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 …

  1. Anonymous Coward
    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!!

    1. Matt Bryant 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/).

    2. stu 4

      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

  2. Aristotles slow and dimwitted horse 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.

    1. Nonymous Crowd Nerd

      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"...

      1. Matt Bryant 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.

  3. IT Hack

    Interesting. Any links to reputable sources?

    1. Anonymous Coward
      Anonymous Coward

      https://www.google.com/

      1. Anonymous Coward
        Anonymous Coward

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

        Any links to reputable sources?

  4. El_Fev

    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?

    1. Anonymous Coward
      Anonymous Coward

      Re: What a load of rubbish...

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

    2. rhydian

      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?

    3. Tim Worstal

      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.

      1. Anonymous Coward
        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?

        1. Tim Worstal

          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.

          1. Tom 7 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.

            1. jonathanb 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.

            2. Tim Worstal

              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.

              1. sabroni 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.

        2. TheOtherHobbes

          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.

        3. jonathanb 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.

  5. R69

    Well said

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

    1. Anonymous Coward
      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.

      1. The Commenter formally known as Matt
        Stop

        Re: Well said

        Downvote for this: "Do wake up."

  6. Madeye
    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.

    1. codejunky Silver badge

      Re: "Branch" line

      Why? So you can claim legitimacy at robbing them?

      1. ratfox 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.

        1. codejunky 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.

          1. ratfox 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?

            1. codejunky 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?

            2. Cynic_999 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.

            3. Ted Treen
              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???

              1. Matt Bryant 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?

                1. codejunky 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.

              2. Lusty 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.

    2. Tim Worstal

      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.

      1. Madeye

        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?

        1. codejunky 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. jonathanb 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.

    3. jonathanb 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.

  7. Unep Eurobats
    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?

    1. Richard Jones 1
      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?

      1. Brewster's Angle Grinder 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).

  8. WOOOOO

    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.

  9. Anonymous Coward
    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.

    1. Anonymous Coward
      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.

      1. Alan Johnson

        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.

        1. spib.burfank

          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?

      2. Anonymous Coward
        Anonymous Coward

        Re: Grossly mileading and innacurate

        3, You're Owen Jones

    2. Tim Worstal

      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.

  10. Anonymous Coward
    Anonymous Coward

    Grossly misleading 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.

    1. garden-snail
      Flame

      Re: Grossly misleading and innacurate

      Yep, the most reliable source here is going to be an Anonymous Coward who can't even spell "Vodafone". No problem with that!

  11. Kenny Millar

    Tim, get real.

    You make big deal pointing out that these companies actually followed the law.

    Yes, we are not idiots, we understand that. The point is that they set up foreign companies deliberately to take advantage of weak tax laws, and by doing so, to avoid paying tax.

    Tax avoidance is perfectly legal, but it is morally reprehensible on the scale that these companies are doing it. THAT is why people are up in arms.

    You too are morally reprehensible for supporting them. You should be using your voice to ensure that UK Companies pay UK tax. period.

    1. sjaddy

      Re: Tim, get real.

      Why is it morally reprehensible?

      Surely the company's legal and moral obligation is to its shareholders not the average person???

      Why should hard working companies/people be penalised for following the law? If the law is wrong (and lets be honest a lot of the times it is an 'ass') - change the law.

      Of course changing the law would require the politicians to do real work as opposed to launching smear campaigns to get people to "morally" pay what is right regardless of what is legally right.

      1. codejunky Silver badge

        Re: Tim, get real.

        "Surely the company's legal and moral obligation is to its shareholders not the average person???"

        More worrying, the shareholders probably are the average person. Pensions are typically shareholding pots and anyone who wants to make any interest probably has shares (there is even the S&S ISA to encourage people).

      2. Anonymous Coward
        Anonymous Coward

        Re: Tim, get real.

        You seem to fall in to two fallacies. The one with a thinking that under law a company has to do everything possible to maximise profits for shareholders and therefore is bound by law to seek out the lowest tax position and secondly you seem to think that they are "following the law". What they are actually doing is looking for a loophole in the law to do something which has now been specifically outlawed - this is not following the law it is avoiding it.

        SImilar to the article where the author tries to quote the law as the reason why Starbucks pays the money they do to their Dutch and Swiss arms. However (and with a little ignorance as I am not going to look up the specific text) that law is designed for anti-competitive practices. To stop BT wholesale, for instance, charging favourable rates and terms to BT Retail. We all know, including the author that it wasn't the case that the Starbucks Manufacturing Emea BV in The Netherlands is there for the worlds best coffee roasting expertise and that Starbucks Trading is in Switzerland as it has the greatest crop of coffee beans and so Starbucks were looking to have a subsidiary as close to the bean farming market as possible or that the Starbucks Manufacturing Emea BV was set up to sell beans to Costa and numerous other customers as an independent trading entity. Of course, not, Starbucks Manufacturing Emea BV and Starbucks Trading were set up to allow Starbuck coffee shop profits to be fed back into the Starbuck Group's balance sheet at the lowest convenient tax rate. Otherwise the coffee shops would all be closed down due to their trading losses.

        Yes, it might be legal (or more descriptively it is not illegal), but to suggest that their hands are tied by the law to make them do it is absolute baloney.

        1. Tim Worstal

          Re: Tim, get real.

          "and that Starbucks Trading is in Switzerland as it has the greatest crop of coffee beans"

          Strangely, Switzerland is the world's leading centre of coffee bean trading. Dunno why myself, might just be historical happenstance like Holland running the cut flower market. But if you were going to set up a coffee bean trading arm for Europe then Switzerland is pretty much where you would put it. Like doing diamonds in Hatton Garden rather than Vauxhall, that's just where you do it.

          1. Anonymous Coward
            Anonymous Coward

            Re: Tim, get real.

            @Tim

            Seriously Tim, the reason that Switzerland is a world leading coffee bean trading centre is exactly the same reason why it is a leader for trading nearly every type of natural resource from coffee to oil. Light regulation and helpful tax structures. It is nothing to do with coffee, these are electronically traded after all. You'd expect that if it was the best trading place in the worlds for commodities due then the Swiss could charge a slight premium on their taxes as the companies would be prepared to pay for the best trading location inthe world?

            I quote "Switzerland's famously low taxes and light regulation have transformed the country into the world's leading wheeler-dealer in everything from oil, copper and zinc to coffee, sugar, wheat and the other staples of daily life.

            Now, concerned at the country's global reputation for tax avoidance and speculation in basic commodities, Swiss public and politicians are considering action against the secretive trading companies that have given it a starring role at the heart of scandals stretching from the Congo to Colombia."

            1. Matt Bryant Silver badge
              Meh

              Re: AC Re: Tim, get real.

