Starbucks pledges £20m corporation tax

After weeks of governmental, media and public pressure, Starbucks has announced it would start paying corporation tax in the UK. 

The company announced it would pay £10m per year over the next two years to HMRC, whether it makes a profit or not.

In October, it was revealed the Starbucks paid just £8.6m in CT in the UK over a 14-year period, despite making a profit of £3bn and reported accounting losses where it was profitable.

Last month, Starbucks UK executives appeared before the Public Accounts Committee (PAC) and were accused of immorality by MPs.

However, PAC chair Margaret Hodge recently said she approved of the company's new decision to pay its tax, saying it was a "step in the right direction." 

Yesterday, Starbucks UK's managing director Kris Engskov posted a public letter on the firm's website, announcing they would pay a higher rate of CT than required by law, regardless of profitability.

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Did anyone hear the Lib Dem MP from the Treasury

hiu612 | | Permalink

on the radio, explaining to the public at large that tax was not voluntary and HMRC were not in a position to accept charitble donations?

ShirleyM's picture

It isn't just politicians that haven't got a clue

ShirleyM | | Permalink

The company was also reported to have filed accounts saying the companies UK operations were making a loss, while reporting strong UK profits to investors.

It seems Starbucks haven't got a clue either. One of those statements must be a porkie!

How will this work?

Ian Bee | | Permalink

Starbucks say that they will not claim a deduction for royalties, but deductions are not "claimed", CT is charged on accounting profits as adjusted under tax legislation. The only adjustment I can see that they could make is to reduce the royalties as a transfer pricing adjustment, which might lead to further questions in the future when they stop making the adjustment. As far as I know the transfer pricing legislation does not take into account adjustments made as a goodwill gesture.

We are also told that Starbucks does not make a profit in the UK, so we might assume that there are trading losses brought forward. These will be set off against future trading profits, and that is not subject to a claim being made but is automatic. So how will they end up paying CT over the next two years?

If Starbucks are really making a PR move, they should provide more details if they want it to work.

johnjenkins's picture

How about

johnjenkins | | Permalink

getting rid of staff and staff benefits, so increase profitability and hey presto CT tax. Ah PAYE take will be down by how much? Surely not the same as CT tax.

Or they could simply say thanks for having us, here's a few bob.

Anyway why would any entity want to pay more tax than they should?

I certainly wouldn't....    2 thanks

justsotax | | Permalink

mind you I haven't got the luxury of planting my 'head office' and owner of my intellectual rights in some low tax country....which is fine in my books, as long as you don't then expect to benefit from what the UK provide (a rich/diverse customer base, civilised country, great health care etc)....we even have overseas aid....which I actually find quite annoying given Bono has decided that all the G8 (or whatever it is) should give, yet he feels he shouldn't pay money by way of taxes into these countries (through which he no doubt made his millions)...the small people with the least choice yet again pay.....why should i?

 

 

sounds like    3 thanks

asking | | Permalink

they will simply adjust their transfer pricing adjustments or royalty payments to ensure the uk entity pays tax at a rate they consider affordable.

In my mind, they either make a profit or they dont - its up HMRC to enforce the law - if they arent doing anything wrong then there isnt any CT due. End of.

By saying 'they will pay' CT in the UK simply due to government pressure, it starts a hell of a precedent - but one many other companies will choose not to follow! Its not in the interests of investors, and lets remember a hell of a lot of these investors are your pension schemes.

At the end of the day, the fact is, they are paying tax, it just happens to be tax in another country where the rates are lower - by making charges into the UK for various 'group' costs. Thats what HMRC should concentrate on, and it appears the chancellor has now twigged to the issues as he is again dropping the CT rate. In future companies may want to pay the CT here, rather than whisk profits out of the country using convoluted but legal group structures.

I dont give two hoots for the moral argument, its not moral to have tax taken from you in the first place - especially when its put to use for wars and to pay european fat cats expenses. If they want to take as much tax as they need enforce or amend the law to make it possible.

Rant over, carry on.

Tax it isn't: tax relievable it may be.

