back to article Firm-Who-Must-Not-Be-Named's tax dodge profit shift? Totally legit

HMRC chief exec Lin Homer admitted yesterday that there was little the tax authority could do to stop big firms like Amazon, Google, Facebook and Starbucks moving their profits abroad to avoid tax. Homer told MPs on the Public Accounts Committee that it was up to multinationals where they were headquartered and where certain …

COMMENTS

This topic is closed for new posts.
  1. fixit_f
    Thumb Up

    Fair play to them

    If I had the option of not paying a load of tax, I'd definitely take it. Sick of having the government PISS MY OWN MONEY INTO MY FACE. It's not like they can even be arsed to empty my bin half of the time and that's one of the few things I'm supposed to actually see from it.

    1. Anonymous Coward
      Anonymous Coward

      Re: Fair play to them

      You do know that every penny they move offshore increases your tax bill don't you?

      Sticking it to the man is one thing, sticking it to the man by shitting in your own shoes is just stupid

      What they are doing may be ok in a legal sense but it is certainly morally wrong

      1. Vendicar Decarian1
        Boffin

        Re: Fair play to them

        When the goal is maximizing profits, morality, ethics, civility, reason, etc. are abandoned, and greed becomes the only driving force.

        "What they are doing may be ok in a legal sense but it is certainly morally wrong" - AC

        Corporations exist to extract as much money from the flock as possible, by providing the worst possible product at the highest possible price.

        Never forget that.

      2. Shagbag
        Mushroom

        You do know that every penny they move offshore increases your tax bill don't you?

        I don't agree with that viewpoint.

        I believe politicians would squander any additional revenues they gained.

        They've been caught with their snouts in the trough over expense claims.

        Any additional funds would be used to buy votes from the electorate and WOULD NOT be passed back to the PAYE taxpayer. Anyone who thinks they would is deluded.

        Full props to the HMRC for pointing out that they are NOT going to be the Government's Whipping Boy.

        MPs can complain all they like but only they make the laws. Their constant calls of 'immorality' is yet another indication of their inherent incapability to acknowledge their own failings. Just like expense claims, politicians will always try to deflect any valid criticim against them by trying to divert public attention from the real issue: their incompetence.

        This sort of thing (tax evasion) has been going on for decades under successive Governments - both Labour and Conservative. To 'cry foul' now is complete hypocrisy.

    2. Piro Silver badge

      Re: Fair play to them

      Yeah, you realise they're ruining it for the rest of us, right?

      1. I ain't Spartacus Gold badge

        Re: Fair play to them

        More importantly, they're ruining it for their own staff, and their own workers. Just like Germany is finding, you may be doing well temporarily, but if all your customers' economies collapse, you'll soon have no customers. The same, on a smaller scale, applies to large companies. Once they're having a large enough effect to suck cash out of economies. If everyone has to pay more tax, they'll feel poorer, and may cut discretionary spending, such as on coffee...

    3. Naughtyhorse

      Re: Fair play to them

      you do know that central govt. is not in the bin emptying business dont you?

      it would appear not

      1. I ain't Spartacus Gold badge
        Happy

        Re: Fair play to them

        Naughtyhorse,

        Well MI5 do have a specialist bin emptying department. It's quite easy to gain access to their services. It just requires associating with certain individuals and/or visiting the correct websites. As an added bonus, not only will your bins probably get emptied every day, you won't be able to fly on Ryanair either. What's not to like...?

    4. Anonymous Coward
      Anonymous Coward

      Re: Fair play to them

      I get what you mean. Except that the companies lowering their tax bills results in high pay and conditions for those at the top, big bonuses and the like.

      While those people lower down doing all the work get hit with huge income tax bills which could be halved if the globalised businesses paid their way.

      Is it right that hard work in the UK generates big profits that are then moved to Ireland and used to fund Ireland's political ambitions?

      1. JohnMurray

        Re: Fair play to them

        No. They're moved to Ireland because Ireland has a lower tax rate on profits.

        The LOSSES however are kept here because they can be used as an offset to whatever tax they do pay.

        As well as charging whatever intellectual property rate they like....it may well be that a company in the coffee biz charges 25p/cup as an intellectual property rate !

        That is up to them.

      2. Anonymous Coward
        Anonymous Coward

        Re: Fair play to them

        anyone who can shaft HMRC is a winner to me - our 'government' confiscates shed loads of money of us all from the moment we wake until the moment we sleep and then they go and fuck up the economy and blame someone else for it (and don't try to tell me that no one in 'government' knew and understood what the bankers were up to).

        A fair tax system is one thing but what we have is not that.

        In the UK, ambition is punishable by tax.

        1. Gio Ciampa
          FAIL

          Re: Fair play to them

          So you're happy to pay more tax - so big business can pay sod all?

          Really???

        2. JohnMurray

          Re: Fair play to them

          Bollocks.

          They're not shafting HMRC or the government, they're shafting us.

          Ambition is not punished by tax, tax is levied on profit. People and companies are entitled to claim a large amount of things against taxation, they take the piss by allocating their profits to offshore artificially-low taxation areas, while allocating any loses to this taxation area. Two bites of the cherry.

          I won't even go onto the banks, who received large amounts of taxpayer money (ours, not stinkbucks) to purchase back government bonds, and then shifted the money abroad to avoid taxes, while still claiming relief on their self-imposed losses while NOT lending it to anyone (which was the whole idea) (and why does a bank need over 300 foreign "branches", many located in low-population islands ?

          If they don't want to pay lax on profits earned here, ok. Then they can fuck-off and let the gap in the excessively-priced non-essential hot drinks market be taken by small shops/companies that cannot afford the price of expensive accountants setting-up false-front companies to avoid tax .

          1. Anonymous Coward
            Anonymous Coward

            Re: Fair play to them

            you fuckin idiot, of course ambition is punishable by tax - if you want to sit on your arse and do nothing except watch the shite on tv then you dont get clobbered; however, if you decide to go for a better job, better house etc etc then you are hammered by the taxman - you making more money sir, that'll cost ya.

    5. The Axe
      Thumb Up

      Re: Fair play to them

      It's not the like the companies aren't paying any tax at all. They are paying business rates and employers NI. In fact corporation tax makes up a small part of the overall tax receipts for the country. Only 9%. The vast majority of the country's tax is made up NI, Income Tax, VAT, Fuel Duty, Council tax and Business rates.

  2. Neil Barnes Silver badge

    So cancel corporation tax

    and double VAT. Or something similar

    Seems logical that the tax should be paid in the country where the product is delivered.

    (Standing by for thumbs down.)

    1. Steve Foster

      Re: So cancel corporation tax

      Or perhaps remove the "vat-free" element of purchases for use within the business. Yes, that should lower profitability of all businesses operating in the UK (thus lowering corp. tax take), but the more regular payment cycle and unavoidability advantages of VAT collection would probably compensate.

      1. hollymcr

        Re: So cancel corporation tax

        Allowing companies to claim back VAT is an important part of how VAT works, it's where "Value Added" comes from.

        Imagine a company buys bits costing £120 (inc VAT), does some work to them and sells for £50 profit. Currently they claim back £20 VAT, making a sell price of £150+VAT = £180, of which the taxman gets £30.

        Your proposal is that they shouldn't claim the £20 back (i.e. the taxman still gets it), so would sell for £170+VAT = £204. The taxman gets £34 on top of the £20 it already got, £54 total. And that's just from one step. If that company was selling to a shop, they'd add their margin plus tax; each step effectively taxing the tax that's already been paid. The companies are no better or worse off, it's only the end consumer who suffers. It means that just to buy something and sell it on at no profit you have to add another 20% tax to the price.

        The whole point of claiming back the VAT then adding VAT to the new sell price is that the increase in the Total VAT is just the VAT on the Added Value, not the VAT on the VAT on the VAT on the.....

        1. Anonymous Coward
          Meh

          Re: So cancel corporation tax@hollymcr

          I think you misunderstand how the idea of stopping VAT being reclaimable could work. I agree it is currently intended to be reclaimable through the B2B value chain, and thus only paid by the final retail user, but it doesn't need to be in certain exceptional circumstances, like tax dodging globo-corps. That doesn't mean that non-reclaimable VAT leads to a rise in prices.

          The companies' asking price is set by what they think the market will take. If Starbucks can't reclaim their VAT because they are a bunch of tax dodging thieves, that doesn't automatically inflate their price (in exactly the same way, have you noticed that their coffee is priced more cheaply at the till because they currently dodge UK taxes? Thought not). If Starbucks were unable to reclaim VAT, they could try and increase their retail price accordingly but customers can then save 20% by going to Costa, or they can choose to pay the extra, and effectively pay Starbucks corporate tax bill on their behalf. The same applies in a B2B context, that Google's prices to business advertisers only change if Google wish to, in reality the market wouldn't accept a 20% hike in rates.