              ".....Light regulation and helpful tax structures....." Oh, it's not just the Amazons and Starbucks of the World (or even just Europe). I know plenty of people that work in Germany but are employed by Swiss subsidiaries and live in Switzerland, commuting every day across the border. I know more than one IT consultant that did the same, working only in Germany but claiming Swiss residency and paying lower Swiss taxes.

              ".....concerned at the country's global reputation for tax avoidance and speculation in basic commodities, Swiss public and politicians are considering action....." Er, no. Just like Mr Junker when pressed on his encouraging tax evasion in Luxembourg, the Swiss are making a lot of noise and the right postures, but the behind-the-scenes message is it all seems to be business as usual. Remember, whilst Switzerland has trade agreements with the EU it is not a member and therefore not bound by either the majority of EU law nor EU voter opinion. Indeed, even when bound by EU law the Swiss have voted their own laws in direct opposition, as shown by the Swiss referendum on immigration which conflicts with EU law on free movement (http://en.m.wikipedia.org/wiki/Swiss_immigration_referendum,_February_2014). Which kinda implies the majority of Swiss aren't that badly bothered about the opinion of the rest of Europe nor the World.

        2. SImon Hobson Silver badge

          Re: Tim, get real.

          > What they are actually doing is looking for a loophole in the law to do something which has now been specifically outlawed - this is not following the law it is avoiding it.

          Simple fact.

          If there is a "loophole" that allows it, then the law allows it<period> Arguably, a loophole is no such thing - it's a feature of the law as written. It may not have been intended (a lot of the results of modern legislation has that problem), but that's what's written.

          So yes, these companies did follow the law AFAICT. Don't like the results - get the law changed.

          And for anyone smugly arguing that tax avoidance is morally wrong ... Do you have a pension ? Do you have anything like an ISA ? If the answer to either of these is yes, then you are benefitting from a tax avoidance scheme. So stop whining about legal use of avoidance.

          1. Anonymous Coward
            Anonymous Coward

            Re: Tim, get real.

            "Simple fact.

            If there is a "loophole" that allows it, then the law allows it<period> Arguably, a loophole is no such thing - it's a feature of the law as written"

            The thrust is an argument that something is illegal, as most comments state it is avoidance not evasion. However following the law indicates that the law is directing you to do something and also is not a feature it is a consequence.

            You could be right to say it is a llowed by law but something is called a loophole as opposed to just generally being allowed or intending to be allowed due to the fact that it is realised that the loophole was not an intention and is a way of circumventing that law.

            For instance a scrap dealer may open up an MOT garage on it's site with a single member of trained staff. They then might offer the service to book the car that you are scrapping into an MOT slot if required before scrapping it. Why? Well then people could drive their old vehicles from all over the country on the road without tax and MOT to get them scrapped and therefore save on large transportation costs.

            1. J.G.Harston Silver badge

              Re: Tim, get real.

              You already are allowed to drive a non-taxed non-MOT'd car on the public highway specifically in order to take it to/from an MOT or a scrappy. I had to do this myself last year when I slipped up and booked my MOT on expiration day and it failed.

        3. Anonymous Coward
          Anonymous Coward

          Re: Tim, get real.

          "...which has now been specifically outlawed..."

          Typo, Should have read "which has not been specifically outlawed"

      3. strum Silver badge

        Re: Tim, get real.

        >Surely the company's legal and moral obligation is to its shareholders

        Myth. There is no statute placing the interests of shareholders above all else.

        >Why should hard working companies/people

        Why should you imagine they are 'hard-working'? For all you or I know, they might be lazy tossers.

        >Of course changing the law would require the politicians to do real work

        Politicians (and the HMRC civil servants) do real work, every year, trying to close down the loopholes dug by (much better-paid) accountants since the previous Budget.

        1. This post has been deleted by its author

      4. Anonymous Coward
        Anonymous Coward

        Re: Tim, get real.

        You're right, "companies following the law" is not "morally reprehensible".

        What *IS* morally reprehensible is how they end up being able to do this:

        - the rich owners of such companies give the political parties the donations they need in order to get elected

        - those political parties then set up the tax systems which let the rich owners and their companies dodge massive amounts of tax.

        (There's even a third stage: when their careers are spent, these politicians are offered well-paid board jobs at these companies, "for their experience".)

        Everyone involved knows that this is how it works. No-one has to ask.

        How do you feel about the morals of this, please?

        1. Anonymous Coward
          Anonymous Coward

          Re: Tim, get real.

          How do you feel about the morals of this, please?

          I think it's morally reprehensible that people decide to vote for parties based on what they hear from the people with the most money, instead of taking the time to understand the issues and vote for individuals. You get the government you deserve.

        2. Mike Pellatt

          Re: Tim, get real.

          "the rich owners of such companies give the political parties the donations they need in order to get elected"

          As someone else pointed out, these "rich owners" are almost certainly you and me, as long as you have a pension scheme of some sort as well. Not just for UK companies either - most (all?) pension schemes' investments will be globally diversified, in order to spread the risk.

          Neither I nor, I suspect you, expect for one moment that any financial donations we make will influence a political party's policies.

          On the other hand, we do have a vote and also the opportunity ti engage more deeply in the democratic process if we wish to change things.

    2. Jim99

      Re: Tim, get real.

      Worstall is using his voice to argue that UK companies pay 0% tax, but income from dividends is taxed at normal income tax rates. And I completely agree with him. Otherwise the same stream of money is being taxed twice: first when it is company profit, and then when it is dispersed to the company's owners.

      1. Anonymous Coward
        Anonymous Coward

        Re: Tim, get real.

        "Otherwise the same stream of money is being taxed twice"

        Money is taxed over and over all the time but they are different taxes. The income tax you get that you then spend on VATable goods or Duty Paid alcohol or the fuel that you buy that has duty and VAT and is paid out of your taxed income which has been subject to corporation tax but may be profits received from a person paying for something from your company using taxed wages.... etc

        Just because an amount of money has been taxed once doesn't mean that it can't be taxed again. You may not like it but it's how it is.

    3. Phil O'Sophical Silver badge

      Re: Tim, get real.

      Tax avoidance is perfectly legal, but it is morally reprehensible on the scale that these companies are doing it. THAT is why people are up in arms.

      So, how much more tax than you're required to pay do you, personally, hand over to the treasury?

      1. Anonymous Coward
        Anonymous Coward

        Re: Tim, get real.

        Seeing as it is quite possible to set up schemes where you can pay as little as 1% income tax then I would suspect most people on here are personally paying a lot more than they are required to pay.

        What most people are paying is the amount that they would be expected to pay without using tax vehicles, trusts and other schemes. There are many, sometimes easy, ways to avoid paying the full expected package of tax. Most people don't go seeking them out though.

        1. J.G.Harston Silver badge

          Re: Tim, get real.

          I currently pay 0% income tax due to my income being less than the personal allowance.

