Just an idea ...
1) Enable all tracking in your browser
2) Visit Amazon. Research your Christmas shopping
3) Use additional browser tabs to order stuff from eBuyer, WH SMith, etc
Amazon paid just £1.8m in corporation tax in the UK despite racking up a pre-tax profit of £74m on £3.35bn sales in 2011, according to figures the web giant wanted to keep secret. MPs probing the company's minuscule corporation tax bill demanded to see Amazon's profit numbers as well as its sales performance, and published the …
1) Enable all tracking in your browser
2) Visit Amazon. Research your Christmas shopping
3) Use additional browser tabs to order stuff from eBuyer, WH SMith, etc
Although a worthy idea. In practice not many will do it. Price being the big factor to a lot of people. Fear of using another service they do not know is another.
But why use Amazon to research when there are many other sites out there?
Browsing Amazon is somewhat painful, unless you know exactly what you want.
So I usually browse elsewhere, find what I want cheaper from Amazon, and order it from them.
It's a shame they aren't paying much tax but until they stop being significantly cheaper than the competition, it's not worth the expense of going elsewhere for the sake of making a minor protest.
Is it cheaper on Amazon? I'll buy it there then...
EVERYONE would need to do this to make a difference and that simply won't happen so I'm not going to waste my money chasing a pipe dream.
At the end of the day they are doing everything legally and therefore it is up to parliament to sort this.
So Amazon makes Billions, that's business.
So Amazon pays little tax, there is nothing illegal here.
So the Government tries to claim it is unethical to do this, yet MP's have had their fingers in the till for years but claim 'we Woz just following the rules'.
MP's pretend to sort out expenses but then buy houses and then rent them out to each other so that they can claim housing expenses. Effectively one MP pays another MP rent using tax payers money.
Joe Public is in the middle of a recession and looks for bargains because he can't fund his expenses from the tax payer. If Joe Public find a cheap bargain because of Amazon so what.
MP's and Government need to look in the mirror.
Though titled as a report into HMRC's accounts, it is in fact all about Starbucks, Google & Amazon's accounts : http://bit.ly/Yp3VIA Have a read!
(Full link for those who don't like/scan bit.ly: http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/hmrc-accounts-2011-12-report/
that a lot of those profits came from DVD and CD sales which were made via their channel island base, thus depriving HMRC of the VAT from the sales too!
Unlikely, given they closed that tax loophole in April, when the UK tax year begins.
"Amazon paid just £1.8m in corporation tax in the UK despite racking up a pre-tax profit of £74m on £3.35bn sales in 2011"
Ah... good point :D
I know a couple of the well-known tech sales outfits that used the Channel Islands method, have now moved warehousing to the UK, and are still ahead on price.
Dear MPs, If you really don't like this situation, please change the law (in a sensible way!). Otherwise, stop whining and go find something useful to do (like cleaning up flood victims properties).
Good idea! How should they do that then? Pass a law that says don't use any of the hundreds of tax loopholes that exist, pretty please? If it were that easy, d'you not think they'd have done it by now?
How about passing laws to close the tax loopholes, they can do that right?
"Good idea! How should they do that then? Pass a law that says don't use any of the hundreds of tax loopholes that exist, pretty please? If it were that easy, d'you not think they'd have done it by now?"
Well passing legislation would be a whole lot more effective than moralising about people and companies exploiting those loopholes.
Dunno, what are the tax loopholes being used? Can they "be closed"? Eg, Starbucks UK buys its beans from Starbucks Switzerland, at what looks like quite a high price, so that money goes down as outgoings from the UK company, and profit for the swiss company. Coincidentally, tax rates are lower in Switzerland.
How do you close that loophole? You can't buy goods from sister companies in other territories? How would (eg) HP provide laptops to UK staff? Would they buy Dells?
That's one loophole. Hey, lets get the others boxed off before tea, show these cnuts in parliament how easy this stuff really is
"Good idea! How should they do that then? Pass a law that says don't use any of the hundreds of tax loopholes that exist, pretty please?"
That's pretty much the argument around tax simplification.
Remember only the end customer or staff pay corporation tax.
"Remember only the end customer or staff pay corporation tax."
Key phrase in your post is "at what looks like quite a high price". There should be no problem with making inter-group transactions (as you say, it would be odd that HP couldn't supply itself with kit), but any such transactions designed solely to move profit from one tax jurisdiction to another should be restricted to normal "market" rates (assuming the business would normally buy such) or even ignored entirely for taxable profit purposes.