          1. hollymcr

            Re: So cancel corporation tax@hollymcr

            @ledswinger Nothing in your proposal would target the tax "dodgers" specifically so it solves nothing. And I quoted "dodgers" not because I approve of what they do, but because they are doing nothing illegal.

            The current system of competition between nation states means that countries like ours lose out through bring uncompetitive. That's an argument for better rules or for being more competitive. It's also an opportunity for companies to gain a competitive advantage by promoting themselves on how much tax they pay; a sign outside Costa "We pay 20% of UK profits in tax" or similar, although of course I have no evidence that Costa are actually any better than Starbucks. A "fair tax payer" charter that companies could sign up for would help.

            Trying to make a law to specifically target Starbucks gets you nowhere.

            Increasing VAT and reducing corporation tax is the only sensible suggestion I've heard so far but I'm sure there's reasons that won't work too. (How to tax the profits of UK companies that they make though non UK sales for example.)

    2. David Webb

      Re: So cancel corporation tax

      Double VAT? You know that companies claim back VAT they pay themselves, although would you really be happy that an extra 20% is added to your weekly shopping list?

      It's really quite simple what is happening, company A is a large multi-national and buys lots of stuff from all over the world, it'll post it's profits against the stuff it's buying, not just in that country, but from all over the world. So in the UK the company buys nothing at all, nada, zilch, it just sells stuff with parts bought in Canada, shipped to China where it is assembled and then shipped to the UK where it's sold. On the profits chart though it lists all the costs it has incurred in Canada and China which makes it look like there is no profit, so there is nothing for Mr Taxman to tax.

      I wouldn't suggest any company would use this tactic for reporting tax in every country as an over-all tax dodge.... "US profits reported against worldwide outgoings, UK profits reported against worldwide outgoings, China, we don't sell much here so lets say we're making a HUGE loss because we're spending a fortune on making stuff here"

      From memory it's crap like this that the film industry use so when a film makes billions of dollars (i.e. Star Wars) the film company can report the film as a loss so they don't have to pay the stars much money if they have in their contract that they get a % of profits.

      1. Anonymous Coward
        Unhappy

        Re: So cancel corporation tax@ David Webb

        So make VAT reclaimability based on paying an appropriate level of corporation tax, or having a valid excuse for not declaring a profit and paying tax (eg startups, genuinely exceptional losses). It really is that simple. And no offsets or witholding element, so that anybody trying to do tax tourism ends up paying both countries tax.

        At the moment the complete w@nkers at HMRC will hound me to death's door over submitting a f***ing tax return (even when all my income is through PAYE), but when Google tell them "sorry, made no UK profits on our UK revenues of $4bn, we're just operating here as an act of charity", the HMRC tw@ts go, "oh, alright then", and go back to polishing their pension statements.

      2. Fatman

        Re: So cancel corporation tax

        From memory it's crap like this that the film industry use so when a film makes billions of dollars (i.e. Star Wars) the film company can report the film as a loss so they don't have to pay the stars much money if they have in their contract that they get a % of profits.

        I believe that it is called creative accounting.

        Perhaps a new idea may have to be instituted - creative taxing.

    3. James Micallef Silver badge

      Re: So cancel corporation tax

      There's no easy solution here, but from a 'fairness' perspective it has always struck me as odd that corps have all the advantages of 'personhood' and very few of the disadvantages. For example a corp can 'live' forever so it's assets are never subject to inheritance taxes. Corp directors and officers, although in some cases technically liable for illegality of the Corp, are frequently shielded by several layers of non-accountability.

      And, of course, the big one - individuals are taxed on their income while Corps are taxed on their profits. I understand the basic rationale here, since most companies make losses in their first few years, or periodically because every so often they might need to invest heavily in capital goods etc. But I'm sure that a way can be worked out to balance the needs of startup companies with the proper taxation of humungous corporations.

      For example, tax a company on profits for X years, and on its revenue thereafter, with safeguards in place so a company can't just create a new subsidiary every X years and reset the count.

      Loopholes for individuals are hammered shut by executive decision at HMRC without needing new legislation, I don't see why teh same cannot be done to corps

      1. JetSetJim
        Thumb Up

        Re: So cancel corporation tax

        > For example a corp can 'live' forever so it's assets are never subject to inheritance taxes.

        I recently thought it would be amusing to charge an inheritance tax to a company if it changed CEO - which would really sting companies that make a bad choice.

      2. jonathanb Silver badge

        Re: So cancel corporation tax

        Shareholders are subject to inheritance tax on the value of the shares. If the company also paid inheritance tax, then you would have double taxation.

        Individuals who trade on their own account pay tax on profits calculated in much the same way as companies. There are a couple of differences related to motoring expenses and expenses with a dual private/business use but other than that, it is pretty much exactly the same.

    4. Naughtyhorse

      Re: So cancel corporation tax

      never mind doubling it.

      if head office = overseas vat=vat!

      oh and theres a 3 year waiting list for you to det up a uk head office.

      fuckers

    5. tony
      Happy

      Re: So cancel corporation tax

      Make perfect sense, seeing as only people pay corporation tax anyhow.

    6. JohnMurray

      Re: So cancel corporation tax

      You Jest ?

      The VAT is paid by the CUSTOMER not the company.

    7. Anonymous Coward
      Anonymous Coward

      Re: So cancel corporation tax

      So you would like us all to pay 40% VAT? You must be joking or not thinking.

      1. hollymcr

        Re: So cancel corporation tax

        @Ivan 4

        Who do you think actually pays corporation tax? Here's a clue: what do you think would happen to retail prices if corporation tax went up?

        At the moment, your cup of Starbucks includes corporation tax (but not UK corporation tax), and VAT. The argument goes that if you dropped corporation tax to zero and increased VAT to compensate, then the total tax take would be the same, the retail price would be the same, but now all the tax would be paid to the UK (i.e. the country the profit was generated in).

        Personally I'm pretty confident the idea has as many flaws as the current system, although I'm too lazy to work out what they are. But it's a nice idea in principle.

  3. Why Not?
    FAIL

    Yeah there is nothing they can do - unless you are small fry

    http://www.hmrc.gov.uk/avoidance/spotlights8.htm

    HM Revenue & Customs (HMRC) are aware of schemes seeking to exploit sideways loss relief by generating trade losses for individuals. Typically, a large loss is generated, either in partnership or alone, by accounting for the arrangement as a trade and either writing down the value of trading stock or claiming deductions or allowances for purported trading expenditure.

    ----------------------------

    Stop them being able to make a loss and setting it against their profit, I would assume they can ask to see their international costs & royalties and make sure they are uniform worldwide. That would stop them adjusting transfer prices to be higher in the UK.

    1. Stratman

      Re: Yeah there is nothing they can do - unless you are small fry

      Or, as I'm sure I've posted before, the EU can declare that royalties paid to parent companies* are not tax deductible.

      *companies with more than a certain shareholding or whatever. There are thousands of EU officials, I'm (fairly) sure they could come up with a suitable definition.

      1. BristolBachelor Gold badge

        @stratman

        Doesn't help. Take Starbucks as an example. I think that they buy their coffee beans from a company in Switzerland. That company can charge Starbucks UK whatever they want. Now you want to make coffee non tax deductable too? What about printing? cleaning chemicals? cups? There are a million products or services that these companies buy that could all be charged at any rate they want so fhat the profit appears wherever they want.

  4. Mad Mike

    Sales are income to corps, so what about salary.

    So,

    Why can't I have my salary paid into a country of my choice and avoid paying (or pay a lower rate) income tax? If corps are allowed to take their earnings, move it to another country and pay tax there, why can't I take my salary to another country and pay tax there? As always, one rule for corps and one for the little people.

    Jimmy Carr was vilified by the PM no less for using a mechanism that until recently was completely legal to avoid tax in much the same way the corps are. Of course, they'ev now implemented a law that basically says any mechanism created solely with the purpose to avoid tax is illegal, which effectively makes that sort of thing illegal. However, if moving your money to another country to pay tax there and not here is not a mechanism created solely with the purpose to avoid tax, what is it? Seems like the politicians are only worried about dodging tax when it's people and not when it's corps.

    1. Why Not?

      Re: Sales are income to corps, so what about salary.

      its been there for years, prohibition of the use of artificial structures to avoid tax goes back to the middle of last century.

      Now we are finally seeing HMRC & the government start to discuss the issue as are the UN.

      http://www.un.org/esa/ffd/tax/documents/bgrd_tp.htm

      Now the question is can the electorate force them to do something?

    2. jonathanb Silver badge

      Re: Sales are income to corps, so what about salary.

      Companies can't just declare that all their profits are earned in for example Ireland. They have to employ staff in Ireland to earn that bit of profit. You could possibly move to another country, find a job there and pay tax in that country, and that is perfectly legal.

      1. Anonymous Coward
        Anonymous Coward

        Re: Sales are income to corps, so what about salary.

