back to article Vodafone didn't have a £6bn tax bill. Sort yourselves out, Lefties

I find myself watching current politics completely open-mouthed in amazement. The number of what are, if we are to be unkind about it, simply outright lies that have become common truths astonishes me. I refer, of course, to the latest revelations of the tax affairs of the nation. The latest round is those revelations from …

Anonymous Coward

And in other news...

You've just discovered that politicians lie or obfuscate the truth to make their point and the sheep believe them...

Oh yes, and the Beeb just report whatever's claimed by either side without bothering to check their facts. And as far as the sheep are concerned, if it's on the Beeb (or the Daily Fail for that matter) it MUST be true!!

21
5
Silver badge
Holmes

Re: AC Re: And in other news...

".....and the Beeb just report whatever's claimed by either side without bothering to check their facts...." Actually, it is worse than that - the media do check their facts but concentrate on reporting the story, something very distinct from the whole and complete truth. If you look closely, they all cover themselves legally with clever phrases such as "it is reported", "we have been informed" (note, not even "reliably informed"), etc., which allow them the legal cover of repeating rumours and hearsay without the threat of being sued for libel or slander. The problem is the sheep/readers/viewers skip right past the clever phrases that make the report an inference and accept it as gospel.

You can't really fault the media for this self-serving, they are in the business of selling the story, not providing the truth (though they will happily justify their own transgressions that way). And whilst the BBC is a tax-funded system (yes, the TV licence is a tax), it is in competition with all the other media services. Whilst I personally believe the BBC is one of the least bad on this point, internal politics and belief do lead to quite alarming occasions of bias even there (such as on climate change - http://www.theregister.co.uk/Print/2012/11/13/climate28_named_wtf/).

14
0

Re: And in other news...

Tim,

lately you are the one reason I keep reading El Reg - I can't say I ilke it's tabloid bollocks story feel over the last year or so, but articles like this (and Lewis's even though I think he's talking bollocks) are the reasons I keep reading daily.

Sometimes my work has me in places where I can't have a..let us say 'peer level' conversation face to face with my colleagues - and only meet my 'real mates' every couple of weeks.... And that's irrespective of whether right wing, left wing, veggie or meat eater.. it's just nice to be involved in a reasoned argument.

Maybe this is should be the new ElReg's raison d'être - expand beyond tech - and become 'the voice of reason' - and I mean that in the true meaning of the phrase - comments by authors, ground in facts, presenting evidence and leaving the interpretation in a greater or lesser extend, to the reader,

+1

16
1
Silver badge

Good article.

Thanks Tim. A very entertaining and informative read.

Just a point of opinion though - the Daily mail is not in the business of "news". It's in the business of selling comics to grown adults that really should know better.

48
5

Re: Good article.

No. Bad article. It attempts to over-complicate the simple popular demand that corporate profits should be taxed somewhere. Tim buries himself in the legalise of what proportion of the profits were or were not made in Luxembourg, when we can all be pretty confident that no real value was ever added in Luxembourg whatsoever!

His argument is legally complex but more importantly morally bankrupt.

I do agree, however, that the Daily Mail may not be to heavily into the "business of news"...

8
9
Silver badge
FAIL

Re: Nonymous Crowd Nerd Re: Good article.

"....Bad article. It attempts to over-complicate the simple popular demand that corporate profits should be taxed somewhere......" Er, no. Go back and read and try and retain the first paragraph - the opening is that TW is amazed at the level of deliberately deceitful untruths spread around by people with issues about "moral bankruptcy" who actually have more left-wing agendas. Probably people like you. The rest of the article is his proof that shows evidence of the argument. Your post is simply more of such evidence.

6
1

Interesting. Any links to reputable sources?

10
5
Anonymous Coward

https://www.google.com/

10
10
Anonymous Coward

re: https://www.google.com/

Any links to reputable sources?

4
4

What a load of rubbish...

Starbucks supposdley has made a loss in this country for the last 12+ years. Why becuase it pays licensing fees to a group company in Luxembough. Yes this is no Tax dodging, its "Tax Efficient", you remember that the next time you tax a loved one to A&E.