I don't think I suggested it would necessarily be easy, but MPs collectively have the power to change tax law. Right now, all they're doing is bitching and moaning about companies doing what's best for their shareholders, when what they ought to be doing is working out how to close the loopholes (or if that's "too hard", start over with a fresh tax code).
it's referring to a piece by some uber-right wing shill in the reg last week. desperately trying to justify the stance that corporation tax was unfair and should be abolished. he failed, miserably, and he and his friend spent pretty much all day trying hard to fend off the righteous anger of me and my fellow lilly-liverd-pinko-socialist-loony-left-moron (apparently the British communist party is alive and well and all working in IT - who'd have thunk it) commentards.
Remember only the end customer pays raw material costs - so i guess it's good business practice for companies to support and install a violent thuggish genocidal regime, say in Africa somewhere, where there just happens to be a shitload of, say Coltan (no names no pack drill), then go on to make a killing in the consumer electronics business while washing their hands of the millions of killings they are responsible for elsewhere.
Even Ayn Rand would have blushed! but what do i know, I'm not an _economist_
I can take that kind of attitude from a mathematician or a physicist - they have to pass hard exams - but economists? worse than sociologists...
now where did i leave my blood pressure meds?
Steve, you haven't suggested a practical way to close just one of the available tax loopholes (you're seriously suggesting legislation should tell companies how much they can or can't sell goods for? How do you enforce that on a company like Starbucks Switzerland, which doesn't operate in the UK?)
If you can't suggest a way to do it, why do you think MPs can? Take the obvious point please, it's not as easy to do this stuff as people posting on message boards assume.
> "Good idea! How should they do that then? Pass a law that says don't use any of the hundreds of tax loopholes that exist, pretty please? If it were that easy, d'you not think they'd have done it by now?"
Actually they have already tried exactly that. This summer, Michael Meacher MP introduced a bill with simple wording, to do exactly what you were saying so ironically: to "outlaw any financial transaction for which the primary purpose is tax avoidance/evasion rather than any genuine economic purpose."
Plain English, and would give HMRC the power to give giant tax bills to the tax dodgers.
Needless to say, the Tories voted against it. (The super-rich tax dodgers own our governments.) Needless to say, it got almost no coverage in the press. (The super-rich tax dodgers own our media.)
Read about it here: http://bit.ly/Mg5ctu
Put simply if a company takes £1.00 from a customer, after VAT is deducted they've got 80p turnover, this is split amongst their costs, like wages, rent, source materials, distribution and anything left is profit which is then taxed unless the company can find a way to reduce it...
And even if a company in that chain doesn't deal directly with the end customer no new money is introduced. People who object to this like to bring up business loans, but these are just borrowed against future turnover.
But I'm quite happy for somebody to point out where even the pitiful £1.8 million amazon paid in corporation tax came from if not the customers, and then any company that supplies amazon where does the money come from for them.
"It's referring to a piece..."
Actually it wasn't but having now had a glance they both come from the same premise. But I'm not sure I'd agree in your summation of the comments as most of the objections seemed to be insults. I'd also not agree with what you think is good business practice but I'm guess that's just hyperbole to help you reinforce what you think is a weak argument otherwise you'd let it stand on its own merits. And you set that stall out early by dropping the "shill" bomb.
Anyhow I'm sure you'll be eager to list amazons sources of income that have nothing to do with customers anywhere, and in your rush you must have forgot to put them in your post.
And finally I'm not advocating not paying tax but moving it to something like VAT, obviously there are problems with that but we're not starting from a problem free zone. One being the realignment of profits along the supply chain, another is VAT evasion, but that's something the government has cracked / cracking down on.
I'd close it by calling any payment beyond cost price for a good to a company in the same corporate structure a dividend, and any licensing paid to a subsidiary or co subsidiary a dividend.
Well, the customers were paid by their employers, so logically their employers of amazon's customers footed amazon's tax bill, didn't they? Oh hang on, that's bollocks, follow that logic through to it's logical conclusion and the Bank of England foots everyone's corporation tax bill, because they issue the money that people use.
The tax was paid by Amazon. If they hadn't paid it, then amazon's profits would have been higher. The fact they're not shows amazon paid that bill. They weren't going to give it back to their customers if it turned out they didn't need it for corporation tax.