  12. kmac499

    TAX shouldn't be taxing

    Surely the simple things are :-

    Tax Avoidance is organising you money within the Tax Law. OK it may be that you are utilising schemes, arrangements, trusts etc in ways that the legislators did not expect. But there ain't no difference between saving in an ISA or gifting away your wealth comfortably in advance of your death. Both reduce the overall Tax you need to pay

    The corporate world is exactly the same whether claiming for your white van or offshoring your brass plate.

    Tax Evasion is Breaking Tax Law, even if that is nigh on impossible to prove beyond reasonable doubt.

    So 'avoidance' is a complete misnomer and doesn't exist except in the mind of the people defining the rules. and the rest of us who don't have enough money to pay acountants etc to organise our 'avoidance'. Maybe it should be renamed 'Tax Reduction'

    Sad to say this but for once I agree with Wostall the real problem is the complexity of the Tax Code. Sort that out, reduce the opportunities for aggressive Tax Reduction, schemes and a lot of these problems go away.

    1. R69

      Re: TAX shouldn't be taxing

      It is called Tax Planning these days...presumably due to the connotations associated with the use of the word avoidance.

      The issue here is less about the non-payment of corporation tax, and far more about a tax system which is too complicated for its own good and allows this - perfectly legally - to happen.

      If the political parties were genuinely interested in addressing the cause rather than bleating about the symptoms to score points off each other they would do something about simplifying it. Unfortunately, there is so much lobbying, and personal vested interest at stake that its just not going to happen anytime soon....

      1. Tom 13

        Re: If the political parties were genuinely interested in addressing the cause

        While politicians are indeed a cowardly lot, I'm not sure this particular criticism is deserved. Certainly they do currently benefit from the complexity of the system as they can hand out favors to preferred constituents.

        BUT

        Can you point to some general point of agreement in the general population about how best to reform the situation? I can't. Even if I choose the relatively small subset of conservative Republicans within the US there isn't agreement on how to reform the system. About 40% want a flat tax (one tax rate for everybody optional exclusion on some base amount of income) and about 40% want a sales tax which they call the Fair Tax. One thing both groups tend to overlook in their rhetoric promoting their cause is that even if the whole country (less chance of that then the Flat vs Fair people agreeing) suddenly agreed on one of these two choices, you'd still need an IRS-like agency that defines what actually gets taxed, collects it, and enforces the rules about collection.

        My own position on the issue is that while the Fair Tax is economically more efficient, if we are to maintain a just society we need to use the Flat Tax. Only if each citizen is equally at risk to damage from the government will each protect the others as he would protect himself.

        1. Tim Worstal

          Re: If the political parties were genuinely interested in addressing the cause

          The Fair Tax won't work. It's a sales tax (once only, at the point of retail) and needs to be 25% or so to raise the revenue. And a sales tax at 25% will have horrendous avoidance (or evasion) issues. To get a consumption tax up to that rate you need a VAT, a little bit being added each step down the supply chain.

          But the people who want the Fair Tax are dead set against a VAT. Go figure.

    2. Yet Another Anonymous coward Silver badge

      Re: TAX shouldn't be taxing

      So living in the UK, sending your kids to UK schools, using the NHS and roads, while having your "salary" paid into a swiss bank, and doing all your spending on a swiss credit card with a fake swiss address while paying no tax - is no different from having an ISA?

      1. Kubla Cant Silver badge

        Re: TAX shouldn't be taxing

        @Yet Another Anonymous coward:

        No doubt we can all see a difference between an ISA and an elaborate arrangement involving Swiss accounts. Perhaps we can even agree that the former is desirable and the latter undesirable.

        The question is, how to promote the one and discourage the other. The tax laws are supposed to do this, but people find holes and exploit them to avoid tax. There are two possible solutions to this. One is to block the holes and accept that more will appear. The other is for the government to decide what is and isn't legitimate over and above the law. This is what got King John into trouble 800 years ago. Worse, arbitrary taxation is a guaranteed recipe for economic collapse.

      2. Phil O'Sophical Silver badge

        Re: TAX shouldn't be taxing

        So living in the UK, sending your kids to UK schools, using the NHS and roads, while having your "salary" paid into a swiss bank, and doing all your spending on a swiss credit card with a fake swiss address while paying no tax

        Might be nice if you could do it, but you can't. If you're "living in the UK" for more than a certain number of days per year then HMRC will consider you as being fiscally resident, and they'll want to see a tax return. They may make allowances for tax you've paid elsewhere in accordance with tax treaties, for example if your Swiss investments have been taxed at source you'll not be taxed again in the UK, but you will pay tax somewhere.

        One way to limit that is to reside in a low-tax country, but even then you may need to convince HMRC that you have truly made a long-term move. Sending your kids to UK schools, using the NHS, etc. could well show that you still have an attachment to the UK and are therefore still domiciled there, even if you pretend your main home is in some Caribbean tax haven. There are a number of pop stars and sportsmen who've learned that the hard way.

        Of course, you could really just go and live on a Caribbean island...

      3. John 62

        Re: TAX shouldn't be taxing

        The people with Swiss Bank accounts couldn't bear the shame of sending their kids to state schools or using the NHS.

    3. Jim99

      Re: TAX shouldn't be taxing

      Tax avoidance is going to the sandwich shop and taking-out rather than eating-in because take-out means not paying VAT.

      Tax evasion is doing that, and sneakily eating in anyway.

      1. Anonymous Coward
        Anonymous Coward

        Re: TAX shouldn't be taxing

        a clear explanation that even the Grauniad could follow. Well, if it wasn't busy checking on it's own various generations of tax-avoiding corporate structures over the years, whilst decrying those of others.

    4. strum Silver badge

      Re: TAX shouldn't be taxing

      >But there ain't no difference between saving in an ISA or gifting away your wealth comfortably in advance of your death

      Piffle. The difference is that these are instruments created by the Treasury, and used as the Treasury intended.

      What the scrotes are doing is finding obscure instruments, and using them as they were NOT intended.

  13. Kubla Cant Silver badge

    There seems to be a worrying tendency to conflate tax avoidance and tax evasion. There have been recent attacks on "agressive tax avoidance" - the implication being that half-hearted tax avoidance is OK. Many of the tax laws are specifically designed to encourage avoidance, the most obvious example being the taxes on tobacco, alcohol and motor fuel, which are kept high to discourage their use.

    At this point it's usual to quote Lord Clyde, who was a Privy Counsellor and Judge in tax cases:

    No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue.

    1. Yet Another Anonymous coward Silver badge

      I am a non-dom, I haven't lived in the UK for 10 years, I don't pay UK tax.

      If however I worked in London. But flew in on monday morning, flew back to the channel islands on friday afternoon, claimed that the 2days travelling didn't count so I was only present 3*52 days/year and so shouldn't pay any UK tax.