        "Companies can't just declare that all their profits are earned in for example Ireland. They have to employ staff in Ireland to earn that bit of profit. You could possibly move to another country, find a job there and pay tax in that country, and that is perfectly legal."

        Funny thing is that when the company I work for was UK owned it made a healthy profit, but since being bought out by an Irish company and becoming a wholly owned subsidiary of that Irish company it has not made a penny profit! Yet there us still plenty cash for directors' pay rises and share options! Amazing!

        Anonymous because I still want a job.....

  5. Anonymous Coward
    Anonymous Coward

    We need more businesses to see the UK as a 'low tax' option...

    That way we can get a smaller cut of a much bigger pie...

    Rather than a large cut of a tiny pie...

    Right now all we really get from the big multinationals is VAT and Income tax from their workers...

    IF we were to reduce their tax liability as a %, then they would see the UK as a much better option to base operations in and then we'd see a cut of their profits usually moved offshore...

    for those of you who can't grasp that idea... think of it like this...

    Company A has a turnover of £1000000 in the UK, £500,000 is expenses such as materials, wages etc...

    the other £500,000 they 'pay' to their parent company based in another company, and as such is now profit of the offshore company NOT the UK company... WE get zilch....

    IF the tax liability in the UK was lower for them, they would not move that £500,000 profit from the UK abroad, and would pay some tax on it.. great, BUT the same company may make £10,000,000 global profits, so IF they were offered a very low rate here, lower than they pay elsewhere, say at 5%, they would pay the tax to the UK, and our tax receipts go up, not down....

    SO basically a higher tax rate here than abroad causes businesses to offshore profits, loosing the UKGOV money...

    Downvote away for my suggestion of giving them lower tax rates...

    1. Loyal Commenter Silver badge

      It worked in Ireland, right up to the point that we had a financial collapse.

      1. Synonymous Howard

        Surely Ireland's financial woes was mainly due to its over-inflated property development bubble bursting, rather than having megacorps employing locals?

        Also don't a number of British companies act in the same way and funnel profits to wholly-owned subsidiaries based out of a holding address in the channel islands? (that lovely near-shore tax haven)

    2. Anonymous Coward
      Anonymous Coward

      Your logic is infallible, except that if we offer 5% tax rates, somewhere else will offer 2.5% tax rates, and eventually we will get fa.

      Taxes aren't some kind of mean government conspiracy against the poor down trodden multinational - taxes pay for services, and every one and every company uses those services. I reckon our best bet is withdraw all govt services from companies that don't pay tax - so that means no police, no courts, no use of roads, rail, airports, no ambulance response if someone gets ill on their premises, charge them up front for the costs of educating their workforce, and their staff's subsequent care in old age.

      Given that this, like most things in life, is probably all the fault of layers, just removing the right to courts should do it. Put a 'do you pay fair tax?' question at the start of any civil court case. If the answer is no you lose, automatically, no right of appeal. So the purveyor of finest Swiss coffee beans will immediately get sued by the barristas of Totnes, on the grounds of selling coffee in rectangular cups with rounded corners, and lose. Totnes will then have billions of dollars to spend on useful things, like high altitude ballooning and collecting antique enigma machines.

      1. Anonymous Coward
        Anonymous Coward

        lawyers even

        layers = lawyers

    3. James Micallef Silver badge
      Mushroom

      "We need more businesses to see the UK as a 'low tax' option..."

      That will just result in a race to the bottom. As long as there are places that are effectively zero-tax, there is no way that the UK can ever compete. I don't see why a high* tax rate will deter most of these companies anyway. For example, if Starbucks had the option of either paying their proper taxes (and still rake in a good chunk of profit from the UK market), or else not operate in the UK at all, they surely will prefer the former.

      *relatively high compared to corporate tax in other countries. In effect corp tax rates are lower than individual rates, AND they pay tax only on profit not on revenue, so they REALLY should not be allowed any further loopholes.

      1. hollymcr

        race to the bottom

        The race to the bottom argument is exactly why no item in Tesco, Asda, Sainsburys etc costs more than a penny. Oh, hang on...

        Competition promotes efficiency. Remember that we are talking about companies who effectively pay zero UK corporation tax because they can shop around, exactly as you can do when you buy a tin of beans. The companies do generate UK tax in the form of employee income tax and VAT because they have no choice. If we're dead set against competing on corporation tax then finding ways to increase the revenue from less "optional" taxes would make sense. But if we're not careful consumers will lose out.

        1. Anonymous Coward
          Anonymous Coward

          Re: race to the bottom

          No it's because supermarkets are in a price fixing scam. They don't really want to seriously undercut the competition because they know it does end up in a race to the bottom and nobody makes any profit. They already sell key items below cost price to bring people in, they don't want to add too many to that list.

          1. hollymcr

            Re: race to the bottom

            @AC 20:01

            So the argument is that competition results in a race to the bottom, except that because of self interest it doesn't? Isn't that just a long way of saying that competition doesn't result in a race to the bottom after all?

            Companies like Starbucks will move money around for cheaper tax rates, but realistically it isn't going to be worth it when you're trading in a country that has low tax rates, even if not the cheapest rates. On the other hand, it is worth avoiding the highest tax rates. There are plenty of things to compete on and price is only one of them. It's not clear cut but surely the idea that a cut in tax necessarily means less tax collected (or an increase in tax rates necessarily means an increase in tax collected) can be consigned to the dustbin now?

        2. Naughtyhorse

          Re: race to the bottom

          the companies dont pay the tax, their staff do!

          and the question is fuck all to do with efficiency, it's the cost of doing business. you make a profit from doing business in the UK it's only right you pay a bit to support the UK (it's a bit short sighted not to)

          starbucks paying no UK corporate tax has put 1000's of public sector workers out of work and onto benefits, which the rest of us get to pay for, which we dont like much, and living on the dole probably isn't the best thing that ever happened to our out of work nurses.

          but hey! a bunch of third rate iPhone users got all this bling and paid no tax.

          i despair sometimes - it's not like it's rocket science

    4. Naughtyhorse

      great point,

      except of course it's bollocks. if the tax rate was set such that the tax liability of these bastards was 1p more than what they are currently paying then nothing will change. And setting it 1p less would start a dash to the bottom

      it was bollocks when thatch was banging on about it in the 80's and it's still bollocks today.

      most right of centre fuckwits dont lke to pay tax as a matter of principle, the rate is irrelevant. most suits are right of centre fuckwits. the only way to make them pay is to make it impossible for them not to pay. tax em on whats in the tills

      1. James Micallef Silver badge
        Facepalm

        "it was bollocks when thatch was banging on about it in the 80's and it's still bollocks today"

        I think in the 80s the top tax rate was in the 70s or 80s, in that context, yes, bringing tax rates down DID help the economy to improve (after all why should any entrepreneur start a business if 75% of their profits are being taxed away?). So it wasn't bollocks at all in Thatcher's / reagan's time.

        It IS bollocks today because the actual rates are so much lower. The 'Republican party-style' idiocy / mathematical fail is that this can be extrapolated indefinitely, while really there is hardly and benefit to be gained from lowering top rates below around 30%

        1. Naughtyhorse

          trickle down

          you must be kidding,

          ronnie could even spot that as bollocks after 1/2 his brain had turned to cottage cheese.

          trouble with trickledown is, here we sit in the second decade of the 20th century 30 years after the policy was introduced, and it still aint trickled anywheres

  6. Anonymous Coward
    Anonymous Coward

    Nonsense

    Lin Homer's entire testimony is vitiated by her use of the meaningless term "Intellectual Property" (IP). There is copyright; there are patents; and there are trademarks. There is no such thing as IP, and anyone who talks about it in vague generalities is either deeply ignorant or culpably disingenuous.

    1. Rampant Spaniel

      Re: Nonsense

      Perhaps time for import duty on IP then :-) You are entirely correct, it laymans terms it's a crock-o-shyte tax scam thats barely legal but highly immoral.

      1. bobbles31
        Pint

        Re: Nonsense

        You my friend make a very salient point. An import on ip is exactly what is needed. Corps have found a way to put a value on something that is tax free. IP is exactly what this is, for a company to take money out if the system (country) it has to be assigned as an expense of the company. Normally this would be assigned to something that had been imported but as you quite rightly point out all that has been imported is the IP. If import duty was assigned to the value of the IP that was extracted then everything would balance. The company can show as big a loss as it likes because it will have paid some form of tax on all of its expenditure.

      2. A J Stiles
        Thumb Up

        Re: Nonsense

        Now, that's not such a bad idea.

        If they want to treat ideas as property, I say let them treat ideas exactly as property -- and make IP subject to value taxation and forfeiture, just like any other assets.

    2. Daren Nestor

      Re: Nonsense

      No, IP is an overarching term that is in common use to describe non-phyisical assets. Trademark, copyright, patents all feed into this.

