predecessor as CFO was reporting on an operating profit margin of 15% from the UK.

Other members of the Starbucks board also appear to be in the latter stages of the disease.  Chief operating officer Martin Coles has stated that the UK has lost money for years, yet in 2007 he was telling investors that the UK profits were “funding expansion in other markets”.

Despite the big losses in the UK, just two years ago the Chief Executive Howard Schulz told investors the UK model was “an example for our US operations to follow”.  Surely following such a loss-making model across their largest market would be disastrous?

What no-one can deny is that with just over 600 outlets, the UK is the third largest area of the business after USA and Canada, nearly twice the size of China in fourth.  Hopefully the amnesia has not caused the directors to forget how many shops they have here!

Starbucks are blatantly making considerably more profits in the UK than they are declaring.  They are using trickery to shift profits to other lower tax countries.  I beg to differ with statements by big tax avoiders that “Global tax is complex.”  It is only complex if you are fiddling it!

HMRC could have and should have been hounding these guys and extracting a fairer share from them. In my view, HMRC should immediately take 400 staff away from hounding small business owners for small beer, and put them on to large multinational corporations with a target to get tens of millions of tax back for the country.

Meanwhile, I have decided the health risks of drinking Starbucks coffee are too great.  I don’t want to contract amnesia like the Starbucks board, so I won’t be buying any Starbucks product until they can all remember how much money they are making in the UK.

franchise or not?

The Black Knight | | Permalink

Can anyone clarify whether Starbucks is a franchised operation.

If it is then the public and MP's  impression of the entity may be quite different from reality.

Has all the corporation tax from the UK trading activity of individual franchisees been taken into account in this non payment of tax? Or have they subsequently engaged in real avoidance schemes? rather than a press misunderstanding of how transfer pricing works.

As usual this is more about the media show than the facts, and none of these people would let the truth get in the way of a good story.

mr. mischief's picture

red herring    1 thanks

mr. mischief | | Permalink

This is a red herring, I refer you to the MSN webiste following Starbucks latest results:

"Although Starbucks has more company-owned stores [than Costa], the rate at which licensed stores are being opened is outpacing the rate at which company-operated stores are opened. The former is a low investment and a high margin business. Margins for franchised stores are typically four times those of company-operated stores. A greater proportion of franchised stores will drive the overall margins for the company upwards."

So in fact - as with most such businesses, for example McDonalds - more franchises means higher margins and more profits.

in that case

The Black Knight | | Permalink

mr. mischief wrote:

This is a red herring, I refer you to the MSN webiste following Starbucks latest results:

"Although Starbucks has more company-owned stores [than Costa], the rate at which licensed stores are being opened is outpacing the rate at which company-operated stores are opened. The former is a low investment and a high margin business. Margins for franchised stores are typically four times those of company-operated stores. A greater proportion of franchised stores will drive the overall margins for the company upwards."

So in fact - as with most such businesses, for example McDonalds - more franchises means higher margins and more profits.

If the margins are significantly different in an owned store to a franchised store then perhaps the transfer pricing agreement is questionable? Why haven't HMRC challenged this?

But also where do those higher profits belong in the US or elsewhere. I do think MP's and HMRC should also be in the Dock on this one as it is largely something that they are responsible for or could do something about (other than bleeting) if they had the will.

And

The Black Knight | | Permalink

therefore how much corporation tax was paid by Starbucks Franchisees? I think this may be a significant figure and relevant to the media and thus public misunderstanding.

It is really HMRC that should be bought to book for failing to argue UK Plc's share, but I expect the IRS is the more powerful negotiator in all this.

 

mr. mischief's picture

You miss the point    1 thanks

mr. mischief | | Permalink

The point about franchises is that the franchisee pays hefty franschise fees, hence all too often the franchisor is the only party making decent profits.  Perhaps the best example of this currently is in the leasehold pub sector in the UK where most landlords and landladies make negative returns and the brewery chains are deaf to their tales of misery.

My point is exactly that here we have a company which has been telling its investors for years that it makes about 15% UK profit margin, and has been rolling out the business model in its third largest market - the UK - across its largest - the USA - precisely because it is more successful and profitable here.

Yet when it comes to corporate tax returns and Public Accounts Committee meetings suddenly it's a loss-maker.