      I think a reasonable person on a jury might detect a difference - even if the accountants don't

      1. spib.burfank

        only present 3*52 days/year

        I wouldn't do that if I were you: that's no longer true (it wasn't statutory and one day the Revenue decided to start counting those days, contradicting what they'd advised people the rules were).

      2. Anonymous Coward
        Anonymous Coward

        I am a non-dom, I haven't lived in the UK for 10 years, I don't pay UK tax.

        You are non-resident, but not necessarily a non-dom.

        If however I worked in London. But flew in on monday morning, flew back to the channel islands on friday afternoon

        If you're still a British citizen (have a British passport) there's a fair chance that the Inland Revenue would decide that such an arrangement could mean that you were still domiciled in the UK, even if not resident (a fine point of tax law), and they'd want their pound of flesh.

  14. Anonymous Coward
    Anonymous Coward

    Great article - *completely* missed the point.

    The Private Eye article - which I read - whilst bandying numbers about, which may or may not have been correct, was more critical of the actions of HMRC in dealing with Vodafone. Particularly the fact that it all seemed to be settled over lunch in a gentlemans club. And that far from being viewed in anyway as improper, this appeared to be SOP for HMRCs dealings with large multinational corporations. In fact, the person who made the deal - Hartnett - went so far as to believe he had no accountability to the Public Accounts Committee when summonsed.

    *That* is the real scandal.

    1. Anonymous Coward
      Anonymous Coward

      Re: Great article - *completely* missed the point.

      "it all seemed to be settled over lunch"

      Yes. And that's a lie. But rather than take my word for it, how about you read the article?

      1. JimmyPage Silver badge
        FAIL

        Re: Great article - *completely* missed the point.

        to be fair AC said "seemed to be".

        quod Caesaris coniugium non suspectis

      2. John G Imrie Silver badge

        Yes. And that's a lie.

        Really.

        If that was the case how come Private Eye has not been sued into oblivion by

        a) Vodafone

        b) HMRC

        c) David Hartnett

        Could this be that Hartnett had to admit to 'mistakes' being made in his handling of Vodafone's tax bill?

        1. Anonymous Coward
          Anonymous Coward

          If that was the case how come Private Eye has not been sued into oblivion

          "If that was the case how come Private Eye has not been sued into oblivion"

          As McDonald's learned years ago in the McLibel trial, big corporations have everything to lose and nothing to win with libel trials. Arguing with commentards in the courts is just a much more expensive version of arguing with people on the internet (as indeed most commentards here have demonstrated: despite plenty of facts available, people would rather cling to their prejudices).

          1. Anonymous Coward
            Anonymous Coward

            Re: despite plenty of facts available, people would rather cling to their prejudices

            Indeed, and it happens on all sides. Everyone needs to be open to trying to understand other points of view or we get nowhere. Language like "hard working companies" shows a similar bias to "dole scroungers".

        2. Annihilator

          Re: Yes. And that's a lie.

          "If that was the case how come Private Eye has not been sued into oblivion by"

          Old adage - never pick a fight with someone who buys ink by the barrel. Not quite the appropriate to apply to Private Eye, but the meaning stands.

  15. Dan Paul

    Now you understand why...

    I've been saying that none of these companies owe you one thin dime of taxes (regardless of the political posturing).

    Europe does not control US corporations and the US does not control European Corporations.

    Tax loopholes that apply to one, apply to all. If you don't like them, change them.

    1. Doctor Syntax Silver badge

      Re: Now you understand why...

      "Tax loopholes that apply to one, apply to all. If you don't like them, change them."

      Quite - and, to a large extent, that's what the debate's about.

  16. phaedrus_the_second

    Abolishing Corporation Tax

    > My own suggested change would be to simply abolish corporation tax

    > and tax dividends and capital gains on shares at normal income tax rates.

    Is it really a good idea that everyone could defer tax indefinitely by stashing their savings in a company?

    1. codejunky Silver badge

      Re: Abolishing Corporation Tax

      Yes

    2. Yet Another Anonymous coward Silver badge

      Re: Abolishing Corporation Tax

      So you pay tax when you take it out - what's the difference?

      It's allowing people to save tax by transferring money from companies to the themselves in different boxes that is the issue

      1. DougS Silver badge

        Re: Abolishing Corporation Tax

        So what stops every small business, or even individuals, from incorporating themselves as a way to avoid liability? One of the benefits (at least in the US) of a C corp is that the shareholders are shielded from unlimited liability for the corporation's actions. The corporation might be sued into bankruptcy, but if it is worth $1 million and is sued for $1 billion, the shareholders' losses are limited to their stock in the corporation, they can't lose more than that.

        That's why C corps are taxed at both a corporate level and individual level. If corporate tax is abolished, you don't 'pay the price' for that liability shield any longer. Maybe a fruit stand isn't likely to be sued for $1 million, but if someone's child dies from eating a piece of rotten fruit, it might happen. Why would I as a fruit stand owner want to risk losing my home and car, rather than just the fruit stand? Might as well incorporate - cheaper than paying for liability insurance!

        1. sed gawk

          Re: Abolishing Corporation Tax

          Without taking a view one way or other, purely as a thought experiment, the difficulty for the average person would be getting an employer to go along with the idea of paying every person through a company.

          I don't think they'd wear it, which would limit the usefulness, but I think if you were so inclined I think you could do so.

          Not sure its quite as straightforward to make it work for you, I run a small business, I pay my bills, fixed overhead and variable invoices from multiple customers and I frequently pay other people to assist me.

          If you pretend all the invoices in one year came from one "employer" being a business returns me less cash compared to sticking the total into an online paye calculator like http://www.listentotaxman.com/

          To answer the obvious question, I am a business because my customers won't deal with me otherwise.

          What am I doing wrong if it's a simple as being a business = save loads / make loads ?

    3. AndrueC Silver badge
      Thumb Up

      Re: Abolishing Corporation Tax

      Is it really a good idea that everyone could defer tax indefinitely by stashing their savings in a company?

      It's so good that we should give it a name. I suggest we call it 'Capital investment'. Maybe we could set up some kind of marketplace where the funds we stash away can be moved between different companies in order to best benefit us. Perhaps companies would see that as an opportunity to compete and we'd develop a kind of 'Darwinistic' survival of the fittest environment.

      All we need now is a name for such a marketplace. Lemme think a minute.

  17. Senshi

    Tim just trolling. Again

    1. Matt Bryant Silver badge
      FAIL

      Re: Senshi

      "Tim just trolling. Again" Oh puh-leeese, grow up! Just because Tim posted an article that you take upset at due to your socio-economic outlook it is "trolling"? By that measure, every issue of Private Eye is "trolling", which is exactly why I and many others enjoy reading it. I think it is fairly safe to state your reaction is that of defeat, because you cannot argue what Tim has expounded.