      Because the company based in the UK is a separate entity to the company based in the the lower tax jurisdiction, "parent" company is not appropriate based on current laws. The company based in the UK is paying that other company to use their logos, trade dress, colour schemes, coffee beans and whatever else, but they are not the same company.

      The money always ends up somewhere.

      Now, I'm Irish and I think our 12.5% corporate tax rate makes sense, what I don't like is the ease of moving money through Ireland.

    3. a cynic writes...
      Coat

      I fear the tide may be against you

      ...the meaningless term "Intellectual Property" (IP). There is copyright; there are patents; and there are trademarks. There is no such thing as IP...

      Copyright, patents, trademarks and registered designs are the responsibility of the Intellectual Property Office ("...an operating name of the Patent Office").

  7. Ben Norris
    Thumb Down

    So can I do that with my wages and pay no tax?

    No amount of imaginative book keeping can avoid the fact that the money comes from the uk public and should be taxed! HMRC needs to grow some balls with these big companies and if the law doesn't support them, ask for some to be made.

    1. Daren Nestor

      Re: So can I do that with my wages and pay no tax?

      It IS taxed. There's VAT paid on the purchase (and VAT is high) and all employees in the UK pay income tax and whatever social contributions you pay over there.

      1. JohnMurray

        Re: So can I do that with my wages and pay no tax?

        "It IS taxed. There's VAT paid on the purchase (and VAT is high) and all employees in the UK pay income tax and whatever social contributions you pay over there"

        Let's put it right.

        The profit they make, if not artificially lowered by in-house excessive essentials purchases (coffee et-al)

        is not taxed because of ingenious taxation avoidance.

        As such they gain unfair advantage over other businesses that do not have use of such avoidance.

    2. a cynic writes...

      Re: So can I do that with my wages and pay no tax?

      Yes providing you can stay out of the country long enough. It was very popular in the 70s when the top rate of tax was 86%, and with artistic types who suddenly discovered their Irish roots* once they learned that if they lived in Ireland they could earn 40,000 Euro tax free.

      *(said Irish roots usually being their Gran owned a red setter)

      1. Horned-Devil
        FAIL

        Re: So can I do that with my wages and pay no tax?

        To be honest, taxing Euro's in the 70's was probably not the best policy...

  8. Loyal Commenter Silver badge

    I can see why businesses do this

    After all, they are businesses. It is in their interests to make as much profit as possible, and if they have shareholders, it is their duty to teh shareholders.

    However, it surely can't be too hard to pass some legislation that states that if you do business in the uk, intangible international trades with companies wholly or entirely owned by, or owning the company in question do not count when it comes to taxes. i.e. you cannot take your £1bn profit in the uk and pay it to your swiss parent company for intellectual property rights, but you would still be allowed to buy your coffee beans from your Colombian subsidiary. Additional legislation may be required to assure that those coffee beans are bought at a fair rate, rather than £100 a kilo, or something similar.

    If this means that some multinational companies decide that they can't compete in the UK, and close their UK business, then it leaves a gap in the maket for someone who can. boo-hoo.

    1. Why Not?
      Big Brother

      Re: I can see why businesses do this

      yes but if big business pack up what Directorships would be available for ex MP's? (of all parties)

      There is no personal gain for our masters in having thousands of independent coffee shops. Our tax take of course would increase massively. The coffee might also taste nice.

  9. RobE
    WTF?

    So...

    the rich can choose how rich they want to be whilst the poor get absolutely, well and truly *screwed* (by the rich).

    If the poor were children and the rich were roman catholic vicars, the poor would all be crying 'rape' right about now! WTF is wrong with the world to allow this to continue.

    1. Piro Silver badge

      Re: So...

      Well, yes, that's exactly how it works, the rich get richer and the poor stay poor, or get poorer relative to previous years.

      1. Anonymous IV

        Re: So...

        "If living were a thing that money could buy

        Then the rich would live, and the poor would die."

        All My Trials, sung by (say) Joni Mitchell

    2. g e
      Unhappy

      Welcome to Capitalism

      It's legalised piss-taking, essentially.

      I recognise that however much it's needed, change is not going to come as the ones who can effect change are the main beneficiaries of the status quo.

      Hence I do what I can to play the game from the inside using its own rules, instead. Less than ideal but at least gains a little altitude on the greasy pole.

  10. frank ly

    "the one we're not allowed to talk about"

    WTF is this pussyfooting around for? When individuals are investigated for 'wrongdoing', their names are splashed all over the papers and they get doorsteped by reporters. Why are the big corporations cosseted in this way?

    1. Piro Silver badge

      Re: "the one we're not allowed to talk about"

      Because politicians have their tongues up these businesses' collective arseholes.

    2. Anonymous Coward
      Anonymous Coward

      Re: "the one we're not allowed to talk about"

      .. and individuals don't buy advertising space in the papers

  11. Nigel Brown
    Happy

    Well I certainly wouldn't miss Fastbucks if they packed up and left.

    1. g e
      Joke

      Yeah! And just think...

      When a Starbucks closes down it might get replaced by a coffee shop... bonus!

      1. Synonymous Howard

        Re: Yeah! And just think...

        I'd vote for SOHO Coffee to take over ... top baristas! Mine's a double expresso with very dry foam please.

  12. ukgnome

    Why can'y the EU or UK legislate that to do business in the UK you need your head office in the EU or UK.

    This truly pisses me off.

    1. Synonymous Howard

      Have a look at where the registered headquarters for the EU arms of the following companies are located ...

      Apple, Google, Amazon, eBay / PayPal

      HINT: they are all in the EU.

      1. jonathanb Silver badge

        Additional hint, they are all in either Ireland or Luxembourg.

  13. Andrew_b65

    Tax credits

    These tax-dodging multinationals could at least be sent a bill for tax credits paid out by the government to their underpaid workers. Why should the UK government subsidize their wage bills so they can make bigger profits to be hived off into an off-shore tax avoidance operation? Low pay means less tax & NI revenue for HMRC and more tax credits payouts. It increases our budget deficit.

    Corporation tax should be paid to each country in which these companies operate according to the ratio in which revenues are generated. The current regime allows these multinationals to leach money out of economies which are active, spending, and generating revenues, causing a distorted picture of the balance of trade. There is no upside to our economy in allowing the current system to continue. Countries which balance their books by offering tax-dodging facilities should be held to account.

  14. Kevin Johnston

    Options

    There is one thing which could be done which would limit profit shuffling. Any 'license fees' or other such administrative figure transferred to a parent company or similar after the first year are declared to be 100% profit in the first country it lands in and tax must be paid at that point.

    This probably will not stop the game but it should get the Corporate pucker factor fluctuating.

    Next step would be to encourage the tax havens to play yo-yo rates so 'they who must not be named' can't work out from one payday to the next where best to hide the money.

    1. Anonymous Coward
      Anonymous Coward

      Re: Options

      > Any 'license fees' or other such administrative figure transferred to a parent company or similar after the first year are declared to be 100% profit in the first country it lands in and tax must be paid at that point.

      That's what they're doing - it's just that the tax rate in that country is (near) zero

  15. Paul_Murphy

    Ban international companies.

    My idea is to ban international companies - if a successful company wants to operate in another country it sets up a new company in that country and all it's profits and losses are dealt with inside that country.

    So companyA.us is different from companyA.uk - different laws, markets, suppliers etc. are all handled within the country and the idea of a particular 'international' company does not exist.

    Goods sold between companyA.us and companyA.uk would have to be at the same rate as companyA.us sells to companyB.us or companyB.uk.

    Can it really be that difficult?

    1. Julz

      Re: Ban international companies.

      That's how it works now. The point is that the individual legal entities/companies in each country are owned/controlled by the same company/person/legal entity and deal with each other in any way they see fit (well, within the legal regulations of each country).

    2. The Mole
      Thumb Down

      Re: Ban international companies.

      That's exactly what they do - which is what the problem is.

      Starbucks setup a UK company, then on one side of their balance sheet they have all their income. On the other side they have all their costs - which includes licensing the "Starbucks" trademark from their parent company (and other intellectual property) at very high rates (after all it's a very valuable brand I'll have you know). They probably also pay to be included in the Starbucks.com website and all sort of other 'expenses'.

    3. Anonymous Coward
      Meh

      Re: Ban international companies.

      There are already plenty of rules on transfer pricing, as this is called, intended to stop this. But as the tax code becomes ever more complex (around 10,000 pages int he UK now), the easier it has become to find a loophole. F*ckwit politicians make this systematically worse by signing up to complex and ill understood agreements that sometimes work and sometimes don't. So due to international trade agreements we let in bazillions of quids worth of Chinese goods, they buy next to nothing from us, and there's very little manufacturing left in this country - that's a bad outcome. We (around El Reg) weep, rend our clothes and gnash our teeth about offshoring of jobs to India, but actually we have a trade balance with India that is (shock, horror) fairly well balanced - that is a good outcome, even if we don't like some of the detail.