The Vodaphone case was he most blantant piece of curruption in years! If it was all above board , why did harnett dicuss such a large tax case at lunch without any legal representation? Are you having a laugh?

30
34
Anonymous Coward

Re: What a load of rubbish...

Err... did you actually read the article or are you just applying political bias?

35
10

Re: What a load of rubbish...

"...you remember that the next time you tax a loved one to A&E."

What rate is that tax paid at? I.e. will a broken leg cost me a granny or next door's pet spaniel?

19
0

Re: What a load of rubbish...

Starbucks and Luxembourg. That's a royalty payment, yes. For they are using the Starbucks name. And that has a value. So, under the transfer pricing rules, there should be a payment for the use of the name.

Starbucks does, in some countries, have franchises. And HMRC (as did the EU more recently) had a look at this. And the rate that Starbucks charges Starbucks UK is the same as it charges franchises, ie unrelated companies.

It's fine.

14
11
Anonymous Coward

Re: What a load of rubbish...

I have a small company. So I can set up a company in low tax jurisdiction (1000 bucks or so per year), and then have my company logo and 'business system' owned by them. And at the end of the year, I can pay them 30 grand or whatever for my company here using the intellectual property such as the logo and 'business system' of my company over there.

Imagine your small sandwich shop, web developer or other such business doing this.

It's fine. I am sure the revenue will have no problem with this at all. I might even get to have dinner with the head of HMRC to discuss such payments too.

What is all the fuss about?

23
2

Re: What a load of rubbish...

Sure you can do that. It's just that you can't get the money out of the company and into your hands without paying tax. Because you've got to either:

a) bring the money back from offshore to your UK company, at which point you pay UK tax

or

b) Pay it to yourself but you live in the UK so you pay UK tax.

So you're in exactly the same position as all these other companies. Tehy only delay tax until they try to take the cash back into America to give it to hte shareholders. At which point they pay the full whack.....sa e-Bay did about 6 months ago.

25
3

Re: What a load of rubbish...

Let us know how it works out for you, eh?

I'm sure Mr Worsted has every confidence that HMRC will apply the same rules fairly and without bias or prejudice.

The fact that there are various revolving doors between the big accountancy firms who manage this kind of thing for the BigCorps, and the Treasury, and HMRC, is entirely coincidental, and in no way relevant to - hey, derp, look at this shiiiiiiny penny!

As is the fact that HMRC's senior team have been caught lying and red-handed by the HSBC story.

Although I'm sure we all expect that to be a one-off - of course.

12
3
Silver badge

Re: What a load of rubbish...

But Tim, you dont pay it to yourself or bring it back into the country or anywhere near the UK tax regime.

Want a holiday - sorted all on tax free money. Want holiday home/boat etc - sorted all tax free. All you have to do is stay alive in the UK and you can live the life of Riley abroad - and bring a wedge of cash home with you too.

10
2
Silver badge

Re: What a load of rubbish...

If you can justify your claim that an independent 3rd party would pay £30k per year for your logo, then yes you could do that. In reality, they might pay at most £300 as a one off fee for logo design. Starbucks has to pay lots of money in advertising and sponsorship to make their logo as valuable as it is.

6
7
Silver badge

Re: What a load of rubbish...

That only works if you are non-domiciled or non-resident, otherwise if you take the money out of the company anywhere in the world, you have to pay UK tax on it. If you are non-resident in the UK, you are probably resident somewhere else and will have to pay tax there.

7
0

Re: What a load of rubbish...

Well, you can try that. But HMRC would like to have tax on your worldwide income if you reside in the UK (unless you're a non-dom). So, assuming they find out about it, they will charge you tax on that life of Riley abroad. And jail you if you don't pay it.

Of course, you could move abroad and then enjoy it. But then you won't be resident in the UK and won't be subject to the UK tax system anyway.

5
0
Silver badge

Re: unless you're a non-dom

non-dom is just bullshit and you know it! I have an affection for the place my Dad grew up? Yeah, that's significant, don't pay any tax.

