Get rid of corporation tax entirely....
0% corporation tax - Why not?
Just tax dividends more highly, and let companies use more of their profits to reinvest in jobs, R&D etc etc.
Microsoft is the latest tech firm to be tarred with the "immoral" tax-dodger brush after a report accused Redmond of funneling £1.7bn in UK revenues through Luxembourg and Ireland in order to legally avoid paying tax here. The Sunday Times reported that the IT giant was sending its British earnings from new operating system …
0% corporation tax - Why not?
Just tax dividends more highly, and let companies use more of their profits to reinvest in jobs, R&D etc etc.
Unless you redefine these payments to sister companies as Dividends, it doesnt solve the problem. Microsoft's divident is paid in the US.
For donkey's years there's been a suggestion that you get rid of corporation tax and take a share in profits instead. Say you were taxed at 20% of your profits then benefit from success and then don't tax you as heavily in the lean times. The problem is, there'd be just another new wheeze to show the richest companies in the world weren't actually making any money...
> there's been a suggestion that you get rid of corporation tax and take a share in profits instead.
Umm, what exactly do you think corporation tax currently is???
Note that it's VAT that's low in Luxembourg and Corporation Tax that's low in Ireland. A clever company will use everything in it's power to lower it's tax liabilities - this way it can make it's prices lower and/or profit larger, helping it to out-compete the smaller companies that don't have the luxury of multiple national offices.
I don't agree with this un-level playing field but I do accept that it's 100% legal. All this slating of the companies rather than the tax laws stinks of diversions and conspiracy to me.
What is you wanted to loosen your ties with the EU and you didn't want to appear to be the party doing it, how would you whip up public opinion enough to seemingly force you to derogate your involvement in the free market or even more radically initiate leaving the EU in some way?
Whilst I personally believe such avoidance to be wrong and unethical, the whole issue of ethics here is somewhat trite. It's a legal issue not an ethical one.
If such actions are not illegal, then the government (this is a politically backed debate) should either quit whining and STFU or change the law.
If they can't change the law because of yet some more EU bollocks (there's well in excess of 170,000 pages in the acquis communautaire) then they should either STFU or leave the EU.
Demonising something that is not illegal smells of a revenue raising witch hunt by a bankrupt government which is espoused by the media.
The government have stoked the fire, now the media will inflame opinion. It may have the desired result in the end, but it's not effective governance.
Try to order a course from Microsoft. It goes through Microsoft Sarl in Luxembourg.
Because of the 15% VAT? Which is still 15% too high of course.
Not a surprise at all. I hear taxes are being raised in Luxembourg in 2013.
I'm honestly staggered that MPs are actually doing the right thing for a change... it's about time big multinationals were called on their tax dodging bollocks.
"I'm honestly staggered that MPs are actually doing the right thing for a change... it's about time big multinationals were called on their tax dodging bollocks."
The issue though is that is responsible governance is not just about doing the right thing, it's more about doing the right thing in the right way, and for the right reasons. Currently (imo) only 1 of those 3 prerequisites is being met fully, and at least one, not at all.
The EU is making moves to tackle tax avoidance. However, for those of us voters in Europe who do not want to sell our sovereignty and our political souls to Brussels, this may be well seen as yet another creeping form of federalism.
Unfortunately the underlying politics here are, in some (or even many) ways, highly contrived.
I just looked at my Windows 8 receipt (I bought online via Microsoft) and it doesn't suggest at all that MS are selling through Luxembourg, it states that it's being sold via MS Germany:
Seller of Record
arvato distribution GmbH
So the sale is from Germany but the payments go through Lux? Is that quite legal?
Yes because got that 100euro DVD you bought, Microsoft Germany had to pay 110euro to Microsoft Luxemburg for that copy, who then had to pay 120 euro to Microsoft Bermuda for the rights to the name.
You should be thankful that they are prepared to lose all that money to sell Windows to you - it's a public service really.
Maybe only allow them to claim vat back against corporation tax?
set the corporation tax at >30%, but let them claim their vat back against the corporation etc.