  18. Naselus Silver badge

    Nice article. Totally misses the point of the furores over taxation, of course, but then Tim's never proven particularly good at accurately reproducing 'lefty' arguments, tending to either create strawmen or cherrypick the easy targets while ignoring the toughies (in the Starbucks case, for instance, he doesn't bother to note the other means by which the company was aggressively avoiding paying taxes beyond using the transfer pricing - and he neglects to point out that the UK company was paying transfer prices twice over, too).

    As other commentards have noted, the real focus of lefty rage in the present scandal is about UK Tax law being designed to produce loophole after loophole, and about HMRC's decidedly comfortable approach to massive tax avoidance - including turning round to hugely wealthy companies and cutting deals to recoup small portions of owed taxes. We KNOW that the companies are only playing by the rules. We're annoyed because those rules have fairly obviously been written almost entirely so that these companies can play games and reduce their tax burden to insanely small amounts.

    No-one's saying that the companies broken the law. They're saying that the UK tax system is shite. We have a system where non-Doms can living and operate in London year-round while parking their income in Switzerland and paying no tax on it; where Starbucks can pay 8 million in taxes over the course of 16 years (and simultaneously report massive losses to the tax man while reporting huge profits to investors - which really ought to be fraud on one hand or the other), and where HSBC is permitted to literally sell aggressive tax avoidance schemes as a product for the super-rich.

    This is a broken method of collecting revenue. Tax is optional for the wealthy and mandatory for the poor, and this ties into the broken political funding model which means that the main parties directly profit from permitting tax avoidance. What we have is essentially a system where tax dodgers provide kickbacks to political parties, who then avoid reforming tax law to clamp down on it (this is even more obvious and blatant in the US, of course).

    1. ragnar

      It’s not that the rules have deliberately been written to create loopholes for companies, it’s that it’s really, really difficult (read ‘practically impossible’) to write laws that cover every eventuality without having loopholes. Sit down with a tax lawyer and try and draft a ‘simple’ piece of legislation to accomplish a simple task. You’ll soon discover it’s incredibly difficult to cover every situation without making things very complex.

      Our tax law is monstrously huge (several multi-inch volumes) – it’s impossible for there to be no loopholes. The government is trying to redress the balance by falling back on various ‘principles based’ anti-avoidance strategies, but those are subjective and open to interpretation by their nature.

      1. sed gawk

        Totally agree the tax laws are too complicated to be bug free.

        I don't really understand why a flat rate for everyone couldn't work, I'm sure someone will be along to explain why it's hopelessly naive.

        I have a problem with the fairness aspect. Essentially, either something is legal or not.

        If it's legal, however repugnant the activity, one should be allowed to do it unencumbered.

        It seems fairly simple, if I pretend my situation is different, then it's evasion, if it's true then it's avoidance.

        It's then seems to be wrong to say "you read the rules and structured everything to avoid giving even one bent copper more than the law compelled you to but broke no laws." but it's illegal anyway.

        I'm not arguing in favour of screwing over the taxpayer, but a prohibition on working out the best execution path through the cruft ridden (tax | *) system seems unjust in a society where being a horrible person is not yet illegal.

      2. Olius

        "It’s not that the rules have deliberately been written to create loopholes for companies"

        No, they have. They really, really have. KPMG and others provide consultation services to the govt, often for "free", to help write the tax laws (because there is no one "in house" any more), and then use the laws they wrote to sell "tax efficient services".

        Many back issues (and likely many future issues) document these laws and relationships.

        This isn't "leftie crap", it is based on proper journalistic investigation from an organ that is well versed with printing facts (Otherwise "the most sued man in britain" would be behind bars many times over, wouldn't he?)

        As the OP on this subthread stated, the point has never been that this stuff is illegal, it is that it is immoral and corrupt. Another point is that without this corruption making the immoral completely legal, we would likely not need austerity.

        1. Olius

          Damn, missed the edit window - I meant "back issues of Private Eye"

    2. Matt Bryant Silver badge
      FAIL

      Re: Naselus

      Whilst I agree that you have clearly outlined the "lefty" grievance from paragraph two downwards, and I would even agree the tax system is not perfect, you have failed to explain the one-sided nature of that viewpoint. For example, you have conflated "big corporations" with "the rich", failing to include that many of "the poor" have their money tied up in pension funds also benefiting from the tax rules that allow tax planning. As far as you are concerned, tax planning/avoidance only benefits "the rich", which the pensions fund case shows to be untrue. Your bias makes you blind to inconvenient facts. You also fail to understand that big corporations employ lots of people in the UK - HMG have to balance how much they whack them with a tax stick with the possibility they will take their business elsewhere, which means lots of "the poor" you claim to care about will be unemployed. Your failure to understand this is on par with such "geniuses" as the unions that trashed the British car industry, doing themselves out of work. What you and a lot of other "lefties" need to understand is not all "big business" is "evil" and you need to strike a compromise in a modern economy, by changing taxation laws if required (as TW pointed out) rather than just relying on spreading lies and bile.

      But you then get a downvote for insisting that TW uses "strawmen" and "cherrypicks" arguments, neatly avoiding actually stating when or how he has done so. That is a standard denigrating tactic amongst poor losers that don't like to admit when they cannot argue the point. I would like to give you a second downvote if I could for your use of "aggressive tax avoidance", which is just typical and mindless repeating of a purpose-made slur. Please try harder.

      1. Olius

        Re: Naselus

        @Matt

        "As far as you are concerned, tax planning/avoidance only benefits "the rich", which the pensions fund case shows to be untrue."

        There is a difference you are missing. Using ISAs and pensions to save paying tax is using certain financial instruments for the purposes for which they were explicitly designed. They are not loopholes, they are financial instruments created specifically to encourage saving.

        Using certain laws on overseas trading which were designed to make the trading easier, to make it look like your company makes no profit by loaning yourself your own money from the Caymans and then paying yourself back at massive profit/interest, when in fact it made billions, is using certain instruments in a way they were never designed for, hence it is an abuse and is morally wrong.

        I'm not sure I can even be bothered to attack the arguement about "leave these poor companies alone - they pay LOADS of tax via employee contributions, they shouldn't have to pay corporation tax too! And anyway, they might leave!" - Anyone reading that can see it doesn't make sense on any level.

        1. Matt Bryant Silver badge
          FAIL

          Re: Olius Re: Naselus

          "......There is a difference you are missing. Using ISAs and pensions to save paying tax is using certain financial instruments for the purposes for which they were explicitly designed...." You are assuming I was suggesting pension schemes that take advantage of tax laws are just as bad. That was not my point. My point is those pension funds get invested in the stock markets and you can bet that the spread of investments will include those big, bad tax avoiders like Starbucks and Amazon, as well as hundreds of smaller companies that are also doing as much tax planning and avoidance as they can. Even the Co-op had a hard time keeping their "morally acceptable" ethical investments clean (http://fincris.net/the-ethical-failures-of-the-cooperative-bank/).