      In this case, our snivel servants and corrupt pols believe they need to kow-tow to European free trade rules that their predecessors signed up to. Obviously nobody signed up believing that these rules would enable Yank corporations to dodge all local taxes, but I shan't hold me breath for anybody in Westminster sorting this out, least of all Spineless Dave.

      1. James Micallef Silver badge

        Re: Ban international companies.

        "plenty of rules on transfer pricing... tax code becomes ever more complex "

        one of the problems is that amendmenst to the tax code increase teh amount of tax laws instead of just stripping out vast swathes of the tax code. More complex tax code has only 2 winners (1) tax lawyers (2) companies who can afford to pay the best tax lawyers.

        Politicians play the game with citizens by dangling exemptions for teh citizens, who then want to hang on to their exemptions, little knowing that the citizen exemptions are tiny fry next to corp exemtions. Just remove ALL exceptions / exemptions, remove the difference between corporate and private rates, and remove the difference between tax on earned income, capital gains, private equity etc. Making the tax rates super-simple and closing the loopholes will probably allow rates to be lowered, individual citizens to pay less tax and total tax take to increase, all in one fell swoop.

        Corporations WILL pay more tax, but citizens will have more money to spend on whetever they're selling, so successful companies will continue to profit. In theory, only the tax lawyers will suffer, is that such a terrible thing?

        1. Anonymous Coward
          Happy

          Re: Ban international companies.@James Micallef

          "Just remove ALL exceptions / exemptions, remove the difference between corporate and private rates, and remove the difference between tax on earned income, capital gains, private equity etc."

          Yes, that'd be an excellent idea as well. Kill employer's NIC, and "climate change levies" and all other taxes on employment, and we're starting to get somewhere. I think non-reclaimable VAT would still be needed to stop tax tourism, but between us there's the making of a strong, easily understood tax system.

    4. jonathanb Silver badge

      Re: Ban international companies.

      That is exactly what happens now. And even if it doesn't, profits from the UK division are taxed here.

      If I set up a coffee shop next door to Starbucks and started selling brown coffee flavoured drink at £3.50 per cup, nobody would buy it from me, even though it was the same price as the £3.50 cup of coffee flavoured drink next door. The reason for that is that I don't have the Starbucks name above my door. At £3.00, £2.50 etc, people would probably still pay extra to have the Starbucks branded variety rather than mine. Maybe at about 50p, people would start buying from me.

      If this Starbucks trade mark allows the UK company to charge £3.00 more than me per cup of coffee flavoured drink, then clearly it something worth paying the owner of that trademark some royalties for. Maybe £2.90 per cup sold would be reasonable? That means that out of the £3.50 selling price, only 60p is available to buy the beans, pay the staff, etc, etc. They may be very special beans sourced by another company in the group that employs lots of staff to sniff out the best possible beans all over the world. You can surely justify paying a premium price for these beans.

      What you describe is already what is done, and yes it really is that difficult.

  16. Vendicar Decarian1
    Boffin

    You elected leaders who were more beholden to Corporations than the people they were elected to represent.

    "WTF is wrong with the world to allow this to continue." - RobE

    Why would you expect any different outcome?

  17. Psyx
    Facepalm

    If it's absolutely legal to evade the taxes, then change the sodding law, rather than say "We can't do anything because it's legal".

    Simples.

    1. Synonymous Howard

      Nope

      It's absolutely illegal to EVADE taxes .. these guys are legally AVOIDing taxes ... something of which we are all capable of doing.

      For HMRC the issue appears to be that the companies have very 'clever' accountants and lawyers and so just find different ways to 'interpret' the laws and regulations ... when one loophole gets closed down, another two open!

      Moral and fair? Well that depends upon your view of Capitalism and The Market 8-(

      1. Anonymous IV

        Re: Nope

        "No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores."

        James Avon Clyde, Lord Clyde, Ayrshire Pullman Motor Services and Ritchie v. IRC (1929) 14 TC 754.

        Surely the same applies to companies, however immoral it might seem?

      2. Psyx

        Re: Nope

        "these guys are legally AVOIDing taxes"

        Semantics of word usage aside: The point stands. Make AVOIDANCE illegal.

        1. James Micallef Silver badge
          Thumb Up

          Re: Nope

          "Make AVOIDANCE illegal."

          or simply close the loopholes instead of complaining about them

        2. Anonymous Coward
          Anonymous Coward

          Re: Nope@Psyx

          "Make AVOIDANCE illegal."

          So you've never filled in a self assessment tax form and put anything in the deductions?

          And you're proposing to make illegal that which is specifically not illegal? Why not just confiscate all private wealth, and have the state decide how it should be spent. Worked a treat in Russia.

          1. Psyx
            Facepalm

            Re: Nope@Psyx

            "So you've never filled in a self assessment tax form and put anything in the deductions?"

            Actually, no.

            "And you're proposing to make illegal that which is specifically not illegal? Why not just confiscate all private wealth, and have the state decide how it should be spent. Worked a treat in Russia."

            tsk: Absurd extension. 1/10, must try harder.

            I'm proposing making all the stupid dodges that allow companies operating in this country to pay sod all in the way of tax illegal. They can either trade here, or sod off as far as I'm concerned.

        3. jonathanb Silver badge

          Re: Nope

          When you make a particular example of tax avoidance illegal, it becomes tax evasion.

          Many people here, me included, put savings money in an ISA to avoid tax on bank interest. That is tax avoidance, and it is perfectly legal.

          1. Psyx

            Re: Nope

            "Many people here, me included, put savings money in an ISA to avoid tax on bank interest. That is tax avoidance, and it is perfectly legal."

            An ISA is a good example, because it's government mandated tax avoidance. It has been very specifically designed as a benign tax-dodge.

            There's a world of difference (ethically) between using a way that the government has given a nod to, and using the holes in-between laws to do it in a less than scrupulous way, to my mind.

        4. Anonymous Coward
          Anonymous Coward

          Re: Nope

          "Semantics of word usage aside: The point stands. Make AVOIDANCE illegal".

          You silly person! Tax avoidance is defined as legal ways of not paying tax. What you are proposing is a contradiction in terms.

          Although if we look back through history to the Tudors and Stuarts, you find that kings once thought exactly like you. In other words, "I don't care what the law says, I am going to help myself to as much tax as I like".

          That is what got Charles I's head cut off. It is one of our fundamental rights in this country that we are ruled by law, not by individuals' whims. Of course the law as it stands is a ghastly mess (perhaps deliberately so), but that is another argument.

  18. Eguro

    Another solution

    One way to try and work around this problem would be to make a brand for products.

    Say a "UK Sticker" (UKS).

    Business would carry on as usual, however corporations with revenue higher than a certain point - say 1,000,000 annually (to be assessed) - would then have the option of opening up their books and being checked by the HMRC. If they are found to not be shipping taxes - although it's legal - to a foreign affiliate (or in other ways dodge tax payment) they'd be allowed to place the UKS on their products or web-site or similar.

    For business with a smaller revenue, who might get shafted cause consumers think they are dodging taxes, there would be a regular sticker that could be used to indicate that the company does not qualify for applying for the UKS.

    Consumers would then be able to make an informed choice as to whether they wish to do business with corps paying taxes in the UK, or whether to simply not care about it.

    Granted there are sure to be kinks to even out, but it's an idea.

    And as for paying for it. Let us assume that consumers actually will care about taxes being dodged, and will want to look for the UKS, this would mean more corps paying taxes, meaning more money for the gov - and hopefully that'll create more income than the cost of implementing the UKS.

    1. g e

      Hmmm, or how about...

      'Made in the UK'

      A tax break based upon the amount of product creation you do in the UK. If, say, a product is 75% created in the UK then allow a tax break or other incentive.

      Helps ensure a certain amount of work stays within the country which at least means jobs and PAYE stay within the country to some extent, too.

      No, I haven't thought about this for longer than five minutes but it would seem to have merit on the surface. (This is where someone points out this already exists and doesn't work)

    2. Synonymous Howard

      Buy British / I'm Backing Britain

      Unfortunately I suspect both the WTO and the European Commission would put a stop to that blatent attempt at backdoor protectionism.

    3. Anonymous Coward
      Anonymous Coward

      Re: Another solution

      Nice in theory, in practice this is what I predict will happen.

      Taking Starbucks as a random example. Instead of Starbucks UK you will get companies setting up thousands of satellite companies (e.g. Starbucks Luton, Starbucks Croydon, Starbucks M1 - Watford Gap Services, Starbucks Gatwick Airport etc.)

      Each company will be below whatever threshold set to prevent discrimination to small, local businesses and so will be exempt. Life goes on, politicians happy as they can show they have done "something", companies happy as they are still not paying much tax, public royally screwed. Jobs a good 'un

      1. Anonymous Coward
        Anonymous Coward

        Re: Another solution

        Dairy Crest does that already. Each milkman is a self-employed contractor. Dodges Employers' NI and a whole heap of other legislation.