DavidW878 | | Permalink

Whatever else this payment may be, it isn't tax: the amount of tax due is what it is and you can't unilaterally decide that it's a different amount (unless you claim or disclaim a relief, which isn't the case here - Ian Bee is spot-on here).   In fact, it's a free-will gift to HMRC.  As to HMRC accepting it - yes they can -  when I was an Inland Revenue Inspector an age ago we did occasionally get money anonymously through the post described as "conscience money" (people had consciences in those days) which the collector (different department in those days) had no difficulty in banking.  And the process known as "voluntary restitution" is a variation on the theme. So no, I don't think HMRC will have any trouble in knowing how to account for a gift of £20m.  The more interesting question is whether Starbucks will be able to claim any form of double taxation relief (presumably not, on the basis that it isn't tax) or whether they would be able to claim tax relief on the payment itself - probably yes, I'd have thought, on the basis that first and last it's a marketing cost, though whether they'd have the chutzpah to make the argument is less certain.

nigel's picture

Dangerous precedent    5 thanks

nigel | | Permalink

I really fear we are watching the tax system being reduced to chaos - or certainly a very unfair 2-track system. On the one hand we have seen 'deals' being done with companies like Vodafone, and now the Starbucks announcement. At at the SME level, HMRC is being give extra resources to pursue defenceless small businesses trying to make a living in very difficult economic conditions.

Several of my clients have asked if they can do a Starbucks - opt out of the tax system and just pay what they want! Nice idea...

 

Peanuts    2 thanks

BryanS1958 | | Permalink

Given the amount of profits that Starbucks has allegedly diverted to low tax rate jurisdictions £20m is a derisory amount - it has cost an additional £50m on the botched railway tendering alone!

However, at least Starbucks employs a lot of UK staff and pays PAYE, what about EBay and others who sell in the UK but employ minimal UK staff and pay hardly any PAYE or corporation tax?  The Government should have these companies in its sights.

Would agree Nigel...    1 thanks

justsotax | | Permalink

the extra resources being put the HMRC way seems to cover the small guys yet again.  The 'avoiders' will be left to avoid...because its legal!.....and unless they change the rules then nowt is going to happen.  Unless of course people power takes place.

 

Perhaps they should spend a few million on a tax team who will identify the rule changes required to get at those who actively look to reduce their tax exposure through more and more artificial means...

He who makes the rules must also stand by them    4 thanks

john woolmore | | Permalink

Surely this is a travesty.  Why should Starbucks make a voluntary payment?  Sounds suspicious to me.  We all know of companies who are actively working to reduce their tax burden and Starbucks would be no exception.  Surely Starbucks should come clean on the conflicting statements regarding profitability.  If they are making tax losses then the media should report this accordingly.  Doesn't make for good headlines though does it?

To me, regardless of any moral issues, it would seem the villains of the piece are the legislators for introducing tax law which allows profitable companies get away with CT avoidance ie not paying a proportionate amount of CT.

However as with many overseas owned companies Transfer Pricing manipulation always seems tempting - has this happened here?  Hence the tax losses.  HMRC has the powers to investigate this, of course.

Starbucks did not create the legislation and they are entitled to use the provisions to make sure they pay the right amount of tax using the allowances and provisions allowed.

So wake up Whitehall and get your act together.  Try employing business savy legislators.  And as for the media try to investigate fundamentals before raising hue and cry.

Ebay/Amazon    2 thanks

AndyC555 | | Permalink

"what about EBay and others who sell in the UK but employ minimal UK staff and pay hardly any PAYE or corporation tax? The Government should have these companies in its sights" 

 

How can the Government have such companies "in their sights"?

They are based outside the UK.  If I was a bookseller in the UK and a German customer ordered a book from me, I'd pay tax on any profits here in the UK.  It would be virtually unworkable to expect me to pay taxes in Germany.

It makes perfect sense to base such a business in a lower taxed country.  And whilst we are on that topic, let's not forget the UK has a low CT rate compared to (say) the USA.  How can we in the UK complain about what companies do if we are lowering our CT rates to attract them here?

If the hysteria being whipped up in the media were followed to it's logical conclusion you'd be expecting companies to set up their HQ in the country with the highest tax rates, which of course wouldn't be the UK.