          Heck, even those unions run by "Red or dead" firebrands that shriek at every opportunity about "evil capitalists aggressively avoiding tax immorally" stick their investments into funds that use tax avoidance or other "immoralities" (http://thetyee.ca/News/2012/11/13/BC-Teachers-Pension-Plan/)! Such evangelical lefties also often later seem to be very selective of how they apply their "morals" to their investments (http://www.dailymail.co.uk/news/article-2539801/Arthur-Scargill-branded-hypocrite-trying-London-flat-Right-Buy-laws-old-foe-Margaret-Thatcher.html).

          ".....I'm not sure I can even be bothered to attack the arguement about "leave these poor companies alone - they pay LOADS of tax via employee contributions...." Yeah, we all know that actually translates to the fact you can't argue it. It's not the first time someone has pushed such selective leftie claptrap, as TW pointed out in the first paragraph of the article.

  19. JimmyPage Silver badge
    Alert

    Serious question

    is it cheaper for a company to spend money paying tax, or lobbying politicians,

    Maybe the tax avoidance we are seeing is evidence our politicians aren't grasping enough ?

    1. Nick Kew Silver badge

      Re: Serious question

      Nice suggestion, but I suspect the answer is no. They could simplify as suggested by Tim, but that would be politically ... um ... courageous. Just imagine the headlines about tax cuts for (billionaire?) bigcos. Not to mention the demands they pass on those "savings" to the consumer.

      To address your question more directly, the more complex the rules, the more scope there is for playing creatively with them. The expenses issue showed many of our elected politicians to be adept at harnessing such complexity for their own gain. I'd expect the non-grasping politician to be in favour of simplification.

  20. Ancient Oracle funkie

    Hmmm, methinks the author is also being economical with the truth. In the article it states:

    " ...it became clear (in Cadbury, a related case) that under EU law the UK's CFC rules did not apply within the EU"

    And there endeth the paragraph with no future reference to legal proceedings looking as if Vodafone were the victors However, let's take a quick glance at what one might think of a reliable source:

    http://www.vodafone.com/content/index/media/faqs_statements/vodafone_tax.html

    And what do we find? That after the above decision the case continued in the UK -

    Back to the Special Commissioners - Vodafone lost

    Next the high court - Vodafone won

    Off to the Court of Appeal - Vodafone lost and were refused leave to appeal

    So when Tim says "At which point it was established that there's no tax bill at all." it's true, insofar as at that point there probably wasn't! In fact, despite Vodafoen losing the final round, there might not have been an actual tax bill, just HMRC suggesting that they were owed some cash.

    And finally Time says " There simply was no deal, no negotiation" whereas Vodafone says "Vodafone and HMRC resolved to work towards a full and final settlement, as summarised above." So8unds like a negotiation leading to a deal to me. But I'm not an author so what do I know

  21. Ian Johnston Silver badge

    Very entertaining. I don't know which bit I like best, the claim that every single HSBC customer who owed taxes has paid or the claim that call-me-Dave's meeting with Vodafone didn't happen, and that everything was settled through a curiously unreported court case.

  22. Anonymous Coward
    Anonymous Coward

    I'm pretty sure the authors prejudices are running pretty strong in this article.

    HMRCs lawyers felt very strongly there was a case and felt very strongly they could win it. The case never happened so statements like "these rules didn't apply" were never properly tested. Vodafone of course were desperate for the rules to not be tested as they felt they would lose and they'd already set aside a much larger stack of money for when that happened.

    What happened was the dick in charge completely lacking in the expertise necessary to make the decisions he did, had a nice lunch, shook hands and gave up.

    I notice there's also no mention of the similar stitch up Hartnett arranged with Goldman Sachs.

    1. Tim Worstal

      I've written about the Goldman case elsewhere (back at the time) and I agree that that one is at least more arguable that Hartnett screwed up. They probably should have been forced to pay the interest on the bill they delayed paying. About £10 million as I recall....

  23. Anonymous Coward
    Anonymous Coward

    This must be the worst article I have ever read on here.

    Virtually all news outlets have been reporting on the 1 in 1000 prosecutions for the HSBC tax avoiders, aka 3600 - 2600 = 1000 and 1 prosecution out of those 1000 (this is the issue).

    If foreign companies are locally based for selling and distribution but issue the actual invoice from a low tax country, how can that not be considered avoidance?

    Amazon for example, paid a measly 0.1% tax on £4.6 billion sales in the UK, everything involved in those sales, website, storage, distribution etc is UK based bar the invoicing.

    That is the complete opposite of your HMRC quote.

    1. Tim Worstal

      Re Amazon

      Two bits of law.

      1) EU law says that any EU based company can sell anywhere in the EU and pay corporation tax in hte country where it is based. That's what "single market" means. Except, if there's a "permanent establishment" in the country of sales. Then tax on he profit from those sales will be paid in hte country of the sales.

      2) UK Luxembourg tax treaty (and this is the standard OECD treaty) is here:

      http://www.hmrc.gov.uk/taxtreaties/in-force/l.htm

      Which says:

      (3) The term "permanent establishment" shall not be deemed to include:

      (a) The use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

      (b) The maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

      (c) The maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

      (d) The maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;

      (e) The maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.

      Or: warehouses are specifically excluded from creating a permanent establishment.

      1. Doctor Syntax Silver badge

        Re: Re Amazon

        It raises the question of what it takes to create a permanent establishment.

      2. Desk Jockey

        Re: Re Amazon

        This leads to a simple conclusion that Luxembourg should be kicked out of the EU!

        OK I jest, but seriously, having a small office with a part time accountant based in it, holding board meetings twice a year there and claiming this is their permanent establishment is stretching things beyond farcical. A scenario where a company bases itself in a core market, let's say Germany or France as an example and takes advantage of their competitive tax system is what the EU laws were designed for. Luxembourg is a small country with very low expenses, is able to freeload off its larger neighbours (check out their nice and expensive armed forces for self defence!) while shafting the neighbours out of tax at the same time. The EU as a whole tends to believe that tax should be spent on socially important things like health, education and infrastructure while Luxembourg gets away with making money (and not a lot of it really by big boy standards) out of preventing that social investment from happening. It is going to lead to a lot of anger...

        Although I would agree that the solution is to reform the laws not to punish the companies. Unfortunately reform of tax law is significantly linked with political corruption/funding.

        1. Matt Bryant Silver badge
          Facepalm

          Re: Desk Jockey Re: Re Amazon

          "This leads to a simple conclusion that Luxembourg should be kicked out of the EU!...." Well, by that argument, we should kick the Germans out for having smarter unions than the UK's "Red or dead" bunch of morons, seeing as the German unions concentrated on working with management to build up their efficiency and therefore their economy without aggressive and confrontational (and ultimately job-destroying) pay demands. Oh, hold on a sec, I can see why that might not appeal to some of the posters here.