        1. Richard 12 Silver badge

          Self-employed Milkmen, eh?

          The weird thing is that this is almost certainly illegal already, as HMRC are allowed to apply the "looks like an employee, smells like an employee, therefore *is* an employee" test.

          It hit a lot of people in my industry - a lot of so-called freelancers suddenly became PAYE.

          1. bobbles31
            Coat

            Re: Self-employed Milkmen, eh?

            I'll take a stab at it,

            Hmrc introduced IR35 which is supposed to apply the test of "on the balance of probabilities is the contractor actually a disguised employee". (The sheep in wolves clothing test)

            They could by the same definition introduce a "on the balance of probabilities is the company just making that foreign payment in order to avoid tax". What I like to call the bunch of robbing bastards test. If they pass the test then the payment be treated as profit and not an expense.

            Mines the one with the PCG membership in the pocket.

          2. Anonymous Coward
            Anonymous Coward

            Re: Self-employed Milkmen, eh?

            'HMRC are allowed to apply the "looks like an employee, smells like an employee, therefore *is* an employee" test'.

            That is already a scandalous evasion of the principle that taxes may only be raised as set down by law. In the days of unchecked, arbitrary royal power the king could say at any time, "I decree that everyone must give me a tenth of all they own". And that was that; unless you wanted your head cut off, you paid.

            Today we have the rule of law, which means that governments must pass laws that state clearly and unambiguously how much tax everyone most pay. To pass a law saying, "the taxman may collect as much tax as he thinks he would like to" is smuggling arbitrary power back in under the guise of law.

            "Looks like an employee, smells like an employee" is vague bullshit. Different people might come to entirely different conclusions; or even the same person on different occasions, or - and here is the rub - when dealing with different taxpayers (some of whom he might like more than others).

            1. Richard 12 Silver badge

              Re: Self-employed Milkmen, eh?

              No, it's not vague bullshit.

              If you work for a single company, cannot replace yourself at will with someone else (and are the entity responsible for finding that replacement if you can't do the work in the end), don't choose your hours, don't use your own tools, and only work under the direct supervision and direction of your "client" etc, then you're clearly not really self-employed, you're an employee who's rights have been taken away by an unscrupulous employer.

              It's usually very obvious where the "client" has decided to do things this way to avoid employers' NI.

              Someone who is truly self employed is contracted to provide a particular service, not a "warm body" for them to direct at will - "other duties as assigned" is an employee contract, not a business-to-business contract.

              - The only real exceptions to the "replace yourself with another" are actors, presenters and designers etc, where part of the contracted service is a particular artiste.

              Put it this way - if your current (or most recent) PAYE employer suddenly declared to you that you're self-employed now, but nothing else about your relationship with the company changed, it'd be pretty bloody obvious that it was simply to evade tax.

              That happened to a metric shitload of building tradesmen until HMRC started cracking down on them.

              There are grey areas of course, and you do have the right to challenge an HMRC decision on this.

        2. JohnMurray

          Re: Another solution

          Almost certainly they are not "real" self-employed.

          Go back to the construction industry and how the revenue clamped-down on bogus self-employment:

          Do they set their own business agenda

          Do they own the assets they use (tools, like transport for deliveries)

          Do they purchase the expendables etc.

          So self employed milk-delivery-persons fail on the first two at least.

      2. Eguro

        Re: Another solution

        I see your points. And yes - thousands of new companies would probably happen.

        Oh well, thinking caps on - the optimist in me still believes the consumers can be raised to action.

        The pessimist just wants to submit already - he's quite lazy.

  19. Gordon861

    Pay Tax Here

    Either companies need to pay tax in the UK on monies earned in the UK.

    Or you tax UK takings at the rate these companies report profits in their home country.

    If Coke or Pepsi are unhappy with this arrangement they can piss off out of the UK and leave all the available profits to their competitors.

    Whilst we are at it, large companies that have a large amount of their workforce having their wages topped up by benefits will have this cost added to the tax bill on their profits. If Sainsburys, Tesco, Asda etc don't like it then they can leave.

  20. Anonymous Coward
    Anonymous Coward

    URL

    Maybe I'll not be allowed to post this URL given that it is an analysis of the current system...suffice to say...we're ruining it for the rest of us...maybe one day we'll waken up :)

    http://www.realityinfo.org

  21. I ain't Spartacus Gold badge

    HMRC may not be able to stop these companies doing it, but they can make it damned expensive and inconvenient, if they can be arsed. OK Starbucks, we think you're committing fraud, as you're making no profits. So why are you still trading? Or are you perhaps evading tax?

    So we'll have a tax inspection. It'll cost you a few million to put all your records in order. We'll send in the tax auditors, and go through the books with a fine tooth-comb. When this happens, the inspectors always pay for themselves, because they find all those small errors, that aren't material, but everyone makes. That's lots of little £500 fines. Then the extra office space and accountants to get the books into order. Then we can challenge your costs in court, and publish that you're doing it, causing reputational damage. Can't stop legal avoidance, but can make it expensive, and inconvenient - and help shift the advantage back towards those who do pay tax. And I bet not all elements of the schemes will stand up in court either. You'd then have sufficient information to help define laws that do stop piss-taking, without harming business.

    1. JohnMurray

      Hmm

      Minor problem: less and less HMRC inspectors year-on-year.

      Staffing levels down by over 30% in the last few years.

      Trained and competent investigators are not easily obtained, unless the revenue chose to go native and use one of the large accountancy companies....who spend all their time telling other companies how to avoid/evade tax....

  22. Crisp

    If there's nothing we can do, then we need to change the law

    We need to put corporations on a PAYE system. Tax them at the point of sale.

    1. Alan Brown Silver badge

      Re: If there's nothing we can do, then we need to change the law

      "We need to put corporations on a PAYE system. Tax them at the point of sale."

      We do. It's called VAT.

      There's very little which can be done to deal with profit shifting overseas, short of reducing company taxes - and if they're too far out of line with personal taxes then you have the added compliance costs of lots more small companies as people setup to avoid tax)

      The real problem is the entire taxation system in the UK is a clusterfuck with extremely high compliance and enforcement costs. Inland revenue are pissing away a significant chunk of what comes in. Simplifying things _should_ reduce complaince costs (equals more money in the govt's hands) whilst at the same time reducing gross tax take (equals more money in private hands). That won't happen because govt jobs are a form of hidden welfare (hiding unemployment) and reducing the headcount also reduces the "importance" of the people above them.

      Cracking down on govt department wastage (management level, not the coalface) would achieve far more than pissing and moaning about how much tax isn't being taken in.

      That said - if the minimum wage isn't enough to eliminate the need for govt to subsidise low paid workers, then the minimum wage needs to go up.

      1. Anonymous Coward
        Anonymous Coward

        Re: If there's nothing we can do, then we need to change the law

        At last, a sensible suggestion.

        "The real problem is the entire taxation system in the UK is a clusterfuck with extremely high compliance and enforcement costs".

        And not accidentally, either. Make the tax laws complicated and inconsistent enough, and the wealthy can afford to hire lawyers and accountants to find enough loopholes that they pay little or no tax. Meanwhile, ordinary people have to shoulder the entire burden. The wealthy, the accountants and the lawyers make out like bandits. And the politicians can shrug their shoulders and say, "Not our fault, mate - we did our best! Look at all the laws we passed trying to make those corporations pay their fair share!"

      2. Crisp

        Re: We do. It's called VAT

        VAT is the tax that the consumer pays. The company then passes that VAT on to the government.

  23. Jim 59

    Cosy

    Says Lin Homer, HMRC chief: "... businesses can choose to some extent where some parts of their business are based and they can choose where some of their profits are based...”

    ... and HMRC could choose investigate, challenge and enforce the rules. But they prefer to deal with the megacorps through cosy relationships, meanwhile keeping the focus on the little people. Just you try diddling HMRC out of £100 and see what happens. Threats, fines, even for filing your tax return late.

    How cosy do those relationships get ? According to Wikipedia, Homer's predecessor Dave Hartnett, "...was named by City University London in July 2010 as the most "wined and dined" civil servant in Britain, having been treated to corporate hospitality 107 times over a period of three years."

  24. fridaynightsmoke
    Facepalm

    More rules = more loopholes, idiots.

    "Them avoiding tax increases my taxes" - no it doesn't. The government taxes as much as it can from everyone and then spends accordingly.

    "Why can't we ban fees for intangible goods?" - so any foreign software or internet company makes 100% profits on their UK revenues then?

    "Why can't we have the government/EU make up lots of new rules.." - yes, because poiliticians are oh-so trustworthy aren't they, and would never engineer exemptions for their donors and big tax hikes for non-donors...

    "Why can't we send $Globocorp packing and have indy outlets instead?" - all the UK customers of $Globocorp would disagree. Every time they use $Globocorp, they make a decision NOT to use $Competitor. There is a reason for that.

