back to article US taxman joins UK politicoes on hunt for Amazon cash

Amazon is fighting the US taxmen over a $234m unpaid bill. The Internal Revenue Service (IRS) told the online superstore in November that it owed taxes in 2005 and 2006, and also challenging its tax deductions, according to a court filing seen by Reuters. But Amazon has countered that the IRS is overestimating how much its " …

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Re Anon 9:53 Tax rates

> why would a company set up in the UK and pay 20-odd percent corporation tax when it could setup in Ireland,

> Netherlands, Switzerland etc. and pay much less -

Corporation tax rates:

Ireland: 12.5% (http://www.revenue.ie/en/tax/ct/index.html)

Netherlands: 25% (http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/winst/vennootschapsbelasting/veranderingen_vpb_2012/tarieven_vpb_2012)

Zwitserland: 21.17% (http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx)

To get a really good deal you have to go closer to home (and outside the EU):

Isle of Man: 0%

Jersey: 0%

Guernsey: 0%

> with the friendly EU it's made all this possible.

Not a lot to do with the EU as international trading (esp. with non-EU countries such as Bermuda) is also governed by specific tax treaties. Furthermore, Switzerland is not in the EU. And the EU means you and I can trade, in both directions, between NL and the UK with essentially zero hassle. (Pity my trading partners' UK banks charge them a lot more for receiving GBP than my local bank charges me for sending them.)

Apols for undermining your argument with boring facts.

Cheers,

H currently in The Hague

(who doesn't pay corporation tax but income tax which bites rather more in NL than in the UK)

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Anonymous Coward

Re: Re Anon 9:53 Tax rates

Probably should have been more specific - seems certain regions in Switzerland offer much better deals than that - we have had quite a few calls from their Department of Trade suggesting we consider moving for the skilled workforce, access to local markets and of course big tax incentives. Some countries also have tax rules that make things like Google's tax shuffle possible / easier - i.e. must be some reason they chose NL.

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Anonymous Coward

Re: Re Anon 9:53 Tax rates

Think the point was when you get one country that charges a lower rate it will encourage companies to have their HQ there.

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Coat

Re: Re Anon 9:53 Tax rates

seems certain regions in Switzerland offer much better deals than that

Kanton Zug, to be specific. Lowest corp and personal tax in CH.

...Mine's the Mink Sable.

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clarke@cilia.org

Chump change by amateurs. For truly wonderful and amazing accounting, you need only go to Hollywood, home of the MPAA. It seems that the actor who played Darth Vader in "Return of the Jedi" - the fifteenth highest grossing picture of all time - still isn't getting paid residuals because the picture still isn't profitable.

http://www.techdirt.com/articles/20110912/13500315912/hollywood-accounting-darth-vader-not-getting-paid-because-return-jedi-still-isnt-profitable.shtml

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@cheeryAllyjspurs 10:48

I am actually surprised that some companies aren't advertising this.

If I had been running Costa coffee or a small local coffee shop, the first thing I would have done is plaster a large sign in my window saying "We pay more tax than Starbucks".

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Anonymous Coward

Re: @cheeryAllyjspurs 10:48

You better be sure it's true then and if Costa has branches in the US perhaps they would seek to minimise their tax obligations 'there'.

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Anonymous Coward

Re: @cheeryAllyjspurs 10:48

Perhaps all companies should have to clearly state how much tax they have paid as a flat figure or perhaps as a percentage of their UK turnover. Probably is it's a bit like HMV vs Amazon - HMV were making losses so would have been paying no / little corporation taxes - so no different to Amazon.

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Anonymous Coward

I don't give a sh*t about the technicalities.

If I have to pay tax, then every entity should be paying their share.

Someone who purposefully avoids paying their share is a scum sucking leech and doesn’t deserve to breathe god’s clean air!

Avoiding tax doesn't make you clever, it makes you lower than a snakes belly and demonstrates that you are not part of society; you are no better than the 10 year dole claimants the Tories hate so much.

Those found to be avoiding tax should be made an example of! Instantly fine them half of their personal wealth, no matter where it is.

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all fancy talk

It is the "technicalities" that you don't care for that define what "their share is" - tax is about technicalities; which is why we need accountants to make sure are paying the right tax.

George Osbourne was paying the right tax, we know that for sure because someone who could understand the rules verified it for him.