 

Cobblers

haroldsteptoe | | Permalink

The company announced it would pay £10m per year over the next two years to HMRC, whether it makes a profit or not. 

....whether it makes a profit or not...made me smile

 

So    3 thanks

The Black Knight | | Permalink

Does this work the same as MP 's CGT ? as in cheque written and held up for camera, paid to HMRC ....no liability on tax return for money to stick to. So refund in the post or straight back to account electronically....Human never saw never noticed...all's well with the world.

Money successfully laundered?

johnjenkins's picture

Perhaps Starbucks

johnjenkins | | Permalink

see it as a donation to the Tory election fund, with, even more perhaps, a knighthood sometime in the future.

Oi! Give us yer xxxxxxx money! We know where yer live!    3 thanks

JackHarper | | Permalink

The new method of tax collection is, apparently, Donation by Intimidation. Tax will now be collected by non-statutory means (extortion) at the whim of George Fauntleroy or the mad woman from Barking, Old Mother Hodge, or perhaps by popular acclaim/denunciation on Facebook. As a Bermondsey Boy I am very familiar with this method

People may well now say: it's only Starbucks Google and Amazon and they can afford it.. In the thirties the German people said: "It's only the Jews".

 I remain a supporter of tax collection by the Rule of Law

Not sure Starbucks

justsotax | | Permalink

are making a donation for the country's sake....I suspect it has something to do with lack of custom/PR etc....in my opinion they should continue as they are...indeed i don't think the HMRC have knocked on their door and demanded they pay tax they do not owe....but its funny what bad publicity does....

 

 

ianthetaxman's picture

Tax isn't taxing....not if you opt out....    1 thanks

ianthetaxman | | Permalink

Name calling by politians and the media on this scale is just ridiculous!  If the legislation allows for it, then why is it their fault if they apply the legislation?  I'd agree with earlier comments concerning a two tier system emerging, and that Government has to have the nerve to stand up and acknowledge the issue for what it is, otherwise this will continue until legislation is amended.  

 

 I wonder what would happen if they made the changes, would all the multinationals that use the current UK law decide to move on to another tax friendly location, potentially taking jobs with them?  What would stop them from doing this?

 

If the application of tax law doesn't matter for them, can we all take the same approach?  The answer is obviously "no" so why can they?

 

This issue has brought out a skeleton that's been hiding in the closet for a long time and it seems that now it's out there, the monster has grown a little too big to stop - I think it's due to it having its cake and eating it....

Starbucks    1 thanks

Dutchnick | | Permalink

Working for a IT company trading throughout Europe we can in reality choose where we pay tax. I never hear any of these politicians admit firstly that they have not got a clue and secondly they seem not to realise customers can shop around for goods and services as they wish. Whenever I return to the UK I bring the usual wine/tobacco etc as it is cheaper than the UK. Morally wrong? No, the market. Until there is tax harmonisation many of these taxes in effect become optional and if like France you make the cost of employment too high you do not get the jobs. The Starbuck offer of paying tax should come from their PR and promotional budgets- ridiculous.

May be you should look at the tax and benefit the UK gets from Starbucks activities. VAT, Jobs (NI, employees/employers tax) They currently have 11,500 employees with 5000 more due over 5 years with the addition of new drive thru operations. There are no complaints when Honda, Nissan make a loss and pay no corporation but provide a huge number of jobs. I like VAT over most other taxes as I choose how much I pay, or not. Maybe scrap corporation tax, would it not bring jobs to the UK?

Any way I have yet to hear from these sanctimonious people how they adjust their income to pay more tax, voluntarily !

 

They missed a trick?

The Black Knight | | Permalink

They could have bought £20M lottery tickets as a PR gesture that would have reduced the tax whilst making a donation.

Will Tax uk uncut be fair and have a Pop at other tax avoiders including certain politicians companies or are they biased as well?

It does seem if you can get the mob baying for blood over something that they do not understand ,and is clearly not right, it makes for good T.V. and diverts the blame for this horrible mess onto someones coffee you don't like.

bit like the Pasty debacle

Voluntary Tax

nicholas.horne | | Permalink

Whether they muck around with transfer pricing, temporarily "forget" fail to claim allowances/losses brought forward (or simply make a gift to the Exchequer which they call Corporation Tax), SOMEBODY is going to suffer at least the interest on a precisely equivalent loss of revenue if Starbucks pay £20 million of tax which would otherwise not be payable.