As Ted Heath once said of Lonrho, "the unacceptable face of capitalism".  But you don't have to take my word for this, all you have to do is read Starbucks' own words:

"So ever since we opened our first store in 1971, we dedicated ourselves to striking a balance between profitability and social conscience. We continue to believe that the ultimate way to scale the power of brand is to share the good we do so that Starbucks and everyone we touch – can endure and thrive."

And loads more utter tosh where that came from, their latest Corporate Social Responsibility report within the Starbucks Annual Report.

wow, hornet's nest of

Oppco | | Permalink

wow, hornet's nest of comments there.

MP's lecturing us about morals?

As we all know, there is already a tax on turnover and a hefty 20% it is too. Of course Starbucks add that to their margin, as they would if it were Corporation Tax instead

It's annoying that all the media coverage on this is given to people who know nothing about tax.

HMRC will view this as an opportunity to up the aggression; doubtless they will go for the easy targets and leave the multi nationals alone as usual

 

 

 

 

thisistibi's picture

@mr. mischief    1 thanks

thisistibi | | Permalink

It's actually you who is missing the point.

In an above post you refer to various spokespeople for Starbucks as having amnesia, having commented on both UK profits and losses for the same years.  The problem here is that you don't know what you're talking about, whereas they do.

Within an international group, you undertake a financial consolidation to make the group accounts, in which intercompany profits and losses are eliminated.  When investor annoucements are made which refer to UK profits, they are talking about profits based on a consolidated set of accounts - with intercompany costs extracted.  That is not the same as the profits for the UK legal entity, which includes intercompany costs and therefore results in a lower profit - or in this case, a loss.

It wouldn't make any sense to talk to investors about profits and losses on a non-consolidated basis, as they are trying to explain the various elements of the consolidated group accounts.

Nick Graves's picture

Like kids & candy...    1 thanks

Nick Graves | | Permalink

Sooo easy to kick up a hornets' nest & get everyone distracted whipping the latest horse, & then quietly go back to ripping off the taxpayer with bogus expenses claims.

La dolce vita...

 

 

 

Turnover

rtrussell01 | | Permalink

But remember that Google's UK turnover is all invoiced to Ireland. So VAT and turnover tax would not apply. It is legal under EC law, but bonkers if you were trying to run the country as a business and raise a fair amount of tax from one of the most profitable businesses operating here.

sluglet's picture

Total Farce    7 thanks

sluglet | | Permalink

MP: Tell me sir why has your company paid so little tax?

CEO: Because we fully complied with the tax law drawn up by MPs!

MP: What's that got to do with it?

Tom 7000's picture

I would have said....    1 thanks

Tom 7000 | | Permalink

I would have said....

 

Sweetheart we havent broken any laws, by you inviting me here you are wasting my time, now what do you want? Get to the point quickly please as  I am busy running my company legally  not making phoney expense claims up like your colleauges.

I wonder what she waould have said to that?

 

Tom 7000's picture

the difference    1 thanks

Tom 7000 | | Permalink

Oh yes and I would have said

 

legality is the base line of law we follow

Morals the higher level you personally choose that is higher

Ethics, those imposed by a trade association

 

Why would you possibly expect a company to have any morals whatsoever. We pay a big 4 Firm 3000 an hour to make sure we dont and comply ecxactly with the law.

Although I have to ask

pauljohnston | | Permalink

Do other Corporations/Companies have bases in the UK to do exactly the same as Starbucks is, ie to avoid higher corporate taxes in its "home" country?

Tom 7000's picture

@pauljohnston

Tom 7000 | | Permalink

you better believe it

CHEAP SHOW

The Black Knight | | Permalink

Unfortunately all you need to make a cheap T.V. show is some isolated information (numbers in this case) some gullible contestants and a gullible audience the only thing missing from this charade is a telephone vote on who should get a dunking.

The real culprits for this economic depression are using this to divert attention away from themselves, first it was greedy bankers, then it was plumbers, then it was a world recession (but only in our part of the world) and now its greedy corporations? does that mean the shareholders?and your pension funds.

Why we needed this show presumably all HMRC have to do is review the transfer pricing arrangements, but the real truth is perhaps they have cocked this up like everything else.

I would say it all comes down to mismanagement of UK Plc

One thing for sure they will loose interest shortly e.g. there were 23 plumbers facing criminal prosecution. Three very silly ones have been prosecuted, the rest have presumably been forgotten.

mr. mischief's picture

Granny sucks eggs

mr. mischief | | Permalink

Having worked for a large international corporation which had a detailed transfer pricing review by HMRC, some previous posters are teaching Granny to suck eggs here.