"Hi, turns out we didn't need your 3 quid, d'you want a cheque or postal order?"
Perhaps another reason not many MPs voted for Meacher's Bill is that there's a government sponsored one which we expect to see in the draft Finance Bill on 11 December. You can read more about it here: http://www.hm-treasury.gov.uk/tax_avoidance_gaar.htm
There's a 'lively debate' amongst tax professionals about whether the HMRC GAAR goes too far, or not far enough; the debate on Meacher's bill is rather more polarised (and not really a debate).
I was interested to note in passing that even Austin Mitchell MP hadn't noticed either Meacher's bill or the Treasury proposals when he asked the head of HMRC if they had any plans to legislate on anti avoidance at the PAC hearing on the Monday before Amazon's grilling - you can see it in all it's glory at http://www.parliamentlive.tv/Main/Player.aspx?meetingId=11707 time 16:06:02
HMRC could challenge large corporates to prove a genuine business case for unusual arrangements which smell strongly of transfer pricing.
That's what happens with e.g. cross-border leases when it comes to writing down allowances.
a) not be in pocket of big business
b) have some balls
It's only bollocks if you can't distinguish between paying somebody for their labour and paying a company for a service, and then treating them differently.
"That's pretty much the argument around tax simplification."
If the only tax would be a simple sales tax with no exceptions, special rates or other nonsense these companies would be paying their fair share with no extra government oversight. All tax problems and loopholes are coming from complicated tax law used to steer market manually.
"I'd close it by calling any payment beyond cost price for a good to a company in the same corporate structure a dividend"
I'd bet that the recharge cost for staffing or other part of the process will become quite costly in some parts of the world, or would you want to add more pages to Tolley's to manage the costs of all jobs in all parts of the world?
"..they've got 80p turnover..."
This isn't a tax loophole. It's actually written into the law. The company is doing exactly what the law says it may do. Explicitly says the company may do.
In order to pay corporation tax in a jurisdiction you must have a permanent establishment in that jurisdiction. And the double taxation treaty with Luxembourg (and with all other 100 of our d-t treaties, and the OECD example one) says that warehouses and logistics chains are not a permanent establishment for the purposes of liability for corporation tax.
Tax avoidance is doing what the politicians didn't intend you to do when they passed the law. Given that the law actually, in detail and explicitly, says that warehouses do not lead to corp tax liability then saying "We've only got warehouses to there's no corp tax liability" isn't tax avoidance. This is just what the law damn well is.
Maybe the law shouldn't say this, that's another matter. But it does.
These are the sort of transactions, where income tax is involved, HMRC have always paid special attention to. Is the deal made for a reasonable price? What I wonder is whether the IP fees charged by one Amazon component to another are a fair price. Get the pricing wrong, and is shifts from tax avoidance to tax evasion.
On this, proving the validity of the price, or showing it's a fake deal for tax evasion, are difficult problems.
So there's an existing way to go after Amazon, but it isn't easy.
The mistake is at the base of tax system; taxing people on the amount they work or earn in the first place. Our tax system taxes work and production in order to garnish the wages of the poor serfs physicaly stuck doing productive work in the uk. This 'feature' of our tax system also makes taxation more or less optional for the wealthy (they just need to avoid doing any actual work in the uk). Bonkers is an understatement
@Steve Foster, Charles Cara at ASR, an investment research firm wrote the following which I think explains what MPs are trying to do, and what they can do, quite succinctly:
"As the OECD highlights, at its heart the problem is that corporate tax is levied at the domestic level and that different countries’ tax regimes can have differences. The overlaps where income is taxed twice are often addressed with agreements to eliminate double taxation. But there are also gaps which results in ‘double non-taxation’. As corporates have become more international, opportunities to take advantage, legally, of these gaps have increased.
The globalisation of companies has also allowed them to structure their business in a way that maximises their costs in high tax rate countries and their revenues in low tax rate countries. For instance, Amazon takes advantage of the single European market and records its sales of books in its Luxembourg subsidiary that has an 11% tax rate, while the expenses of its warehouses and delivery service are allocated to the UK subsidiary that has 24/26% tax rate. Here the ownership of Amazon’s operations and assets are artificially (although legally) split. In forging the European single market and removing capital controls, governments have already effectively given up sovereignty over corporate taxation.