And unless that "somebody" is HMRC at some stage in the future, shareholders (and/or other companies in the group) will presumably decide to sue the current board of Starbucks.  

What a lark!

One would assume that in    1 thanks

johnt27 | | Permalink

One would assume that in order to reduce the royalties paid and thereby voluntarily increase the corporation tax that Starbucks pay their IP must be impaired.

Which means a write down in Switzerland or wherever the IP is held, because of the recent battering in the press, lower income from royalties and maybe no tax to pay or even a refund from a carry back - anyone?

The problems with transfer pricing mentioned above are irrelevant. HMRC can't enforce these rules as no one really knows what the true value of IP in any company is nor what a market rate of licencing would be in these cases. If MPs want to legislate against this - here's an idea only allow IP charges of 5% of income to be tax deductible.

Strabucks approach however is a great way for the board to uphold their fiduciary duty and keep both the great british public (who seem to think tax paid somehow correlates with turnover) and of course their auditors and the IFRS bods on the right side.

Genius.....

A new way of working

ds | | Permalink

Although only for the big boys of course, does this represent a new way of working out the amount and indeed the neccessity to pay tax at all. ? Well I never .....

carnmores's picture

well Starbucks do at least provide a public service

carnmores | | Permalink

people  sit there for hours with one muffin and run their  businesses  - on the basis of morality should these pseudo sqautters not be paying business rates

Only Corporation Tax avoided?

markfd | | Permalink

So if I read it right, Starbucks have avoided CT but presumable paid all the other taxes they are subject to .. rates, NI, VAT on their markup ...

Whereas Margaret Hodge who's family company shareholding is mostly held in a trust is presumably avoiding CT (company based in that well-known steel Canton of Zug), inheritance tax, CGT and income tax.  (I assume the trust is offshore.)

It's hard to think of a better example of your typical hypocritical, do as I say not as I do, champagne socialist, useful idiot.  That's before her history of covering up child abuse on her watch in Islington.  Now we have taxes being determined by mob rule rather than the rule of law.  Be very afraid.

 

johnjenkins's picture

I wonder what

johnjenkins | | Permalink

the extra tax is on an increase in 7.1% on turnover in 3 months. (Costa Coffee). Starbucks wouldn't pull out because they are making money. How much does it cost to make tea/coffee and how much do they sell it for? Not rocket science. Even if they did pull out someone would take their place. If the mark up is right then there is a market. I don't see any problem with paying tax on the profit earned in the country you earn it or failing that some kind of small sales tax on overseas companies.

You have to wonder what

Knight Rider | | Permalink

You have to wonder what Starbuck's PR department is up to.

To have MPs whose expenses seem to be beyond HMRC scrutiny, speaking about tax as if it is a moral issue rather than a statutory obligation beggars belief.

Come on Starbucks you can do better than this.

Targeted Companies

BryanS1958 | | Permalink

AndyC555 wrote:

"How can the Government have such companies "in their sights"?

Clearly the Government has got companies in its sights - it is making scapegoats of certain companies.  The point I was making is that there are plenty of other companies which pay even less tax to the UK tax coffers, so why not have a pop at them as well.

Basically, it all to grab a few headlines, make people think that 'we are all in this together', whilst avoiding the need to do a proper job investigating for potential breaches of tax rules or writing more watertight legislation.

johnjenkins's picture

Or a PR

johnjenkins | | Permalink

exercise. So that when HMRC hit the small business they can turn round and say. Look we got money out of the bigguns.

Mind you DC tied up with X factor, Britains got talent, his daughters birthday and gay marriages perhaps he needs a bit of a diversion.

"The point I was making is    1 thanks

AndyC555 | | Permalink

"The point I was making is that there are plenty of other companies which pay even less tax to the UK tax coffers, so why not have a pop at them as well. "

 

My question remains.  A company outside the UK sells to a UK customer.  Are you saying that you think profits on that sale should be taxed in the UK?  You would also have to accept the reverse.  UK companies exporting would have to pay profits tax in those countries.  Companies with no physical presence in countries would have to find accountants and prepare tax returns.