6
3
R69

Well said

Its the law which is the problem....not those who choose to abide by it. There is no law for morality.

19
0
Anonymous Coward

Re: Well said

...and why are these terrible tax laws made? In order to allow these same rich people to "choose to abide by them", people who just happen to pay sizeable donations to the parties who make such laws.

Do wake up.

12
4
Stop

Re: Well said

Downvote for this: "Do wake up."

2
1
WTF?

"Branch" line

I find it surprising that none of Microsoft, Google, Facebook, Amazon or Apple have a branch in the UK. They have 1000s of employees between them, hundreds of offices and storefronts yet have no branch in the UK? I can't imagine it's because they cannot afford a "branch". Perhaps that is the solution - to mandate businesses with operations over a certain size in a country maintain a "branch" in that country.

10
9
Silver badge

Re: "Branch" line

Why? So you can claim legitimacy at robbing them?

8
7
Silver badge

Re: "Branch" line

There is an idea to that. The rule that companies are only taxed in their resident countries were written to help small companies and save them the hassle from declaring taxes to half a dozen country.

In the case of large multinational corporations, which do control a company in UK anyway, you might argue that such a helping hand is not necessary: They are already declaring taxes, just for a different activity.

Changing the current laws to insist that companies should pay tax in the country where they earn the money as long as they control a company there does not seem complex (though it might be hard to actually get politicians to do it).

One must only beware of the law of unintended consequences. Microsoft might decide that closing their UK offices could be more beneficial if it allows them to save enough tax.

About the "robbing" comment: Between the country which nurtures success and generates wealth, and the country which generates nothing but sets its corporate tax lower, I find it hard to think that the latter merits more money than the former.

15
0
Silver badge

Re: "Branch" line

@ ratfox

"The rule that companies are only taxed in their resident countries were written to help small companies and save them the hassle from declaring taxes to half a dozen country."

And through justification of original purpose we can happily accept the removal of tax. Because it was designed as a way for the king to fund his lifestyle/wars by taking only from the rich. So going back to original purpose we can remove the tax burden on most people and level a small tax on 'the rich'? And the return of the realisation that people are taxed not companies. The money is earned and taken from the people who pay tax.

"One must only beware of the law of unintended consequences. Microsoft might decide that closing their UK offices could be more beneficial if it allows them to save enough tax."

This is why tax is a stick not a carrot. You can reduce in the hopes of encouraging people to do more economic activities (spend more, employ more, pay more, etc) but by increasing tax you cause harm by reducing employment, spending, salary.

"About the "robbing" comment: Between the country which nurtures success and generates wealth, and the country which generates nothing but sets its corporate tax lower, I find it hard to think that the latter merits more money than the former."

Conflating the idea of stealing with nurture is both twisted but unfortunately popular (as it was with the various socialist paradises). To nurture success is to allow progress and not hinder (see above explanation). To generate wealth is to free the population (the people) to work, to earn, to spend freely (again the opposite to taking their money from them).

As for a country that generates nothing it will struggle regardless of the tax level, although it would be very difficult (if not impossible) to get out of the situation with high tax levels.

4
11
Silver badge
Boffin

Re: "Branch" line

And through justification of original purpose we can happily accept the removal of tax. Because it was designed as a way for the king to fund his lifestyle/wars by taking only from the rich

Taxes are now used to pay for necessities which make it possible to have a successful society: Roads, infrastructure, a functional justice system. The aim of the tax system is to fund all of these while hindering economic activity as least as possible. Declaring taxes in multiple countries is a bad idea for small businesses, because it would cost them a lot in accountants and return a pittance. Doing so for large companies would cost them a rounding error in accountants and have much higher returns.

Conflating the idea of stealing with nurture is both twisted but unfortunately popular (as it was with the various socialist paradises). To nurture success is to allow progress and not hinder (see above explanation). To generate wealth is to free the population (the people) to work, to earn, to spend freely (again the opposite to taking their money from them).

You need to invest to get returns. You need to pay salaries to have people work for you. You need to pay taxes to have a functioning country. You might claim that not investing, not paying salaries, and not paying taxes is the right thing to do in order to have more money, by simply spending less.