    1. Anonymous Coward
      Anonymous Coward

      Re: More rules = more loopholes, idiots.

      "Them avoiding tax increases my taxes" - no it doesn't'

      Yes it does. Governments don't tax highly because they have to. It doesn't make any sense to upset the voters who will kick you out at the next election if you over tax them. They try to keep taxes as low as possible which is why at the moment they are having to borrow lots to make up the shortfall. When companies avoid tax on this scale they have no option but to increase taxes and borrow still more.

      Also despite the private sector thinking they make the wealth, in a lot of cases they don't. An awful lot of companies rely on government contracts to keep going. What should happen is:

      Government collects tax

      Tax get distributed to private companies, contractors, benefits claims, public services etc

      Private companies etc use that money to pay suppliers, employees and make profit

      Employees and profits are taxed and that money goes back into the pot

      Employees spend their wages and get taxed on their purchases and that goes back into the pot

      Government collects tax and it starts again.

      Most new wealth is generated by exports, everything else just goes around in circles

      What happens when companies decide to offshore that money instead of putting it back into the system? A gap appears in that circle that must be filled somehow leading to increased taxes for everybody. But the companies do exactly the same thing again, leading to a bigger shortfall in tax collection next time around. This is good for the books of the company and the shareholders are pleased but is incredibly bad for the economy. Eventually the economy collapses and then it becomes bad for the companies who caused the problem as nobody can afford their products meaning more job losses, even less tax and incredibly difficult to get back to a stable state.

    2. Anonymous Coward
      Anonymous Coward

      Re: More rules = more loopholes, idiots.

      "yes, because poiliticians are oh-so trustworthy aren't they"

      Alot of politicans are involved in these tax avoiding companies in the first place.

    3. Anonymous Coward
      Unhappy

      Re: More rules = more loopholes, idiots.

      "The government taxes as much as it can from everyone and then spends accordingly."

      If only that were true. I'm sorry to break this one to you, but the government spend regardless of how much they get in taxes, and that's why this country's national debt is now somewhere around £1.2 trillion, all of which has to be serviced until it can be inflated away. Half of that is down to two men, Brown and Blair, who should be tortured in a humourous manner and then burnt at the stake for their reckless and traitorous incompetence (noting that Cameron and Osbourne are no better).

      1. Alan Brown Silver badge

        Re: More rules = more loopholes, idiots.

        You can't lay the blame for the deficit at the feet of Brown abd Blair. It might have shot up under them but the circumstances which led to that (unmaintain infrastructure, deferred spending, etc) go back decades.

        At some point the system can't be pushed any further and money has to be spent or everything breaks down. It happened on their watch but the blame accrues to both parties and dates back over a period of at least 60 years.

  25. Graham Dresch
    WTF?

    Why is this so difficult for governments to understand ?

    High taxes lead to tax avoidance strategies. All of which are completely legal .the same way high rates of duty lead to increased smuggling.

    The only viable long term solution is to cut corporation tax to a level which makes it not worth avoiding.

    The big problem this raises for politicians, is that they cannot subsequently raise the tax because they are short of revenue to spend on some vanity project.

    Lower taxes benefit everybody.

    1. Anonymous Coward
      Anonymous Coward

      Re: Why is this so difficult for governments to understand ?

      Yes, because no government services are ever needed by anyone. Cut tax to zero and abolish government. Because I am sure Megacorp will happily pay their cleaners enough to send their kids to private school and pay the bupa subscription. Of course productivity might suffer given the percentage of each day that the average worker will have to spend fighting off the marauding gangs of predatory bandits..

    2. BoldMan

      Re: Why is this so difficult for governments to understand ?

      So we cut our rates of corp tax to say 12.5% to match "Offshore Tax Haven #1" What happens when "OffShore Tax Haven #1" cuts their corp tax to lower? They are a small island in a sunny part of the world and don't have the same horrendously expensive welfare costs that the UK Gov has, so they have room in their budget to cut it further. How low does the UK Gov go before this becomes a race to 0% corp tax?

    3. James Micallef Silver badge

      Re: Why is this so difficult for governments to understand ?

      "High taxes lead to tax avoidance strategies"

      I disagree. If Starbucks has a loophole that allows it to pay zero tax, it will choose to pay zero tax whether the nominal rate is 5%, 15% or 50%. The solution is to close the loophole not to lower the rate

      1. Dazed and Confused

        Re: Why is this so difficult for governments to understand ?

        > I disagree. If Starbucks has a loophole that allows it to pay zero tax, it will choose to pay zero tax whether the nominal rate is 5%, 15% or 50%. The solution is to close the loophole not to lower the rate

        The loop hole is that it is cheaper to pay corperation tax in the US than in the UK. Since as the law stands they can choose where the profit is made they choose to pay US tax rather than UK tax. I'm not sure how anyone will ever come up with a scheme that can exactly tell how much should be due in which countries. OK with the likes of Starbucks then it guess they don't spend a lot on R&D, but take say a drug company who are paying billions to develop drugs in say the UK and then sell some of the drugs in say France. How much of the profit from selling the drugs in France should stay in France? Should they be able to say that AcmePills.com/fr should not contribute any of their selling price to the R&D? and should therefore pay French tax on all the sales price less the raw materials costs & French salaries?

        Where do you draw the line?

        The argument for lowering corporation tax is that if the tax rate is lower in the UK than in the US, then MegaCorp will chose to pay UK tax instead of US tax.

        If you could end up with a higher take home and a higher standard of living if you moved, would you choose to move?

        In an ideal world, sure they and everyone should pay a fair share of tax, but how is this going to work in practice?

  26. Dazed and Confused

    We live in a world where there is choice

    If the went down the road and there were two shops selling the same thing, and one shop charged 25% higher than the other, would you choose to shop in the cheaper or the more expensive shop?

    Companies take the same approach. That is how everyone's laws work.

    If the MPs don't like it they should try and change the law. They might find that other countries also changed their laws in ways that we don't like too. Getting upset with someone from the tax office is dumb, they do write the laws, the MPs do, so if they aren't happy they should yell at themselves.

    1. bobbles31

      Re: We live in a world where there is choice

      Your argument is only slightly flawed, Starbucks themselves are the very antithesis of your argument. They charge a premium for a product that is exactly the same as everyone else's. and yet, people pay the higher Starbucks price, why?

      How high would a tax have to be before Starbucks stopped seeing a profit big enough to warrant having outlets in the UK? This is the point at which Starbucks would leave. Whilst there is a profit, there will be a company there to exploit it.

  27. scrubber
    Flame

    Local shops

    The real problem here is that by avoiding taxes they are able to out-compete the local coffee shops who have no off-shore subsidiary to hold their profits and so must pay tax.

    I don't care, burnt bean water is overpriced and tastes crappy anyway.

  28. Anonymous Coward
    Anonymous Coward

    and go through the books with a fine tooth-comb

    WTF is a tooth-comb.

    and go through the books with a fine-tooth comb

    There, fixed it for you

    1. JimmyPage Silver badge
      Joke

      Re: and go through the books with a fine tooth-comb

      you don't comb *your* teeth ?

    2. EvilGav 1
      FAIL

      Re: and go through the books with a fine tooth-comb

      You haven't fixed anything!!

      It's a fine toothED comb - as in the teeth of the comb are fine.

      1. Anonymous Coward
        Anonymous Coward

        Re: and go through the books with a fine tooth-comb

        Actually, "fine-tooth" is a perfectly good adjectival phrase. Compare "wide-gauge", "heavy-calibre", etc. It's funny that, as average standards of literacy steadily fall, there seem to be more and more pedants insisting that one form or another is wrong. English is a very flexible language. ("Fine-toothed" is also correct, although it sounds a little precious to me).

  29. Anonymous Coward
    Anonymous Coward

    One way round it.

    If the company concerned sells goods to the public ( coffee, burgers, music etc.) then their profits could be taxed by a variation of VAT. ie. 20% from the customer plus a percentage from the company. Simples.

  30. Anonymous Coward
    Anonymous Coward

    Income Tax

    Tax companies on income, not profit. Obviously, quite a low tax level should allow a similar level of revenue.

    If companies are going to consistently take the piss out of the rest of us, then the government should bring the hammer down on them. Hard.

  31. Anonymous Coward
    Anonymous Coward

    Avoidance or Evasion

    > She accused HMRC of being unable to get enough information out of companies to assess whether they were avoiding tax or not.

    So are they being accused of avoiding or evading tax? Avoiding is legal right? Or am I breaking the law with my cash ISA? The blurry line of avoidance and evasion is getting worse. Just how HMRC like it.. unless you are a huge corp of course.

    1. Twizzle

      Re: Avoidance or Evasion

      We now have so-called "aggressive" tax avoidance. This is to distinguish it from the normal (and still legal) avoidance of the past but allows government to whip up public outrage against these companies and (excuse me for being a cynic) take some of the heat of the governments' spending policies.

