Starbucks pledges £20m corporation tax
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@ds
It's not only the UK that's going down the pan.
Gordon Brown just carried on where Messrs. Major and Lawson left us. In the true sense we have not come out of the last recession. You cannot let the world borrow, borrow, borrow then suddenly put a stop to it without fallout. It's the same as anything though, before you stop something - have a replacement that works.
The world is so small now that whatever any country does will have an effect on the rest. So come on you brilliant minds let's have a worldwide tax system that suits all. (oh no you can't, oh yes you can etc.etc.)
If the companies involved were not American in origin I can't imagine that the BBC would have given this much coverage.
Companies that operate within the law should be welcomed in the UK - do we wish British companies operating abroad to be tried by the mob in their host countries?
A company that manages its tax affairs efficiently can return more money to its owners who in turn pay more tax. Ultimately companies pay no tax at all;people do.
At a time of stagnation and unemployment,anti business fervour whipped up by the BBC and hypocritical politicians can serve only to increase the demand for foodbanks.
Panorama
If the companies involved were not American in origin I can't imagine that the BBC would have given this much coverage.
Companies that operate within the law should be welcomed in the UK - do we wish British companies operating abroad to be tried by the mob in their host countries?
A company that manages its tax affairs efficiently can return more money to its owners who in turn pay more tax. Ultimately companies pay no tax at all;people do.
At a time of stagnation and unemployment,anti business fervour whipped up by the BBC and hypocritical politicians can serve only to increase the demand for foodbanks.
The panorama farce last night, seemed to be having a crack at UK companies....a complete program of nonsense.....obviously designed to wind up some lawyers.
Completely missed the point that if you are non resident that has an effect on your UK tax.
Panorama
I agree.
Last night's Panorama programme was a joke. Entitled "The Tax Haven Twins" it spent nearly half its time on a pathetic jaunt to Sark, making allegations not about tax but about the way the Barclay twins are influencing political life on the Island and pandering to the presenter's own paranoia (was he being followed around Sark by a mysterious man on a bicycle??).
And what were these amazing allegations about tax? London properties owned by off-shore companies. Hardly news is it? Then the programme took a swipe at Cameron & Osborne for "not commenting on the issue to the Programme" without mentioning the changes Osborne has actually introduced, with annual charges, CGT and Stamp duty increases.
And the Ritz. We were told that the programme would show how 'tax reliefs' were being used by the Ritz. What did this turn out to be? Trade Union funded tax campaigner Richard Murphy saying that The Ritz would make a profit if it wasn't paying lots of interest. I haven't seen the accounts myself but I bet if you took wages and laundry out of the P&L it might put the hotel back into profit as well. Hardly proof of outrageous avoidance is it? In truth I don't know how the Ritz is owned, whether it's a one-hotel company or whatever.......but if a programme says it's doing an expose shouldn't it be the case that I DO understand the ownership after the programme?
Then the programme launched into a bizarre attack on Littlewoods who are taking HMRC to court over interest on repaid VAT. This is obviously a matter of law. They are either entitled to the interest or not but if they are then it means HMRC are wrong in law. The programme seemed to imply that because The Ritz paid no CT and the Barclays were rich that somehow this meant Littlewoods shouldn't fight its case. Say what? Then they wheel on Nadine Dorries to say it's all appalling that the Barclays don't pay UK tax - Dear God, this woman holds elected office and can't work out that if you're not a resident of the UK you won't pay tax here.
There are problems with the tax system and it could be overhauled but this is a matter for Parliament. And the issue certainly isn't served by a cheap, tawdry, mish-mash of a programme badly put together, meandering and meaningless, full at best of smear and innuendo. Panorama was once the flagship documentary programme of British TV. Last night it put out something the Daily Sport would think twice about publishing.
Richard Murphy
I could have sworn that R Murphy also advised that if your assets are offshore that you don't pay IHT.
Silly me I thought it had something to do with domicile.
Do any of these clowns have the faintest idea?
Makes you wonder how much rubbish I have absorbed from Panorama. Was the program on the secret drone war complete nonsense too?
The Barclay twins should have had some circus clowns pop up in every scene or a stripy french man on a bike with onions. Would have been funnier?
Be interesting to see if parliamentary privilege (as a defence against defamation) applies when you are not in parliament?
Are you serious?
My “main point”, which I repeat for the third time, is that:
"Technology is changing the way companies do business and the tax “landscape” needs to evolve as necessary to reflect this"
Are you seriously saying that you disagree with this statement?
Please clarify.