Tax treaties would need to be completely re-written, the concept of a 'Permannet Establishment' would disappear.

You've said the Government should have Amazon (A Luxemburg based company) "in their sights".  I'd ask again; how?  What are you proposing?  And when other countries do the same, what then?  Remember, any company exporting from the UK to the US will, under what you seem to be suggesting, face paying a higher rate of tax than they do currently.  And be paying it to the US treasury.

If you start 'having a pop' at foreign companies, expect foreign countries to start 'having a pop' at UK companies.

 

 

johnjenkins's picture

@AndyC555

johnjenkins | | Permalink

If that is indeed the case why are HMRC going after these companies? Even more ludicrous is why are these companies paying up? The difference between Mr Carr and these legit companies is quite pronounced. To me, if all wasn't kosha then these large concerns would say "bog off".

probably

The Black Knight | | Permalink

johnjenkins wrote:

exercise. So that when HMRC hit the small business they can turn round and say. Look we got money out of the bigguns.

Mind you DC tied up with X factor, Britains got talent, his daughters birthday and gay marriages perhaps he needs a bit of a diversion.

These topics do appear to be chosen for media debate interest but no action to follow:

I mean Gay Marriage? either they have not read the Bible? or were they going to rewrite it or base the whole thing on a new book (Sooty does Sweep up occasionally?)

Nothing against Gay people and I am not religious but the Bible (and presumably its believers) has no tolerance for gay people and says they should be put to death.

The whole thing reminds me of tax law.....they have not read that either.

and DC's the clever one.....God help us.

Ask the Government, not me:-)

BryanS1958 | | Permalink

AndyC555 wrote:

Are you saying that you think profits on that sale should be taxed in the UK?

I'm not saying anything, it is the Government that is targeting specific companies to get a few headlines and avoid allocating adequate resources to HMRC to do a proper job. 

 

But why target these specific companies, which at least employ staff and pay PAYE and VAT, etc when there are other companies such as EBay, which employs hardly any staff and pays hardly any tax, which are not being targeted. If Boy George is applying the moral code to Starbucks, why not EBay?

No one has made a fuss about E bay

The Black Knight | | Permalink

BryanS1958 wrote:

AndyC555 wrote:

Are you saying that you think profits on that sale should be taxed in the UK?

I'm not saying anything, it is the Government that is targeting specific companies to get a few headlines and avoid allocating adequate resources to HMRC to do a proper job. 

 

But why target these specific companies, which at least employ staff and pay PAYE and VAT, etc when there are other companies such as EBay, which employs hardly any staff and pays hardly any tax, which are not being targeted. If Boy George is applying the moral code to Starbucks, why not EBay?

No one has made a fuss about E bay yet and this is a response to media clap trap? QED

added to which E bay is like pasties and sacred to working class tax evaders. Can you imagine the mess when they start throwing their pasties at passers by?

Here's how.

Chaztax | | Permalink

"

"The point I was making is    1 thanksAndyC555 PM | Wed, 12/12/2012 - 14:23 | Permalink

"The point I was making is that there are plenty of other companies which pay even less tax to the UK tax coffers, so why not have a pop at them as well. "

 

My question remains.  A company outside the UK sells to a UK customer.  Are you saying that you think profits on that sale should be taxed in the UK?  You would also have to accept the reverse.  UK companies exporting would have to pay profits tax in those countries.  Companies with no physical presence in countries would have to find accountants and prepare tax returns.

Tax treaties would need to be completely re-written, the concept of a 'Permannet Establishment' would disappear.

You've said the Government should have Amazon (A Luxemburg based company) "in their sights".  I'd ask again; how?  What are you proposing?  And when other countries do the same, what then?  Remember, any company exporting from the UK to the US will, under what you seem to be suggesting, face paying a higher rate of tax than they do currently.  And be paying it to the US treasury.