In that case my area emerged unscathed.  If someone's charge out rate was £30 net and the central overhead was £20, we were charging the overeas subsidiary at £50.  The £20 was fully auditable and transparent, no problem from HMRC.

However, either by accident or design a different division had been charging at £30.  After a few hundred thousand hours of this HMRC got on to them.  Queue a hefty additional tax charge.  I think it might have been accidental, but the corporation tax rate in the other country at the time was 5% lower than in the UK.

Back to Starbucks.

I am absolutely fine with them not paying any UK tax providing:

1.  They have one consistent story.  If the intercompany charges are genuine arm's length charges the UK is loss-making.  Fine.  So rip-up the stuff in the annual report about 15% margins.

2.  It rips up all the drivel in the Corporate Social Resposibility report and replaces it with "Our policy is to aggressively manage our tax charge and make full use of every possible scheme and loophole available" etc.

It simply can't have this both ways.

Nick Graves's picture

Taxation; impractical as well as immoral?

Nick Graves | | Permalink

rtrussell01 wrote:

But remember that Google's UK turnover is all invoiced to Ireland. So VAT and turnover tax would not apply. It is legal under EC law, but bonkers if you were trying to run the country as a business and raise a fair amount of tax from one of the most profitable businesses operating here.

 

Raises an interesting hypothetical; since a proportion of Google's business is IPR and other intangibles that may be beamed anywhere around the world, how long before somesuch business has its RO as a communications satellite? AFAIK, there is absolutely no taxation repression in outer space... 

you mean to say

The Black Knight | | Permalink

Nick Graves wrote:

rtrussell01 wrote:

But remember that Google's UK turnover is all invoiced to Ireland. So VAT and turnover tax would not apply. It is legal under EC law, but bonkers if you were trying to run the country as a business and raise a fair amount of tax from one of the most profitable businesses operating here.

 

Raises an interesting hypothetical; since a proportion of Google's business is IPR and other intangibles that may be beamed anywhere around the world, how long before somesuch business has its RO as a communications satellite? AFAIK, there is absolutely no taxation repression in outer space... 

You mean to say your office is not in the cloud already?

Sucking eggs

The Black Knight | | Permalink

As you have quite rightly pointed out you can't have your cake and eat it, so if different pricing is used for the same item but in different tax rates then HMRC must be able to challenge this.

My point about franchisees, licenced shops is that although some of the profits will be paid back up the chain the majority of it will stay and it is the corporation tax on those profits that the UK has collected from UK sales.

So the figure of £8.6M is a bit misleading if the public and press and MP's believe Starbucks includes the sales from all those shops.

The perceived missing tax is therefore a HMRC failure to apply the rules.

More useful would have been a breakdown of how much tax was contributed to the UK coffers from Vat, Employment taxes, corporation tax etc etc from the entire operation understood to be Starbucks.

Tax avoidance    3 thanks

Denis Lyons | | Permalink

Isn't it a bit ironic that MPs are trying to take the moral high ground on this.  Do the various MPs expense claim scandals in recent times give them grounds to comment on the morality of multinational companies?

The transactions carried out by multinational companies UK businesses need to be thoroughly tested under transfer pricing regulations, morality (or lack of it) should not be an issue.

 

Nick Graves's picture

My head is

Nick Graves | | Permalink

The Black Knight wrote:

Nick Graves wrote:

rtrussell01 wrote:

But remember that Google's UK turnover is all invoiced to Ireland. So VAT and turnover tax would not apply. It is legal under EC law, but bonkers if you were trying to run the country as a business and raise a fair amount of tax from one of the most profitable businesses operating here.

 

Raises an interesting hypothetical; since a proportion of Google's business is IPR and other intangibles that may be beamed anywhere around the world, how long before somesuch business has its RO as a communications satellite? AFAIK, there is absolutely no taxation repression in outer space... 

You mean to say your office is not in the cloud already?

But the office remains on terra firma. Or Terror Firmer, with the amount of nonsense with which we have to deal.

 

Eat cake ...

JC | | Permalink

One can always '.. have your cake and eat it ..'

On the other hand you cannot '.. eat your cake and have it ..'