If the question is where Amazon’s profit margin “should” be taxed, then I’m afraid I fail to understand the logic by which it should be taxed in Luxembourg.
Let’s think back to the pre – internet age and consider the basic scenario where UK individuals are buying products from UK retail companies which have UK “bricks and mortar” shops. These UK companies are within the scope of UK corporation tax.
The internet comes along, providing overseas companies with the opportunity to easily sell in bulk to the same UK individuals. Because these overseas companies do not have UK shops, and have clever tax advisers, they are able to escape UK CT. Because of that, they can lower their prices and undercut the UK companies. Furthermore, because they now have greater financial resources, they can employ more people in their IT and customer service departments, and thereby probably provide a “slicker” customer service to the UK individuals.
Most of the UK customers will therefore migrate towards buying from the overseas companies. Taken to its logical conclusion, this will result in the UK companies being driven out of business, thus depriving the UK taxpayer of the tax revenue that those UK retailers had been paying.
By destroying a large part of the UK tax base, the overseas companies, far from providing a net benefit to the UK, have done the equivalent of paying a massive amount of NEGATIVE UK TAX.
In my view, this scenario shows that the international tax system is outdated and needs to be reviewed. Unfortunately, George Osborne didn’t even mention this particular area in the Autumn statement, never mind announce a review.
I add that I am not advocating protectionism for UK businesses. If the overseas company can out – trade the UK company by virtue of hard work, imaginative customer service, technological innovation, etc, then that is all part of normal business competition. What should not happen is for the overseas company to be getting a head start on the UK company by virtue of some clever tax structuring and some computer hardware put into an arbitrary low tax country.
So what is the logic for applying UK tax to the overseas company and how should they be taxed? I agree that trying to tax them on their use of the UK delivery network does not seem to be an appropriate answer. As far as I can see, the answer has to be that the overseas company should pay for the opportunity of selling to the UK customer. The best manufacturing in the world is no use unless you have a customer to which to sell your product.
If the overseas company succeeds in obtaining the UK customer’s business, and taking it away from a UK company, they should pay an appropriate price for that privilege – namely the same tax rate that the UK company is paying. If the overseas company still succeeds in being the best and cheapest despite this extra cost then, as I said before, I don’t have a problem with that.
I aim to be open to logical arguments and if anyone can give a good reason why, economically, Amazon’s trading profits should be taxed in Luxembourg rather than the UK, then I’ll acknowledge that. However, I have a suspicion that I won’t be doing so any time soon.
I'll have a go...
OK. At your suggestion let's think back to the pre-internet age.
I might get a catalogue fill in an order form and post it to a shop in Luxemberg.
I might pick up the phone and call a shop in Luxemberg and order something from them
I'm struggling to see the difference, beyond the ease of access that the internet provides.
What you seem upset about is the possibility of lost UK trade. You ignore comletely the fact that the internet opens up the world market to UK manufacturers just as it does the world market to UK customers.
So anyone selling to the UK having to pay tax on profits in the UK? Other countries would do the same. What you seem to forget is that the UK has one of the lowest CT rates in the developed world so UK manufacturing would be hard hit as its costs rose (the tax rate on profits on exports to the US would increase from 24% to 39.2%) so UK companies would have less to invest, less to pay wages.
Places with little manufacturing and which mostly imported goods would gain by increasing their profits tax sucking money from the countries that made goods to those that imported them.
Then there is the question of "what is profit?". Different countries measure it in different ways. Our UK exporters now face filing dozens of tax returns under different rules in dozens of countries, with different timetables. Possible for the biggest companies but an insurmountable barrier for small and medium companies. And the idea of a unified world-wide tax code is fanciful to say the least simply because what is best for one country would not be fair or work in another.
You have completely ignored my point about where the economic burden of manufacture belongs and then sign off with a "suspicion" that I have no logical arguments. I think any unbiased reader of our exchange would acknowledge that my arguments regarding taxing profits where the economic burden of manufacture is incurred are logical and fundamental to this issue and that you have not attempted at all to address them.
You want me to clarify my position on your statement:
"Technology is changing the way companies do business and the tax “landscape” needs to evolve as necessary to reflect this"
It's such a broad statement who could do anything other than say "I agree"? But do I think that international profits taxation should be based on where the customer is? Absolutely not, for all the reasons I have expressed and which you have ignored.
You insist on answers to your questions yet provide none to mine so there is no point continuing this discussion unless you do.
So, here's amore specific question than the one you asked me. If the labour, the materials, the investment, the knowhow, and the supporting infrastructure to enable a product to be made are based in Belfast, what economic argument do you have that the profits on that product should be taxed in Monaco simply because that's where the customer is?