If they have no profits they can't claim vat back.
If imports attract vat then we get 20% of all transactions, UK based companies can claim some of their input vat back. Non UK companies pay 20% on everything regardless
You can set vat reclaim based on SIC code.
Yes the transfer price thing has been going on for decades so New Lie could have fixed it but didn't.
"The committee has suggested that tax laws need to be changed internationally so that large corporations have nowhere to hide their profits."
So, you are going to get every country to agree on a set tax rate then? There will be more than a few countries that won't as they like the current system. If Ireland changed its system, it would see those six workers out of a job and then it would repeat for all other companies that do that the same thing. The Cayman Islands also has a zero tax rate. Maybe what the governments of the world need to do, give the companies that exploit tax loopholes exactly what they are paying for; nothing. If the company needs to use the legal system, tell them to sue where their headquarters are. Provide no local tax breaks and if they need to file bankruptcy protection, tell them to file where their corporate headquarters is.
Personally, I commend any and all legal actions, whether carried out by individuals or companies, that reduce their tax-bills. Businesses have an obligation to maximise their shareholder-value and dividends; at an individual level I consider myself to be vastly overtaxed and am happy to spend a few grand (tax-deductible of course) on a good tax-planning accountant every year.
I'm only glad I don't actually get all the Government I'm paying for.
Exactly and it should apply to everyone:
Why can't I claim back all the food I buy as operating expenses?
I should be allowed to declare that my home is registered in the Caymens and not pay council tax
I should be able to pay YAAC-Bermuda for the rights to my name so I make a loss on my salary and claim benefits.
> Why can't I claim back all the food I buy as operating expenses?
Because you can't.
> I should be allowed to declare that my home is registered in the Caymens and not pay council tax
You can, if you really live there, but trade in the EU.
I bet Apple are wishing they took out a patent on complicated European tax schemes now.
So, politicians are now shocked about something the large corporations and the rich have doing for decades with their approval? Whats next, pigs flying?
The UK Government should follow India's lead and introduce Withholding Tax deduction. In India any foreign company selling into India has to pay tax equivalent to 50% of the corporation tax payable in their home country. This means that all revenues are taxed successfully.
The way that India polices this is to put the onus on the home company to deduct the tax when paying the invoices of the foreign entity.
I am sure the UK Government can make this happen in the UK.
Currently India has forced Microsoft etc to pay hundreds of millions of dollars in 'avoided' tax. The consider this to evaded tax as the companies have intentionally looked for loopholes.
So when Microsoft UK pay Microsoft Ireland/Luxembourg or Starbucks pay their foreign entity they will need to deduct this tax from the invoice and remit this amount to the UK HMRC.
It has not stopped investments into India and I am sure it will not here. The problem in the UK is that we give them all the low tax we can and yet they see fit to abuse the system.
"50% of the corporate tax payable in their home country?"
So I sell to India through an independant distributor located in the Bahamas. Zero tax owed.
"I am sure the UK Government can make this happen in the UK."
The Bahamas, a member of the British Commonwealth. And the UK government can't even lean on them? Good luck with all of the other tax havens that can just tell HMRC to bugger off.
In my opinion, the best tax system is one that operates on events within your borders and ignores international corporate structures. The latter are beyond your jurisdiction, so there's no point in wringing ones hands over them. Implement a sales tax. When goods change hands within your jurisdiction you collect a percentage.
> When goods change hands within your jurisdiction you collect a percentage.
The problem with this is the WWW.
If you buy something from another country and it is delivered to you, where did that transaction actually take place? It could be in the country of the guy selling to you, or the country in which you bought it.
You can't pay tax in both places because that would be unfair. So a rule has to be created to define where it happened. It is easier to do that in the company's location: one central place rather then the beurocratic nightmare that would occur if a country had to handle all the tax situations in all the countries that they sell to. So you then locate the company notionally in the country with the best tax advantage, which is what is happening, in a manner of speaking.