If you start 'having a pop' at foreign companies, expect foreign countries to start 'having a pop' at UK companies. "

 

 

 

At the moment, warehouses are exempted from being P/E's under UK domestic and treaty law. A size limit could be put on that exemption so that Amazon's massive warehouses become P/E's, which reflects the reality that they are trading IN the UK, not WITH the UK.

That's how. 

.

Chaztax | | Permalink

.

Really?

AndyC555 | | Permalink

"At the moment, warehouses are exempted from being P/E's under UK domestic and treaty law. A size limit could be put on that exemption so that Amazon's massive warehouses become P/E's, which reflects the reality that they are trading IN the UK, not WITH the UK.

That's how" 

 

Do Amazon EU own the warehouses?  If a UK subsidiary owned them, how would that be a P/E of a company that didn't own them?

 

I'm not an apologist for Amazon just pointing out the practicalities.

 

And, as I've said but no-one seems to have responded to if we demand tax from Amazon, we have to expect other countries to tax our exporters. Are we happy about that?

 

And consider other businesses abroad.  A (say) business in a poor Afican country builds products using local resources, local labour in a local factory funded by local investment and exports to us.  Are you saying you want the profits taxed here in the UK? Because they have sales here?

 

We're taking one-sided extreme examples and demanding re-writing decades of convention without any thought of the consequences.

My answers

Chaztax | | Permalink

Thanks for your response.  It's good to get some debate going on the topic of P/E. My answers are:

  1. I don't understand your point. If a UK resident company owns a UK warehouse, then clearly the warehouse will be subject to UK corporation tax, and the P/E issue won’t arise.
     
  2. And if there is a serious flaw in my suggestion to limit the exemption (from being a P/E), to warehouses below a certain size, then I'll be happy to admit it – but I need someone to explain clearly just what that flaw is.
     
  3. I don’t think we should be unhappy if other countries copy any reasonable changes to legislation that we make.  The principle is that if a business needs to set up a massive warehouse in a country, then the economic reality is that they are trading in the country, NOT with the country. From a practical perspective, I expect there would be a net gain to the UK taxpayer, since I doubt that many UK companies have Amazon – sized non-P/E warehouses in Luxembourg (or indeed anywhere else).
     
  4. No, I’m not saying that. I am not suggesting that the P/E concept be abandoned – just that it be amended to reflect the realities of modern trade.
     
  5. Technology is changing the way companies do business and the tax "landscape" needs to evolve as necessary to reflect this. I quite agree that the consequences should be considered in advance before rushing into precipitate action, and I was hoping that, in the Autumn Statement, George Osborne would announce a review of the whole area of P/E. However his silence on the subject seemed deafening.

It's this....

AndyC555 | | Permalink

 "I don't understand your point. If a UK resident company owns a UK warehouse, then clearly the warehouse will be subject to UK corporation tax, and the P/E issue won’t arise" 

 

The point is this.  What is the issue? You are trying to tax Amazon on the profits Amazon make selling goods in the UK and think that turning a warehouse in to a P/E you would achieve this.

However, it's probable that any warehouses are owned by subsidiaries of Amazon and so would not be a P/E of Amazon EU.

You think that doesn't matter as "the warehouse will be subject to UK CT".  You're missing the point that this doesn't make the profits of what Amazon EU sells taxable in the UK.  If (say) Amazon EU sells an item for £1,000 with £400 profit and pays Amazon UK £10 to deliver it using their UK warehousing/delivery system that will NOT make the £400 profit taxable in the UK.  It will make the profit on the £10 paid to Amazon UK taxable in the UK but that's all.

 

Another way of looking at it would be to suppose that Amazon EU only use the Post Office to deliver all it's goods.  You wouldn't even think about trying to tax the Post Office on the £400 profit Amazon are making from the parcel the Post Office is delivering. Amazon UK would be a seperate legal entity just as the Post Office is.

Turning a warehouse into a P/E woud not achieve what you think. The flaw in your thought is that profits on the goods sold are a seperate issue from profits on the cost of delivery.