          Then the Greeks can ask for the UK to be kicked out for not running up such a bad debt balance, and the Italians can ask the French to be kicked out for having a better health system, etc., etc. Face it, all members of the EU have advantages of one form or another, and they seek to maximise those advantages inside EU laws. You could suggest the one way to stop that would be to have one set of tax laws and one monetary system for all of the EU, killing such "unfair" tax avoidance as Amazon and Starbucks are accused of, but I would suggest Amazon and Starbucks would simply move their "headquarters" outside the EU to another tax haven and proceed as before. There's also the slight problem that the EU has proven grossly incompetent at running the Eurozone (Greece should never been allowed entry with their dodgy books, and it looks like the other Euorzone members have been equally "immoral" with their "unfair" but legal debt swaps - http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDibpgE_X2MM), so the whole tax avoidance/planning issue is likely to continue for many years yet.

      3. Olius

        Re: Re Amazon

        The fact that it is legal, Tim, has never been the issue. If it were illegal, people would hopefully be locked up. The point is that it is immoral and an abuse of all of us. If the companies that could afford to set up these arrangements paid the same effective percentage in tax as the companies that can't, the UK would perhaps not have food banks or a failing NHS.

        To put that another way, some tax analysts have estimated this amount to be around the same as our deficit. i.e., we would not have a deficit if we had been getting the tax in. No deficit = no reduction in funding of services. And, perversely, no reduction in services would likely increase our GDP indirectly - healthier, happier people with a good safety net work better.

        When they "legally" take this money overseas, we all suffer. As we suffer, our GDP goes down, then we suffer some more.

        I hope this is on your concience as you defend this system, Tim.

        1. codejunky Silver badge

          Re: Re Amazon

          @ Olius

          "The point is that it is immoral and an abuse of all of us"

          That sounds like an excessive tax system which makes it more enticing to keep the money out of the country. Morality is a flimsy argument for anything because morality is very fluid and is not absolute. Is it immoral to steal? Yes, so tax is immoral. It is immoral to legally avoid tax? You say yes so anything you do is immoral.

          "the UK would perhaps not have food banks or a failing NHS"

          And the last gov wouldnt have gone on an excessive spending spree, the public sector wouldnt make up about half of the employment.... oh wait! If you assume the problem is the availability of money then you ignore the spending element. The fact that govs have been massively overspending in a major boom negates any hope that more money would solve the problem. Obviously this discounts your entire theory of no deficit if they paid up.

          "When they "legally" take this money overseas, we all suffer. As we suffer, our GDP goes down, then we suffer some more."

          So you suggest we send the thief to our neigbour because they can afford it, otherwise they will steal from us? Should we not consider the idea of stopping the thief? Hence argue to reduce the tax burden and expect the gov to be responsible without demanding we bail out their bad habits and luxury lifestyle?

          1. Olius

            Re: Re Amazon

            @codejunkey

            I think I haven't made my point very well. Let's try again.

            I see a difference between a law or rule and a consequence of that law, or loophole. It takes the law in the wrong spirit.

            Suppose you run a cafe and you set a rule of "bottomless coffee - unlimited refils!". You would expect people to use this rule to have 2, 3, 4, 5 coffees. It makes people feel welcome and hopefully means they will buy more things in the cafe and invite their friends. It is good business sense.

            But someone starts coming in several times a day every day with a couple of 2l bottles and fills them up using your coffee cups after buying just one coffee. So they have paid for, say, 2 cups of coffee and walked off with, say, 10l of the stuff.

            You can argue that is well within the rule, but most people would consider this taking the p***.

            And then instead of changing the rule in some way, you decide to let it stay as it is but put the price up to cover it. So now everyone in your cafe is paying for the person (eventually "people") who are exploiting this loophole.

            1. codejunky Silver badge

              Re: Re Amazon

              @ Olius

              I understood that meaning, but people can decide that the shop is too pricey now and move on, so the analogy doesnt work. Instead the gov is stealing money from people. Some people keep their money out of reach of the grubby mits of the gov even if it costs them to do so because it is cheaper to pay for security than to let the thug take the money. Instead of demanding the thug stops the people seem to argue for the thug to take more, just please not from us.

              The gov spent up. It doesnt matter how much money they could have had coming in they would have spent it and more. It was bad policy, bad economics, lack of financial capability which caused this problem NOT the legal avoidance of tax. The problem needs addressing but the problem is not grabbing more tax money through higher tax.

        2. Matt Bryant Silver badge
          FAIL

          Re: Olius Re: Re Amazon

          ".....The point is that it is immoral and an abuse of all of us...." Morality is simply down to perception, so all you are doing is insisting your POV is more important/right than anyone else's and the sole matter of concern when considering the issue. This is disproven by the simple fact that if that were true, all the politicians would be falling over themselves to implement tax laws closing such loopholes. They are not because they realise (unlike you) that accepting a measure of tax avoidance inside the law is necessary to remain competitive. Just ask the ex-workers from British Leyland how making themselves uncompetitive worked out!

          ".....If the companies that could afford to set up these arrangements paid the same effective percentage in tax as the companies that can't, the UK would perhaps not have food banks or a failing NHS....." What complete and utter male bovine manure! Firstly, please do define the performance point at which you would consider the NHS to be at least "not failing", and the corresponding level of increased investment that would require. I won't even bother to ask you to justify your claim of "failing" as that is just as much of a biased perception as your "immoral" claim. It might interest you to actually know that the 18% of the 2015 budget planned for the NHS is £133bn - if that level of spending is "failing" what level would satisfy your leftie "morality"? £150bn? £200bn? Oh dear, suddenly it looks like even the ridiculous "£6bn" figure mentioned in the article would not make a dent in the funding gap you insist exists, and certainly not leave additional cash to feed those using food banks. Not surprisingly, another leftie myth debunked in seconds.

          "....some tax analysts have estimated this amount to be around the same as our deficit...." Apart from asking which "tax analysts" said that, you yourself have already made that point irrelevant. You see having no deficit would only mean collecting as much tax as we plan to spend, which would still leave the "failing" NHS (you do remember you insisted it was underfunded, right?) getting their £133bn, which you have already implied is not enough. By your insistence (I could never be generous or drunk enough to call it "logic"), even if all the Big Bad Capitalist Corporations stopped avoiding tax it wouldn't provide the additional funds you insist are required for the social utopia you insist we should be having. So your argument is still a load of leftie propaganda bullshit.

    2. ragnar

      60% of the 1,000 were found to be fully compliant with UK law (i.e. they were non-domiciles not liable to UK tax, beyond paying the flat rate charge).

      The remainder HMRC prefers to get the lost tax, penalties and interest back without entering into complex court cases, where the outcome is uncertain, cost to the taxpayer very large and where the cash reward is considerably delayed. It's much harder to prove 'beyond reasonable doubt' that someone has committed fraud, then to get the taxpayer to pay up.