And that would be wrong.

As for a country that generates nothing it will struggle regardless of the tax level, although it would be very difficult (if not impossible) to get out of the situation with high tax levels.

What is exactly produced by Luxembourg and the Cayman Islands, do you think? Do you believe these places to be struggling?

8
2

Re: "Branch" line

Standard part of common law is that you "don't pierce the corporate veil". Google UK and Google Eire can both be owned by Google Inc and UK is doing engineering and Eire is selling and you think, hah! but they're the same company really! But the law says they ain't. You can't look through that corporate front to decide otherwise.

13
2
Silver badge

Re: "Branch" line

"Taxes are now used to pay for necessities which make it possible to have a successful society: Roads, infrastructure, a functional justice system."

Duck houses, moats, bloating public sector, porn for MP's lonely husbands, etc.

"Doing so for large companies would cost them a rounding error in accountants and have much higher returns."

That is an interesting justification. What returns are so high as to be 'a rounding error'? Is it the wage of their cleaner crew? Checkout person? Who should be out of a job to pay this tax? Who decides the subjective amount that is too much? I bet I could justify that you earn too much so remove some of your money. Doesnt make it right, still stealing even if you justify it as 'they can afford it'.

"You need to invest to get returns."

Well said. And to invest you need money. To have money you need to earn enough to pay your bills. One such bill is tax. Tax which gets spend least productively in an economy compared to private individuals/companies who can increase employment (something the gov cannot do).

"You need to pay taxes to have a functioning country."

Yes. So define functioning? Boobjobs on the NHS? How about bailing out failing private industry (I will muse that the porn industry apparently asked for support in the US)? Bloated public sector can be justified by improving employment figures, until you see the crippling damage it causes. Add the general fact that lower tax allows more growth (by not restricting it) and so stops the country looking like Greece. Not a functioning country but love their public services.

"You might claim that not investing, not paying salaries, and not paying taxes is the right thing to do in order to have more money, by simply spending less."

You misunderstand our positions. Apart from the taxes bit you are claiming those are the right things to do. I argue that more investment leads to higher salaries leading to more tax take to have more money and allow more spending. But how can someone invest in themselves and the world around them when their earnings are confiscated?

"What is exactly produced by Luxembourg and the Cayman Islands, do you think? Do you believe these places to be struggling?"

Investment opportunity. They are not struggling because they are worth putting your money into. They are attractive protection from thieves. Ask yourself why do people want to send their money there? And if the money is going their it is leaving somewhere (I hope you agree). Yet having money flowing in to the country increases the countries wealth/growth/employment/taxable revenue. So why do we try to push all those positives away and try to punish people for making money? Why do we attack people who generate wealth and why do we hate investment?

4
10

Re: "Branch" line

@Codejunky: If a company is not obliged to have a "branch" in any one country that it operates, could it not refuse to have a branch in any country and thus reasonably claim to be exempt from tax? I suppose all it takes is one country to declare itself corporation tax free, and all companies would move there. Such a country could support itself with, say, advertising instead of tax revenue. We would all be happy to accept that Microsoft et al were no longer well-known Luxembourgian or Irish companies but were say Bhutanese

@Tim: Common law is by it's definition mutable. What you have stated is thus convention - it can change with legislation or sufficient case law. Incidentally, what is the original purpose of the corporate veil? Is it still genuinely relevant or is it a convenient hold-over from an earlier time?

2
0
Silver badge

Re: "Branch" line

@ Madeye

"If a company is not obliged to have a "branch" in any one country that it operates, could it not refuse to have a branch in any country and thus reasonably claim to be exempt from tax? I suppose all it takes is one country to declare itself corporation tax free, and all companies would move there. Such a country could support itself with, say, advertising instead of tax revenue. We would all be happy to accept that Microsoft et al were no longer well-known Luxembourgian or Irish companies but were say Bhutanese"

And is that wrong? If a country has no corporation tax would they replace that with something else? If so how attractive is that to the corporations? The corporation wants to get the most from its money (as all private people do). Governments want to take as much as they can get away with. Tax grows but rarely reduces as people and departments become reliant on other peoples money and demand more. When their is less tax take the people and departments dont want their goodies to reduce, however when their is a glut of tax taking people and departments have their hands out in demand.