The OECD highlights some methods that are used for profit shifting such as patent licenses, royalties and brand rights, which were highlighted by the UK Commons Select Committee. It goes on to include hybrid financial instruments, captive insurance entities and treasury/financing operations, as well as hybrid financial instruments.
As the OECD sums up, “While these corporate tax planning strategies may be technically legal and rely on carefully planned interactions of a variety of tax rules and principles, the overall effect of this type of tax planning is to erode the corporate tax base of many countries in a manner that is not intended by domestic policy.”"
"It's only bollocks if you can't distinguish between paying somebody for their labour and paying a company for a service, and then treating them differently."
Know why I can't distinguish between those two definitions tony? Because they're indistinguishable.
The person provides a service to you.
The company labours to provide their service.
The distinction exists only in your head, to ratify your assertion that corporation tax is paid by end customers. It really isn't. The law says it isn't. My receipts indicate it isn't. My tax returns for the year say it isn't. You say it is, based on a definition of terms you imagined to suit you. Good luck with that.
Your sums are wrong. If the ex-VAT price, as you've stated, is 80p, then the inc VAT price is 96p, not the £1.00 you stated.
If the inc VAT price is £1.00, then ex VAT is 1/1.2 = 83.3p
Somebody is MAKING MONEY and is NOT PAYING THE KING'S MEN!
HOW IS THAT POSSIBLE I DON'T EVEN KNOW!
The problem is the UK has a massive deficit, missing from the fund of money that's used to provide public services like education, health, income support etc etc, and these servics atrophy without necessary cash. Laws were passed requiring companies to pay corporation tax at a procscribed rate. Companies went out of their way to go around those laws and not pay that tax. Services suffer as a consequence.
Here's a poem from the 1700s called "Sorry you're dead Mrs Miggins, we ran out of dialysis machines"
Here's a poem from the 2000s called "Sorry you're dead Ms Miggins but we ran out of dialysis machines because the economy's screwed and we don't know what we're doing so we're blaming everyone else instead. [sent from my iPhone 5 in first class]"
No, there's a deficit because the government can't stop spending. Public sector spending doubled in real terms between 1997 and 2010 but tax didn't rise fast enough. There is an issue with tax avoidance, but the main problem is fiscal incontinence.
It is possible to have two separate problems which can both be independently addressed and solved, without any requirement to ignore one of them.
We're discussing one of those problems, companies dodging corporation tax. Saying another problem exists is interesting, possibly true, but not actually relevant to the discussion.
"We're discussing one of those problems, companies dodging corporation tax."
Yes but since when did "we" give any shade of a damn about companies not paying tax? It's a problem for the government but they've somehow manipulated us into kicking up a fuss about it - threatening to boycott amazon & starbucks etc. It's not the government's ham fisted attempt at running the economy, no it's all those evil corporations legally avoiding paying tax....
Until the economic crash, caused by the financial industry, government expenditure was in step with revenue.
And debt was being paid-off.
"it's all those evil corporations legally avoiding paying tax"
HMRC are continually stamping on schemes that are ONLY designed to minimise tax paid.
But given that their staff have been reduced by a third over the past five years, and with more going, they are rather overstretched.
If the scheme has no commercial value and is only for the purpose of avoiding tax they can refuse to accept it.
"Until the economic crash, caused by the financial industry, government expenditure was in step with revenue.
And debt was being paid-off."
So why were we running a deficit prior to the recession? About the only time we weren't running a deficit (and "paying off debt") was a few years in Labour's first term when they were trying to prove they had the economic nous to run the economy without it all ending in tears.
Not that the financial industry gets a free pass in the ongoing shit storm but splitting up the regulatory authority into three wise monkeys didn't help things but at least it gave the politicians some nice early PR about a "Tripartite Regulatory Authority ensuring the banks don't take unnecessary risks".
Along with the Tories who were promising to match Labour's fiscal incompetence in the hope that the public would be stupid enough to elect them.
Basically we've pay a fortune for 650 idiots to tells us lies whilst they get rich. And fools decide to treat the management of the nation like supporting a football team where everything is either the fault or not the fault of the idiots in power. But thats party politics.
"But given that their staff have been reduced by a third over the past five years, and with more going, they are rather overstretched."
Damn that Gordon Brown man! Who merged IR and C&E to make HMRC. With the express intention, announced at the time, of reducing the head count through efficiency gains.
The plan being to reduce the head count by about the amount that the head count has been reduced.