 

People try to run an argument along the lines of "Amazon is using the UK's infrastructure to make profits so should pay tax here".  No they aren't. Take my example of the African business.  It's using its local infrastructure to manufacture an item.  That's where the economic cost of the manufacture is based.  If it then uses a carrier company to deliver the goods then, for sure, the carrier company is using our roads, people and so on and, for sure, the carrier company should pay tax on the profits it makes on delivering this goods but its going too far to say you should pay tax on profits in the UK when the entire economic cost of manufacturing those goods is born outside the UK.

For the avoidance of doubt......

BryanS1958 | | Permalink

Chaztax wrote:

"

"The point I was making is    1 thanksAndyC555 PM | Wed, 12/12/2012 - 14:23 | Permalink

"The point I was making is that there are plenty of other companies which pay even less tax to the UK tax coffers, so why not have a pop at them as well. "

My question remains.  A company outside the UK sells to a UK customer.  Are you saying that you think profits on that sale should be taxed in the UK?   "

The claims the Committee are making about tax liability seem to have no basis in tax legislation - I completely agree that they are pretty much without foundation. 

As I say, it is all about what the Government says should morally be paid.  So as it is a moral discussion I'm only saying  that if the Government is targeting a couple of companies that DO employ a fair number of staff and pay PAYE, why not include other companies which make big profits from the UK but DON'T employ many staff and don't pay much PAYE? I gave EBay as an example, but I'm sure there are others.   Why single out Starbucks, etc who pay quite a lot of UK tax, even though they don't pay much corporation tax.  It makes a mockery of the Government's campaign...targeting the wrong taxpayers as usual.

Starbucks do appear to

The Black Knight | | Permalink

Starbucks do appear to have rolled over when an argument could have been presented?

Perhaps Starbucks were the only ones who agreed to play ball for the public accounts committee perhaps there is something else they have on them, or is this just a way of dealing with the fuss. "don't worry guys we will have a show trial with no effect. You show remorse and this will all go away"

What is presented to and understood by the public at large is misinformation.

And a diversion from the FACT that twice as much is missing from EVASION yet nothing is being done here either (apart from words)

Someone must have a vested interest in deliberately sinking UK Plc

 

Smear and innuendo    1 thanks

AndyC555 | | Permalink

http://www.bbc.co.uk/news/uk-20729430 

 

Maybe more detail will be given in the programme but at the moment this is just reporting by smear and innuendo! 

This is where we are heading in the aftermath of the "Starbucks" fiasco. And the quote from rent-a-gob  Nadine Dorries??!! "They're incredibly wealthy men who don't pay British tax. I think it is just utterly appalling." 

 

IT'S BECAUSE THEY DON'T LIVE HERE YOU IDIOT!!!

Revenge for the telegraphs reporting

The Black Knight | | Permalink

Revenge for the telegraphs reporting on MP's expenses?? Starbucks just misdirection?

Just shows the law makers never read them?

Confidentiality and an abuse of parliametary privilege

The Black Knight | | Permalink

How do they know these brothers have not paid uk tax? Surely that is confidential? So presumably given that the statement maker cannot claim the statement is true they are relying on the defence of parliamentary privilege against an act of Slander?

Presumably the ltd companies accounts show why the company does not pay tax in the tax reconciliation unless we are going to be presented with a turnover figure again?

Next week the revival of Witch Hunting and burning cats in baskets?

There is no one to blame for the UK economy but MP's!

Deal with it!

Panorama    1 thanks

AndyC555 | | Permalink

"Next week the revival of Witch Hunting and burning cats in baskets? "

 

Next week's Panorama covers the forthcoming tax trials to be held in Salem.  

 

you have to laugh

The Black Knight | | Permalink

You have to laugh when own medicine is handed out.

http://www.pressgazette.co.uk/mp-nadine-dorries-i%E2%80%99ll-not-talk-lo...

 

Aha, I understand your point

Chaztax | | Permalink

Aha, I understand your point now. OK, based on that, I have to agree that my initial suggestion of taxing a warehouse as a P/E doesn’t appear to be a final solution – although it has served to provoke a discussion.

I am however sticking with the first sentence of my fifth point above, namely that technology is changing the way companies do business and the tax “landscape” needs to evolve as necessary to reflect this. The “decades of case law and convention” argument is in fact no argument for anyone refusing to reappraise existing tax concepts, when the internet didn’t even exist during most of those decades.