Are YOU paying the right tax? no doubt you think you are paying YOUR SHARE which is the point; so do these guys...

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Buy local

Maybe we need a campaign like "Patriots pay taxes", "Proud to pay my tax" or something.

Local traders could display it in their windows (or their websites) and the likes of Amazon, Google, Starbuck, Vodafone, Tesco etc wouldn't.

Of course, it would be better if MPs tightened up the tax laws to negate such chicanery in the first place.

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Re: Buy local

A traffic light system would work - people could affix the stickers to ads by the companies.

The data would need to come from an independent site somehow..

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Re: Buy local

This way to protectionism...

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Happy

Re: This way to protectionism...

Now Tom, I've said this before, protectionism is okay, so long as none of the other countries are doing it.

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Re: Buy local

"Proud to pay my tax"

oh come on...*nobody* is proud to pay tax. Everyone resents it. There is never too little tax. If they offered a 1% reduction in NI or PAYE, you'd be all over it quicker than a zombie in a mensa convention.

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Re: Buy local

Protectionism? Who ever mentioned that?

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Re: Buy local

"oh come on...*nobody* is proud to pay tax. Everyone resents it."

Newsflash - some people don't mind paying. I enjoy having roads, the NHS etc. Makes life that much easier. I am quite happy to pay my fair share (we can argue about "fair" if you like).

The thing I resent is our MPs spunking my cash into their pals' wallets through tax-avoiding PFI deals. All PFI deals need to stop. Now.

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Anonymous Coward

Idea?

Stop taxing income (for people and companies). So that's no taxes on profit etc.

Only tax consumption. So something like VAT on *everything*.

Subsidiary buys a service/item from parent? Tough shit, pay tax on that.

You consume someone's service (e.g. an employee's work). Tough shit, pay tax on that.

Give them a bonus? Tough shit, pay tax on that.

Buy a house? Tough shit, pay tax on that.

I might be over-simplifying things; but surely a tax on consumption makes some of these dodges much harder?Hmm....I guess they'd just sell things to subsidiaries at a loss and thus evade tax that way. :(

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Re: Idea?

or...

Sales within a corporate structure are at cost. If it is a purely internal product (IP or suchlike) then the taxman sets the cost and hence value for licencing.

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Anonymous Coward

Re: Idea?

That could also work. But you can be sure the companies would simply fiddle the books to make the cost seem higher. Much easier just to tax their consumption.

Want to pay less tax? Consume less. Dear god - it sounds like a green policy!

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Re: Idea?

Why not simply make licensing subject to vat/import duty?

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Flame

Groan...

...once more, this time with feeling:

Avoidance != Evasion

Frankly, the sour grapes about the whole thing boil down to two things:

- You didn't think about using the same scheme yourself

- You didn't think about taxing the same scheme yourself

Think it's unfair? Campaign for the rules to be changed. Also campaign for bigger harbours, since all the international Corps will be exiting these shores the moment it comes it effect.

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Anonymous Coward

Re: Groan...

Avoidance = Evasion x better PR

"Also campaign for bigger harbours, since all the international Corps will be exiting these shores the moment it comes it effect."

So what - with all the evasion they engage in, they provide little to the local economy. The people are will still be here, they still need goods and services; so having UK based companies supply those (and pay their taxes) would be to the betterment of the UK.

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Devil

Re: Groan...

In NZ they have a flat rate tax -- NO ALLOWANCES.

From memory, people got around this by having trust funds. It was amusing to be asked if I wanted to pay my rent in cash, via an envelope into the landlord's hand or via cheque to the trust fund... no prizes for guessing whic was cheaper.

Simplfy the taxation system and you will increase tax yield because it removes the (deliberate) inherent complexities and thus remove the wriggle room to find the loopholes.

The poor pay more tax as a proprotion of income -- direct and indirect taxes -- than the rich. Remove VAT "trading" options from companies, caused by the perverse fiddling of who did what, when and with whom in regard to perceived value added to goods and services. Change this to a fixed small rate applicable and payable to all the stages of the circulation and collection cycles. The rich use their VAT registration (their companies and businesses) to acquire goods and services and offset and transfer their liabilities to the end-payer (the real tax payer, those who are PAYE tax payers). Companies negotiate with HMRC about their taxes, particulalry VAT! Something Mr/Mrs/Miss/Ms Bloggs cannot.