2
1
Silver badge

Re: "Branch" line

[i]"Taxes are now used to pay for necessities which make it possible to have a successful society: Roads, infrastructure, a functional justice system. The aim of the tax system is to fund all of these while hindering economic activity as least as possible."[/i]

If that was indeed how the vast bulk of the tax income was spent I would have no problem with the level of taxation - because I'd be living in a paradise.

When however a huge proportion of our tax money is spent on things that will make our lives worse and less safe rather than better, I begrudge every penny I have to pay.

8
3
Unhappy

Re: "Branch" line

@Ratfox:-

"...Taxes are now used to pay for necessities which make it possible to have a successful society: Roads, infrastructure, a functional justice system..."

Our roads are in one hell of a state, our infrastructure is broken & can't cope, and it's been one hell of a long time since our legal system had anything to do with justice.

So where are my taxes going???

5
2
Silver badge

Re: "Branch" line

They have a service company branch in the UK, and the Irish or Lux company pays the UK service company to do some work on their behalf, at the same rates that a third party outsourcing company such as Serco would charge.

2
0
Silver badge

Re: "Branch" line

If all their employees worked in Bhutan, and their products were all sold from a Bhutanese hosted website, then yes that would work.

0
0
Silver badge
Stop

Re: Ted Treen Re: "Branch" line

".....Our roads are in one hell of a state, our infrastructure is broken & can't cope, and it's been one hell of a long time since our legal system had anything to do with justice....." Ted, are you posting from Greece, perchance? Portugal, maybe? One of the 'stans? Or is it that you really need to get out in the World and actually see how the UK actually does compare to the state of many other countries to realise just how (IMHO) silly you sound?

10
1
Silver badge

Re: "Branch" line

"Our roads are in one hell of a state"

Not sure where you're from but here in the UK (the subject of debate) the roads are in the best condition they have been ever. The majority of the motorway network either is now or soon will be managed motorway (Smart motorway in some places) which has drastically reduced delays and improved safety. This is the main infrastructure that keeps the country running, and it takes priority over the slightly rough surface on some local roads in terms of both money and manpower. Once the people putting managed motorways in, and extending more lanes on the motorways have finished I'm sure their very next job will be to fix that pothole near your house which affects a couple of hundred people.

3
2
Silver badge

Re: Ted Treen "Branch" line

@ Matt Bryant

"Ted, are you posting from Greece, perchance? Portugal, maybe? One of the 'stans? Or is it that you really need to get out in the World and actually see how the UK actually does compare to the state of many other countries to realise just how (IMHO) silly you sound?"

Unfortunately Matt I would have to somewhat agree with Ted even in the UK. It depends where in the UK you go but the investment/infrastructure is pretty variable yet we pay more and more. While we are not necessarily as bad as Greece or Portugal we should be ashamed how that is the baseline we compare ourselves against. Those countries had their irresponsibilities but also chained to the euroblock which is sinking very badly.

1
0
WTF?

Tax is due somewhere, surely?

OK, I haven't really been following all the details of this. But if Vodafone made "a vast amount of money in Germany", why didn't they pay the tax in Germany?

8
1
Silver badge
WTF?

Re: Tax is due somewhere, surely?

The tax, if any, is due where it is due under the processes of the relevant tax law(s). It is for the German tax authorities to decide the amount of tax due on income within their country.

I assume that those who are jumping up and down are happily paying tax on their entire income and not just the part above the tax free limit? To accept that some income can be received free of tax would be to receive funds without paying tax on them, thus avoiding tax legally.

Here is another moral dilemma for you, lets say that a person has some funds sat in a bank account getting almost no interest and though paying all the tax arising from that tiny income the pay only a tiny amount of tax. Because seeking a higher income by chasing deposits is hard work they did not chase the maximum income they could get. Since almost half of any additional income would go in tax they decided that the extra work on their tax return was not worth the overall effort.