I return to Amazon, since they are a good illustration of this principle. Let’s assume for now firstly, that the contracts that UK consumers make when buying goods from Amazon are legally concluded in Luxembourg via some piece of computer hardware based in that country, owned by Amazon SARL, and secondly, that under UK and treaty tax law, this means that the profits are taxable in Luxembourg and not the UK. In my opinion that is an inappropriate result and is a sign that the law needs to be reviewed. The reason I say that it’s inappropriate is that it focuses on the fleeting legal form of the transaction and ignores the economic substance, which is that most of the sale takes place in the UK.

If one steps back from the detail and looks at the big picture, then the economic reality is that Amazon are making sales in the UK, and that UK law should be taxing the profits from those sales.

Perhaps the answer to this is in fact some kind of taxing system based on the location of the customer, combined with a threshold to exclude  businesses with a low level of sales. It requires careful consideration. My point is that we should be considering what the answer is, rather than asserting that there isn’t even a question.

Disagree completely...

AndyC555 | | Permalink

I disagree completely with your main point above.

You can think of tax in many ways. A neutral way of thinking of it is a payment to support the infrastructure that enables you to trade.

Now, you say that the 'economic substance' is that the sales take place in the UK and so the profit should be taxed in the UK.  Please go back to my example of the small African state where local materials, local labour, local factories, local investment, local knowhow, and local management  are all involved in the making of a product.  Where is the 'economic substance' of the manufacture of that product?  Clearly, in my view, it's in the country where it's made. So if there's a proft on the sale of that product, to help pay for the infrastructure that helped create the product where should it be taxed?  Where's the 'economic substance' of the cost of manufacture and which country deserves a share of the profit to help support the infrastructure that helped create it?  Pretty obvious in my opinion, regardless of where that product is sold.

Now, if you say Amazon don't manufacture anything, I'd agree with you, but then the vast majority of products sold by Amazon aren't manufactured here in the UK either.  And if they are, they are not being manufactured by Amazon but by British manufacturers who (presumably) Amazon pay and who then pay profits on that manufacture. 

If it isn't a UK manufacturer involved, what has the "economic cost" to the UK been of the manufacture of that product?  It's precisely nothing.  It has cost the UK nothing at all, in terms of infrastructure costs.  So, on an almost philosophical level, I'd ask why should the UK exchequer be enriched with a share of the profits on a product it has contributed nothing towards making?

Your proposal of taxing profits where the customer is would, I am sure, be popular in Monaco.  Every Ferrari, every Sunseeker, every diamond necklace bought by its inhabitants would be a welcome boost to Monaco's infrastructure.  But is that really how the system should work?

johnjenkins's picture

I think this debate

johnjenkins | | Permalink

actually highlights many of the problems within the concept of taxation.

I see no reason why a company cannot base itself whever it wants and pays tax in that country on its profits. If another country wants a slice of that because it feels it's missing out , then surely the best way is to have a small import or sales tax. Let's face it we are going to end up paying one way or another.

At least that way bone fide companies don't have to put up with media and political frenzies.

Why aren't Supermarkets up to these tricks too ?

ds | | Permalink

If we are to use the principle of where the financial transaction takes place and is registered, ie through the internet to an account in Luxembourg as in Amazon's case, then what is to stop the likes of Tesco, Sainsburys etc arranging matters so that they too can take advantage of this trick to avoid CT?

If their customers pay by an electronic means, not cash, then even the tills in the high street shops could be linked to servers in tax havens and thus offer customers discounts for paying electronically. This of course makes a total mockery of the tax system.

It seems no surprise to me that the corporations making the most of these loop-holes appear to be American in origin. I would suggest some special under the table deals were done by New Labour with these US corps who invested in the UK, created jobs, paid PAYE and VAT but were allowed as a reward to reduce CT to zero right under the noise of economic genius Gordon Brown.

Also worth considering is the almost exclusive use of M$ software in the public sector, offices, schools and colleges at what must run into tens or hundreds of million pounds when free Linux software is easily available and is more than adequate for office and internet applications. There has been a big fraud going on and it should be no surprise the UK is falling rapidly down the pan.

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