      Hopefully these corporations will take action themselves and use a "we pay Tax!" slogan to distinguish themselves from the competition - perhaps people will pay a bit more if they know that the company they are buying from is paying its fair share of tax?

    2. JohnMurray

      Re: Avoidance or Evasion

      As said by a chancellor:

      "the difference between avoidance and evasion is the thickness of a prison wall"

  32. ElsieEffsee

    Never bought. ...

    ...anything from one of these fancy coffee shops and i never will. Why anyone wants to pay £3+ for a hot drink is beyond comprehension and as we're meant to be in recession, it makes me wonder where people get the money to waste on such rubbish!

  33. Horned-Devil

    You're all to blame

    So who here works for an international business? Does the benefit of your work exist purely in the UK? Do you administer systems that cross borders or code software with an international sale/multi-country collaboration? If so, then your work is involved in off-shoring tax somewhere along the line (to/from some country). Your company will be 'charging' you out to sister companies in other countries and the intangible assets you develop will be owned by someone.

    This is all perfectly legal - the big fail of the government is the allowance (despite supposed rules to the contrary) of the setting of the internal prices which allow this. I can understand to a certain extent Google - probably quite a degree of 'non-physical' presence outside the UK involved in running that operation but Starbucks? Yes, the brand is powerful and can understand the pricing to a certain extent but to take that much profit out based on just the brand? Surely they are accepting that it is crappy coffee and that store location and taste make NO impact to the bottom line? Can we see an Apple style judgement making Starbucks take out full page adds in the press saying "Our coffee tastes like shit, you only buy it because of the brand - that is why we can justify the transfer price"

  34. Anonymous Coward
    Anonymous Coward

    GREEDY BA*TARDS! Simple as that.

  35. Apdsmith

    The solution's mostly there already

    There's already the facility in this country to ignore company arrangements that are in place solely to reduce the tax bill - what might be an idea is to stop sacking the people in HMRC who police these things. Large corporates are increasingly able to pay whatever they like as HMRC is increasingly unable to go to court and get the more creative avoidance declared evasion. As ever, the law is already there to deal with the situation but the will to enforce it is sadly lacking - you'd almost wonder if the point is to engage in some "isn't this awful" hang-wringing for the voters while ensuring that valuable donors aren't truly threatened.

    1. Anonymous Coward
      Anonymous Coward

      Re: The solution's mostly there already

      "There's already the facility in this country to ignore company arrangements that are in place solely to reduce the tax bill..."

      Well, there shouldn't be. Companies are under a legal obligation to maximize their profits - so that shareholders can get the expected return on their investment. (And before you get stuck into the dirty rotten lazy champagne-guzzling cigar-puffing shareholders, remember that a large percentage of shares are held by pension funds).

      In order to maximize profits companies try to increase revenue and cut costs ("A penny saved is a penny earned"). Are you going to tell them that they mustn't try to reduce their tax bill? That just means they have to cut other costs more - employee pay and benefits, for example.

  36. Indy
    Holmes

    Just let the paying public decide

    Why not simply inform the consumer about those companies who do very well while retailing their wares in the UK, but then pay next to no corporation tax for the profits generated by our consumption.

    If people really feel hard done by, they can simply walk past the multinational and make their purchase from the small local vendor, who at least contributes to the well being of our country.

  37. A J Stiles
    Unhappy

    The law needs to change

    Whenever something is wrong, but not illegal; or illegal, but not wrong, then the law needs to change.

    But somehow, I don't think either Labour or the Tories are going to change a law that benefits their members and donors.

    1. Anonymous Coward
      Anonymous Coward

      Re: The law needs to change

      "Whenever something is wrong, but not illegal; or illegal, but not wrong, then the law needs to change".

      And that will work perfectly, because everyone agrees on what is right and what is wrong. Besides, won't this become an earthly paradise when lying, unkind remarks, and selfishness are actually illegal?

      There is a reason why the concept of law is separate from the concept of morality (and both are separate from the concept of justice).

  38. Anonymous Coward
    Anonymous Coward

    can I venture a name of this unnamed company here?

    or is it a state secret and I'll be banned from the internets and immediately deported to country where they pay peanuts to have their shiny toys assembled? Not THIS unnamed company? Oops, sorry, in which case it must be...

  39. ratfox
    Joke

    Disgusting

    I shall immediately stop paying for Google!

  40. Anonymous Coward
    Anonymous Coward

    Well it's our own fault...

    ...we bitch and moan about the EU laws and how they are dictating how our banana's have to be (hint search about the facts on this) and when it come to Tax harmonisation, we all bleat that it's taking power away from us.

    So what's it to be? A level tax field across the EU, or companies taking the piss?

    And best make it the EEC not the EU

  41. Sean Timarco Baggaley

    What about a flat business rate option?

    You want to do business in the UK? You pay X% of your revenues. That's revenues, not profits. If you have a fixed percentage to pay, it becomes an easily budgeted 'cost of doing business', so you just include it to your business plan's budget section and allow for it accordingly. Only if you can prove you made a loss do you get to avoid paying it. Throw in an initial 3-year 'holiday' for new (small) businesses to give them time to get up to speed. If said business hasn't yet made it into the black by then, they probably never will.

    Existing multinational corporations do not get such a 'holiday' as they should have the damned money in their corporate capital expenses account already.

    Of that percentage fee, 50% goes to the local (or regional) council, the rest goes to the Treasury. That gives local councils some leeway if they want to offer reduced rate incentives to attract certain types of business to their region.

    *

    An alternative is to require that any business operating in the UK must be entirely independent of the rest of the business, which is limited solely to "holding company" status. Profits can only be paid up to the latter after UK taxes have been paid. The UK operation effectively acts like a national 'franchisee' of the multinational 'franchise', so even the IP stuff changes into predictable flat-rate annual fees (or per-sale royalties) that must be within bounds approved by HMRC.

    *

    Or there's a variation on the 'Transaction Tax' approach currently bumbling through the EU: simply charge a transaction fee for any payments made to locations with different tax rates, with the amount based on the difference between said rates. The likes of Bermuda and the Canary Islands may well piss and moan, but they only have themselves to blame.

    There are always options to solve problems like these. You just need to be more creative than the accountants.

  42. Anonymous Coward
    Anonymous Coward

    Vote UKIP and solve this problem

    This is an EU law issue. If you do business in the EU you only have to have one HQ and that is where the profits are taxed.

    There is sweet F all that HMRC or Parliament can do on this (well apart from lowering corp tax and increasing ground rents - can't move the stores generating the revenue to Luxembourg)

    So next election get out and get behind your UKIP candidate or maybe just maybe learn that companies don't f'ing well pay tax - it's you as a customer, you as an employee and/or you as a shareholder that carry the burden of tax. When it comes to some of these simple economic principles you lot are like a bunch of US evangelical Christians that don't get evolution - fucking muppets

  43. mark l 2 Silver badge

    A lot of what people are suggesting to stop multinationals moving profits abroad will also hit 'home grown' UK business and could quite probably put a lot of smaller companies go out of business. Some of the suggesting have been to:

    *abolishing the ability to claim back VAT on purchases for the business - this will probably close down a lot of business that rely on low profit per transaction but high number of sales

    *taxing companies on income not profit - So your saying if i run a company that had a turnover of £1000000 but due to purchasing, R&D, marketing, wages, business rates, etc only made £10000 profit i should still pay say 25% corp tax on the entire turnover so have a tax bill of £2500000 to pay.

    *Make the corps have a major audit - HMRC are already stretched without having to audit this big corps that will have large accounting teams a high paid lawyers to make sure everything they do is all within the law.

    Unfortunately there are no easy answers, you can't force Ireland or other countries to increase their corp tax and as it stands these corps are within the law of what they are doing, and any sledge hammer aproach to it may result in UK business going under or increased prices on goods and services for everyone.

  44. Richard Neill

    Re-balance from corp. tax to VAT

    Why not simply change the mechanism. Increase VAT, decrease Corporation tax. VAT is paid in the UK no matter what. And if the sliding re-balance is done rightly, it won't affect consumer prices. It would remove the competitive advantage currently granted to companies that don't "play fair".

    1. Anonymous Coward
      Anonymous Coward

      Re: Re-balance from corp. tax to VAT

      "Why not simply change the mechanism. Increase VAT, decrease Corporation tax".

      Because only consumers (individual taxpayers) pay VAT? Companies, on the whole, reclaim as much as they pay - VAT is specifically designed not to be a tax on business.

      The result would be that consumers buy less, and companies shift their operations to other countries where the markets are more promising.

  45. This post has been deleted by its author

    1. jonathanb Silver badge

      Re: Do you remember the good old days...

      Because a lot of the tax havens are already British colonies, eg Cayman Islands, Bermuda, Jersey, Gibraltar, Isle of Man, British Virgin Islands.

This topic is closed for new posts.

Other stories you might like