Dump the "dividend paid" and "commercial loan" tax exemptions and loopholes for shareholders and companies -- its become a way of fiddling income and should be treated the same as salaries and wages. A single flat rate system is the fairest and most easily administered.

In short, the only people/entities who suffer will be accountants and management consultancy companies (Goldman Sack's, et al anyone?).

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Re: Groan...

@ AC

So what - with all the evasion they engage in, they provide little to the local economy

Corp tax doesn't go to the local economy either.

Neither does the PAYE and NI the employee pay, nor does the Corp NI on those employees. Those go to HMRC. The government makes plenty from indirect taxation of these orgs, and corporate tax is a mere topup.

Only the rates/council tax (and possibly rent for council owned buildings) and the retail outlet of said org contribute locally.

people are will still be here, they still need goods and services; so having UK based companies supply those (and pay their taxes) would be to the betterment of the UK.

Whether a company is international or UK based, the majority of revenue comes from indirect taxation, and the creation of jobs and thus a local economy. Ask Sunderland how much it would like Nissan to go home, which it would consider if you bumped up corporation tax.

Also, read this:

http://www.theregister.co.uk/2012/11/25/tax_and_tech_biz/

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Re: Groan...

quote: "Ask Sunderland how much it would like Nissan to go home, which it would consider if you bumped up corporation tax."

As opposed to Longbridge, which might well like the idea of restarting the Rover factory once we have a demand for automotive production with the withdrawal of Nissan? Are jobs in Sunderland inherently more or less important than jobs in Longbridge?

Every single multinational that provides goods or sevices to the UK, can be replaced with a national company that supplies those goods or services. It may take a little time to get up to speed, but the demand is already there. Comet goes tits up so Dixons rakes in the sales, it's the same thing.

If companies don't want to trade in the UK that is their choice; the demand for products and services won't magically disappear, and the free trade options inside the EU mean that we can always choose to purchase across borders if we wish, or if local supply is not up to the demand. Demand is related to price, of course, but it is also related to supply; the loss of several companies in one segment just means that there will be a lucrative market for any replacements, or the alternative option where we find out we never really needed the product in the first place, and that the original demand was being artificially inflated.

It's like climate, there are several negative feedbacks as well as the positive ones, and people seem happy to skew perceptions one way or the other for their own agenda. I am by no means immune to that myself, hence the post above :)

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Re: Groan...

"So what - with all the evasion they engage in, they provide little to the local economy. The people are will still be here, they still need goods and services; so having UK based companies supply those (and pay their taxes) would be to the betterment of the UK."

That assumes there are UK companies already providing the same goods and services. There might not be. And even if there are, it assumes that the UK companies can suddenly re-scale their operation to fill the vacuum created by the recently departed corps. In most cases that won't be possible. I work for a UK food producer - if our competitors were removed from the market could we suddenly increase our output by say 1000% to service all the new business? I'll give you one guess.

Do not mistake "paying no corporation tax" for "making no contribution to the economy". These are very, very different things. I fail to see how dumping the entire workforce of Amazon, Starbucks and McDonalds (to name but a tiny few) on the dole queues benefits the economy.

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Re: Groan...

"As opposed to Longbridge, which might well like the idea of restarting the Rover factory once we have a demand for automotive production with the withdrawal of Nissan? Are jobs in Sunderland inherently more or less important than jobs in Longbridge?"

But what makes you think that the loss of Nissan production in Sunderland will mean that there is suddenly a demand for Rover cars? What's to stop the shortfall in supply simply being made up by increased imports from elsewhere? And that would be far worse - buying a Nissan or Toyota made in the UK ensures the vast majority of cash stays here and goes to supporting jobs here. Those workers then support other aspect of the local economy with their own spending and consumption.

"Every single multinational that provides goods or sevices to the UK, can be replaced with a national company that supplies those goods or services. It may take a little time to get up to speed, but the demand is already there."

Speaks someone with apparently little idea of logistics. Companies don't magically come out of thin air and even those that already exist can't just scale their operation to meet a massive increase in demand. Supply chains that don't exist don't just magic into being.

Don't get me wrong, I am a big fan of buying British and always choose Costa over Starbucks etc (and even bigger fan of buying local, so I buy from my local butchers, farm shops etc) but anyone suggesting that these big MNC's make no contribution to our economy is just plain wrong. Corporation tax is but a drop in the ocean compared to the money they are sinking into the economy with the rents they pay, the employees they hire and the supply chains which service them.