I simply don’t have time
I simply don’t have time
…to deal with every one of your specific points in detail.
I will take one as an example. Yes, I am well aware that the UK CT large companies’ rate is 24% (and going down), whilst the US tax rate is much higher. Nevertheless 24%/23%/21% UK CT, (which the UK retailers given in my previous posting will be paying on their taxable trading profits) is still a lot higher than 0% UK CT (which the overseas retailers are potentially paying). More to the point, the specific country rates are an entirely separate issue from the question of where, in principle, profits should be taxed.
Yes. Manufacturing is obviously a key part of the process of selling a product for a profit. So is the end customer. You say that I have ignored your points but equally, you have not addressed my point that a business that has the opportunity to sell to the inhabitants of a country is thereby gaining an economic benefit from that country, for which in principle it should be paying.
I’ve already said that that some kind of threshold is likely to be necessary to prevent an excessive administrative burden for smaller businesses.
If you feel that I haven’t addressed every single one of your points in detail, it’s because there are very many variables and issues involved in a complex subject such as this and a full and detailed debate would take far too long. International corporation tax is, of course, extremely complicated and the design of an appropriate system for the 21st century is a challenge which governments can (and in my view, should) be discussing. Such a challenge is bound to take a very substantial number of man hours and I’ve no intention of attempting to do it here, single-handedly, in the course of a few postings on this website.
This discussion doesn’t seem to be heading towards a conclusion and this may be my last posting on this topic for now. That DOES NOT mean that I accept that there is a good reason why, economically, the trading profits of Amazon (to stick with the real company, rather than some hypothetical example), should be taxed in Luxembourg. I don’t think that there is such a reason.
I will sum up my position in this debate by saying that, as I see it, there are essentially two possible stances: Firstly, that advancing technology has highlighted certain fundamental flaws in the global corporate tax framework and that a review of that framework is required; secondly, that the existing framework is basically fine and that the contrary view is attributable to media frenzy/hypocritical politicians etc.
I take the first stance. Let the readers of this website decide their position for themselves.
@Andy
Good points but it should be up to the companies where they are based and not politicians. There's an old saying "don't buck the markets". You can see the disaster we are in because of "market manipulation". Who says that Amazon are taking sales away from uk companies. Perhaps they have found a niche in the market that wasn't there. Don't forget you can price yourself out of the market.
So all we need is a way of getting money from non uk companies that everyone is happy with. Where is the problem with that.
HMRC failure to apply the rules
Can hear both arguments and I am anti large corporates destroying small UK business and our tax base.
But surely this is a failure by HMRC to apply the transfer pricing rules and the Ramsay principle, by weak negotiation and a blind eye combined.
It is HMRC that is not fit for purpose not the rules?
"Oh, yes I have!"
"you have not addressed my point that a business that has the opportunity to sell to the inhabitants of a country is thereby gaining an economic benefit from that country, for which in principle it should be paying."
As it's the Christmas season, "Oh yes I have" addressed it. I think your point is just plain wrong and I have explained why. The economic 'balance' between the country of the customer and country of the manufacturer is achieved because one has the product and the other has the money. What at that stage is out of balance is the division of the profit between the manufacturer and the country in which the product was manfactured and which has (as explained) paid for the infrastructure necesary for the product to be produced.
If you want to impose import duties or a sales tax, fine; argue for it. But no part of the profit on the manufacture of a product should be taxed based on the location of the customer. It has cost the country of the cutomer not a single penny to produce that product or enable that product to be produced.
But one last question for you. Requires only a yes or no answer, shouldn't take long. You say that a manuffacturer should pay tax on profits in the UK, even though they have no presence here. OK then, the question is: "If an overseas company making profits in the UK paid its employees a bonus, thereby reducing its profits to 'nil' would you be seeking to tax those employees on the bonus?"
And this IS my last post on the subject.
My answer is:
If the employees were resident and working outside the UK full time, then no. However if the employees’ total remuneration were above a reasonable market rate in relation to the work they were doing, I would raise the argument that the excess was not paid for the benefit of the company’s trade, and was therefore not a tax deductible trading expense.
Definitely my last post.
And a Happy Christmas to all.
@AndyC555
Is that your last post because you think that the Mayan calender might mean the end of the world and you are now off to have the biggest party for your clients knowing that it is all tax deductable as there will be no HMRC staff to challenge your figures.
Or are you just [***] off cos you can't get your own way (lol).