Question: Is this tax avoidance since the income and the resulting tax liability has been forgone?

4
1
Silver badge
Paris Hilton

Re: Tax is due somewhere, surely?

And if someone lays on their couch because earning a living is "hard work" is that tax avoidance? Or what about anyone who opts for an income less than they could earn in another position?

I'm sure there are some higher rate payers who can't be arsed to squeeze the maximum out of their assets. I wouldn't be bothered, if I was that rich. But people with vaults worth of money seem to always want more - most of them already have more money than they can sensibly use anyway. And they'll do the the "hard work" because 60% of £2E6 is still another £1.2E6 and that's all they care about. And we don't know how hard we can push these people because the tax system leaks badly at the top and because we haven't fully costed the negative externalities they cause (e.g. London house prices or configuring our economy to service them rather than manufacture goods).

5
4

I'd agree with taxing dividends and capital gains at normal income tax rates, with appropriate thresholds, a la the proposed buffet rule http://en.wikipedia.org/wiki/Buffett_Rule

I suppose the people that wouldn't and get to have their say are the ones with lots of lobbying collateral rather than your average person in the street.

3
1
Anonymous Coward

Grossly mileading and innacurate

The reality as opposed to the hype or porpoganda in this article is that the inland revenue had just won in the court of appeal and Vodaphone were going to have to pay 6.75 Billion. The ideology of the journalist should not obscure the facts.

This is what was shocking about the deal. Vodaphone had lost. The deal after the inland revenue won undermines every future case against a large business and encourages delay and legal obstruction when when the case is hopeless because the worst that will happen after many years delay is that the company pays less than the amount owed. The reality is that Vodaphone could have been compelled to pay the full amount and interest. That does not mean that Vodaphone did not have some negotiating strenghs, they could threaten moving business out of the UK but the legal IRs positions was so strong all that should have been at stake was the interest. Even here the IR should have been very tough threatening Vodaphone with reputational damage, and perhaps disqualifaction as a government supplier as unethical attempting to influence tax decisions in an unfair manner because of the effect on future cases. It needed to be shown that fighting a case is less beneficial than paying up rather than the opposite.

17
18
Anonymous Coward

Re: Grossly mileading and innacurate

There are two possibilities:

1. You know a lot about this matter, have followed the Vodafone case in detail, including reading bailii.org rulings, have a good understanding of tax law, EU law and the relevant ECJ rulings. But due to an unfortunate accident involving a blow to the head, you now insist on spelling the company's name "Vodaphone" in all your correspondence.

2. You're an ignorant commentard who knows nothing more about this than you've gleaned from the stupid tweets of idiots who follow idiots who follow idiots who write about finance and economics in The Guardian.

I have an open mind. You tell me which one is right.

26
6

Re: Grossly mileading and innacurate

The fact that the last legal action was a win by the inland revenue is a matter of public record.

This undermines the entire article and makes the writer lookrather stupid.

7
5

Re: Grossly mileading and innacurate

"The fact that the last legal action was a win by the inland revenue is a matter of public record"

As is the ECJ ruling on UK CFC law not taking precedence over Community law. It was quite clear to HMRC that they'd lose in the ECJ. And it was also clear to the Government, which is why UK CFC law was subsequently changed to bring it into compliance.

If you had a shaky legal basis for having taxed thousands of controlled foreign corporations going back over many years, would you (a) quietly let bygones be bygones, or (b) force the issue to a final ruling and then have to pay back billions and billions in tax you shouldn't have taken?

8
0

Re: Grossly mileading and innacurate

http://www.dorsey.com/london_tax_may26/

Not quite. HMRC won on one technical point: that the CFC rules could possibly be applied under certain circumstances in the EU. Cadbury showed that Vodafone almost certainly met the requirements that CFC did not apply.

7
1
Anonymous Coward

Re: Grossly mileading and innacurate

3, You're Owen Jones

2
0

Page:

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Forums

Biting the hand that feeds IT © 1998–2018