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FAIL

Re: Groan...@Numpty

Egypt has outrageous import duties and forces people to purchase what is known to the ex pat workers as "local equivelant"

A misnomer if ever there was one as its never even close to the original.

I worked on a hotel project in Cairo where the massive hydropool needed a specific plant setup, too expensive to import so they got the plans and bonded some plastic pipe together for the "local equivelant" and then stood back and looked shocked as several hundred thousand gallons of water left the system and flooded the floor of the health club below.

If Nissan leaves and Rover re opens what do you think the quality of the product will be? The proof will be in the driving and it wont be pretty. The reasons we no longer have a domestic car industry on any scale is due to the massive costs and the appaling quality so unless your idea of a car is a Trabant be careful what you wish for!

Plus with European free trade Nissan will just setup in another EU country and have employees there whilst simply shipping the cars to the UK to sell so your utopian dream to force these companies out leads to unemployment, higher benefits bill and a dying economy.

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Re: Groan...

Your recommendations are pretty much how the system works already.

I'm not sure what you mean about VAT "trading" options - very little about VAT is optional. The VAT paid by a company is a slice of the value added, which is determined by what you receive from a third party for your supplies less what you paid third parties to do it. No "perceived" about it. It happens at all stages of the cycle, too. And most of the time you have things like staff costs with no VAT to recover, so your effective rate of VAT on the value you add is much higher than 20%.

Mr Bloggs can negotiate with HMRC about taxes just as much as any company can. Nearly every negotiation with HMRC that I've been involved in is an examination of what actually happened: the ones about how the tax rules should apply to the transactions are relatively rare. The reason companies negotiate more than individuals is that they do more stuff, so there's more subject matter to discuss. Tax deduction at source makes most individuals' tax affairs very clear and simple compared to those of companies.

By dividend exemption, I presume you're referring to lower rates of tax on dividends when received by individuals. Those just compensate for the fact that tax is levied twice on the same profits: once in the company, and again on the dividend. Until a few years ago the end result was pretty balanced either way; now with lower corporation tax rates dividends are usually better, but not always.

Loans are very hard to exploit, especially for individuals - ever heard of s455 tax? It's practically a penalty system.

Rule 1 of fixing a system: find out how it works now. You might be surprised.

You're right that simplification does make things fairer, but you can't take it too far or you end up making them unfair again - like your NZ trust funds. It's like a chaotic system: even where the rules are simple, they can have enormously complex consequences. The UK system is too complex now, but flat taxes bring a host of anomalies.

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Re: Groan...@Numpty

quote: "If Nissan leaves and Rover re opens what do you think the quality of the product will be?"

Rover won't reopen, it got bought by India. But the skillset of the guys in Sunderland will still exist, and my point was we have already had one massive car factory closed yet apparently we still make cars here, and we still have the facility and ability to make cars here.

quote: "The reasons we no longer have a domestic car industry on any scale is due to the massive costs and the appaling quality so unless your idea of a car is a Trabant be careful what you wish for!"

Rover were shit, granted (MG only slightly better, in a few cases). But Nissan, built right here in the UK, aren't? So you are confirming that we can build quality vehicles in UK plant (Nissan in Sunderland), then claiming we can't build quality vehicles in the UK. Bit disingenuous? Rover's designs were the problem, not our local manufacturing or engineering skills. McLaren is a UK company too, you know, and if they saw a possible market they could be interested in the acreage at Longbridge (or even Sunderland tbh) :)

quote: "What's to stop the shortfall in supply simply being made up by increased imports from elsewhere?"

Nothing. If we can build it cheaper here than importing it, there is margin for a "local" company to compete. If we can't, then we have to import. Since (in the Nissan example) we already build those product here, then it's obvious to me that we can build it cheaper here already. I'm not asking us to force internationals out, just to plug the idiotic tax loopholes that they are honour-bound to exploit to their fullest (alternatively, give all citizens equal access to the same loopholes), and then let the market sort itself out. Which it will, since as I pointed out the demand for product doesn't magically disappear just because an international company got all butthurt about paying more tax and decided to up sticks.

quote: "Speaks someone with apparently little idea of logistics. Companies don't magically come out of thin air and even those that already exist can't just scale their operation to meet a massive increase in demand. Supply chains that don't exist don't just magic into being."