So is the Great Derpy British public going to boycott Microsoft products such as their OS and preinstalled hardware like they stoically did with Starbucks? No?
So if I work for Microsoft and get paid 50p/hour (call it training/apprenticeship so minimum wage doesn't apply)
Then I pay no NI, get supp benefits, council tax discount, free school meals, etc
Once a year I fly to Guernsey and do a REALLY hard days work for Microsoft Guernsey Inc for which I get paid say 50,000, and I pay local (0%) tax on. I have a Guernsey credit card to pay for all the little toys that I need to survive the other 364 days of grind at my 50p/hour job.
I never realised Bernie Ecclestone posted on this forum
Any company that does not pay the correct tax for sales made should not be allowed to sell their products in that country.
did you not read the article?
"Fellow "tax-avoiding" firms Amazon, Google and Starbucks have all told UK officials that they follow international tax laws, but MPs have said that while their actions might be perfectly legal, they're also immoral."
That means they are paying the correct tax, which is to say "what is required by law." If said MPs are not happy with that amount of tax, the correct response is to change the law. Once the law is changed such that the correct amount if tax is what said MPs want, MSFT/GOOG/AAPL/etc. will began to pay it.
If they are not paying a "moral" amount and cannot be charged with a crime, it is the MPs fault for writing immoral laws.
I don't really have a problem with any of it - as long as VAT is being paid and recognised, where is the issue?
This aspect is already covered in European tax law, and I agree totally with some of the earlier comments about a corporation's duties to it's shareholders to maximise the profits.
There isn't a moral argument either, this is invented bollocks - to whom is the corporation's moral obligation? UK.gov? I don't think so. Once again it's to it's shareholders.
Under Australian law (I'm not intimately familiar with English law but I can't imagine it being all that different) the director(s) of a company have a legal obligation to achieve the best outcome for their company. So when you hear your politicians (ours do the same shit too) ranting about legal but immoral behaviour by companies, just remember that the companies in question are obeying the laws which were written by... you guessed it, the very same politicians who are doing the ranting.
Incidentally, when was the last time you heard of a politician, of any political flavour, voluntarily paying more taxes in order to comply with some imagined moral imperative?
Not moral; inconsistent with rectitude, purity, or good morals; contrary to conscience or the divine law.
I'm pretty sure corporations don't act for the good of anything other than their own existence, ergo, by their own nature are already immoral. Much like banks.
Immoral liars (or professional politicians if you prefer)... misdirection... bullshit - what's the real story here? Can't believe the papers are parroting the politicians... Black is white, dogs lying with cats, the 21st is fast approaching!
"MP's said......that while their actions might be perfectly legal, they're also immoral."
As opposed to twisting the letter of the expenses rules into a pretzel to claim as much money as possible from the publc purse (legal, bot imoral) or fiddling their expences claims (both illegal and imoral)
Personally I don't really expect many CFO's to take any notice of the moralility lectures from 650 members of an organisation that has a severe credability gap when it comes to probitity in public office, especially when membership of that organisation is based on winning a popularity contest in which the majority of eligible voters either didn't vote, or voted for somebody else, and have no way of removing unfit members that, for example, go off moonlighting on reality TV shows, rather than doing the job their paid (along with expenses) to do.
Sorry, but as I said in the previous tax minimisation article...
Nobody in Government can try and name call multinational companies for minimising tax through legal means after the "it was within the rules" excuses that Government ministers pulled when they knowing made immoral claims. This is more "seen to be doing something" and deflect from the root cause.
I'm not going to say that sorting out Global tax laws is a simple task, but trying to whip up public backlash because the laws themselves are broken is just "seen to be doing something" pantomime at it's worst. None of the companies have broken the law, just used them to their advantage in a way the Government didn't expect.
In the same way that Gordon Brown as PM couldn't blame the previous Chancellor for the financial screw up, the Government can't blame companies and individuals for operating inside the law to their own advantage. Doing so would highlight how broken the system and previous decision were,
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