Do Nissan, or Starbucks, not have a supply chain for their current UK business? I wonder if they would be able to handle the output from "BNP Right-Wing Anti-Foreigner Cars Plc" (or whichever existing or new manufacturer, insert your own favourite comedy name here) that decides to take over the Sunderland plant when Nissan bugger off? Also, and to more fully address your point, they certainly can't do it instantly, I completely and wholeheartedly agree. But if the demand is there waiting to be fulfilled, you can bet your ass that companies in the same market segment will want in on that slice of pie, and they'll be able to find VCs to fund the expansion.

You're making it sound like international companies have us, as a country, by the balls and that if we refuse to let them pay fuck all tax here we're going to go down the shitter. I don't disagree per se but, by contrast, believe that the reason we look like we might be heading down the shitter is that companies like that pay fuck all tax here, yet have a large slice of our GDP funnelling out of the UK into various tax havens.

Our UK consumers already have that money they would have spent on <insert company name here>, and if they no longer have that choice, the money doesn't evaporate, and their wish to spend it on certain market segments stands a good chance of remaining too (e.g. new car, overpriced coffe with free wifi). Give them alternative options and they'll take them, whether it's an import from France or the new UK coffee shop down the road. You have however got rid of a bunch of cheap vultures sucking the economic lifeblood from the country to feed somewhere else; draconian internal tax regulations mean that the money stays with the draconian internal government, rather than scooting through a double Irish with a Dutch sandwich and off to foreign climes.

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Big Pharma has done this for decades

In their production formula for many items there were ingredients used in the USA or UK that were very costly, that on analysis turned out to be simple cheap compounds. These purchases allowed them to export those $$ to their offshore subsidiary as they imported that ingredient to make their pills. Some of these ingredients turned out to be simple salt, with a few dollars per ton that were invoiced as a precious ingredient at thousands of dollars per gram, which inflated the cost of the pills it went in to.

All companies with offshore subsidiaries need to be watched for this behavior or the profits in the USA/UK will completely vanish and the offshore subs do very well indeed.

Audit methods with teeth and assay and inspection rights are needed so that this profit exporting is discovered and denied.

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Anonymous Coward

Re: Big Pharma has done this for decades

Pharmaceutical grade materials require a lot more paperwork and testing than food or industrial grade materials. And different packing and supply agreements.

Hence although one might buy 5 tonnes of compound X in paper bags on a pallet at £25/ton to clean sheet metal before painting it,

you might buy 1 tonne at £50/ton in plastic sacks to keep your bakery products mould free

but pay £100/kilo for a 25 kg drum to put into medicine.

(all numbers are inspired by reality and make no claim to be accurate)

Apart from the packing and checks, the products might be identical. eg Pharma grade sucrose is the same quality as the stuff that goes in your mug of tea.

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Re: Big Pharma has done this for decades

"Audit methods with teeth and assay and inspection rights are needed so that this profit exporting is discovered and denied."

So we end up with an enormous HMRC to be able to manage all of this audit and investigation which swallows up all the effective tax that it brings in? Could well be a zero sum game (or even cost more to manage/administer than would be gained in additional tax revenues)

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Anonymous Coward

An IT company.....

.......Forces you to purchase equipment internally, laptops, paper, printers etc, what I could get from Saples (5 reams of paper) @ £16 I was forced to buy internally at £288, for exactly the same Staples paper, that is how that particular company makes little or no profit on its government contracts

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Re: An IT company.....

OH! You figured out where manglement bonuses come from (£288 - £16) .

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Anonymous Coward

hmm

business as usual for the current Administration's biggest left-coast financial backers.

Support higher taxes for "the rich" while opposing spending cuts, then do everything to dodge them so the working man gets stiffed, while the government crows about "saving the 99%" but it's the 99% who are actually paying the bills.

time to push the big red RESET button yet?

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Unhappy

Politicians make stupid (tax) laws

Corporations take full advantage of said stupid (tax) laws.

Politicians complain about stupid (tax) laws.

You and I, we just get screwed over.

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Anonymous Coward

What have Currys, HMV, Jessops all got in common - apart from all going bust recently - they all sold goods whcih Amazon could sell cheaper, in part because of their judicious choice of where to pay VAT (and other mechanisms to cut their tax bill).

Proposal: any company with over, say £100m sales in UK whose not declaring, say 5% profit, becomes fair game for nationalisation without compensation.

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