      They're being pragmatic by only prosecuting in the most severe cases.

  24. arrbee
    Childcatcher

    I'm sure it is a complete coincidence that all of the major political parties have enthusiastically taken up offers of free advice from the major accountancy consultancies over the last 15 years or so.

    ( I see the latter's latest area of financial entrepreneurship is to advise local government how to get out of the ludicrous PFI contracts they previously obliged them to sign up to by setting the rules from within central government - it is difficult not to admire their, err, flexibility ).

  25. Nick Kew Silver badge

    Yes, but

    Yes it's the law that's the problem. Your suggestion would make a sensible workaround. Except, it's too simple and easy, and simplicity is the enemy of corruption - whoops!

    However, I think you do your argument no favours by progressing it from the entirely sensible (Vodafone not paying Uk corp tax on German earnings) to the contrived. Yes of course Starbucks is doing the right thing given its structure, but the issue there is: was there ever a legitimate reason to create that structure in the first place?

    That is, if you don't accept tax avoidance as a legitimate reason. Your argument would be all the stronger if you'd stopped at Vodafone and not taken it into territory that requires that question to be answered. You've given anyone who doesn't accept the legitimacy of tax planning a weapon with which to rubbish you there!

    1. SImon Hobson Silver badge

      Re: Yes, but

      > but the issue there is: was there ever a legitimate reason to create that structure in the first place?

      Obviously yes - basic economics, if you have an opportunity to decrease your costs and/or expenses then doing so will increase profits. The law allows it, so it's legal. We may not like it, but that's not the company's fault - it's the fault of the legislators that made a law that allows it.

      As an analogy, some businesses don't register for VAT when they could do. If the bulk of their sales is labour, and the bulk of their customers are not VAT registered - then it may be better to not register for VAT (if their turnover is low enough), take the hit on not being able to reclaim the VAT on materials purchases, but be able to not add VAT to their labour rates. End result is the business makes more money, the customer pays lower prices, but the VAT man gets less money. Would it be morally wrong for the one man and a van jobbing builder to do that ?

      Similarly, there are pensions and ISAs - both are tax-efficient ways of saving money, especially if you (legally) use salary sacrifice to allow your employer to put money in your pension and reduce tax paid. So yes, I take advantage of several legal tax avoidance schemes - does that make me immoral ? PS - I'm a basic rate taxpayer, even if I doubled my income I'd still be a basic rate taxpayer - so hopefully people will agree that "as the little guy" I'm entitled to do what I can to (legally) minimise my tax. Does avoidance only become immoral above a certain income/richness level ?

      1. Olius

        Re: Yes, but

        So when a person creates two companies, one in the Caymans and one in the UK, and the Caymans company (with one employee - a part time janitor) lends the UK branch £50m at 20% APR, makes profits in the UK of £40m a year for two years and pays the Caymans branch £80m which leaves 0 to pay in the UK because there was no actual profit, and that person is then paid £30m by the Caymans branch, that is EXACTLY the same as me using an ISA that was designed to pay interest with no tax?

        OK then...

        1. sed gawk

          Re: Yes, but

          It's clearly not the same but the basic point you raise in one where it's clearly a made up scheme not a real situation.

          The reality is more complicated, at what point do you require a company to *deliberately* not be as tax efficient as possible?

          Take my small business, I pay vat every three months, if I don't pay it on time, they charge me more money. I read the rules saying "pay on time or it will cost more" and I pay on time, hence I have deliberately structured my affairs to reduce my tax bill, why is that wrong?

          I think you'd agree that seems a fairly reasonable action, but really how is that any different to the ones who are on the right side of the law with very complicated corporate structures?

          At issue is the basic principle of legality, we have laws not morals to bind us. There are "moral" legal systems in the world, and I am eternally grateful that I do not reside within their jurisdiction.

          Which leaves us with laws, either its legal or not, and if its legal and you want to do it, you should be allowed to do so with whatever degree of complexity you desire.

          Should you be able to use any legal means at your disposal to reduce your tax bill, including setting up elaborate but legitimate overseas holding companies?

          If you want to do so and you are not breaking the law, yes you should be allowed.

        2. Matt Bryant Silver badge
          FAIL

          Re: Olius Re: Yes, but

          ".....ISA....." And where do you think your ISA funds get invested, comrade? Oh crap - in the very tax-avoiding companies you are slating, and because those companies perform better by tax avoiding. Get it? Seriously, put down the Marx and go actually learn something about the markets before you try any more "reasoning".

    2. Matt Bryant Silver badge
      Stop

      Re: Nick Kew Re: Yes, but

      "....That is, if you don't accept tax avoidance as a legitimate reason...." BZZZZT!! Sorry, that assumption is incorrect - tax avoidance is not illegal, therefore it is legitimate. Please stop trying to insist otherwise.

      You really need to work harder on understanding the difference between "fair" and legitimate". "Fair" is what people throw about when they are upset or morally-offended by something which is not illegal, usually when they don't have an argument that holds water, so they fall back on squealing about "unfairness". To make tax avoidance illegal you would need to change the laws, which is why we have ended up with such a humongous mess of UK tax laws - people trying to make it more "fair" to at least the majority (because you cannot please all of the people all of the time). To change the laws you either need to convince enough people that your reasoning is valid (unlikely) or get them to swallow such untruths by bleating on about "aggressive tax avoidance", etc., etc.

      1. Nick Kew Silver badge

        Re: Nick Kew Yes, but

        Matt Bryant: whoosh! Why not read what I said before shooting down something I didn't say?

        I was posing the question not to answer it, but to try and hint to Worstall (and others with the brains to understand) that the question might be asked. Or insidiously implied, in a manner that obscures what the underlying question actually is and admits of whatever answer the questioner wants.

        1. Matt Bryant Silver badge
          Facepalm

          Re: Nick Kew Re: Nick Kew Yes, but

          "..... whoosh...." Yes, I bet that's a sound you're very familiar with. In essence you are now trying to insist you don't want to say that tax avoidance is not legitimate, it's just you're so upset by Tim's article that you just have to disagree some way, so you chose to make out someone (obviously not as reasoned and smart as you, and in some way reality-challenged, which you of course are not) might bring up your point. Shall we look at your original post?

          ".....Yes of course Starbucks is doing the right thing given its structure, but the issue there is: was there ever a legitimate reason to create that structure in the first place?....." Because, of course, you know there is actually no difference in legality between Vodafone's case and Starbucks tax avoidance, you just try and make the inference that planning to pay less tax and putting in place measures to do so makes it "illegitimate". Because, of course, you are too reasoned and smart and not in any way reality-challenged by socio-political outlook to think that really, you're just suggesting others might think that way, right? A river in Egypt comes to mind.

    3. Tim Worstal

      Re: Yes, but

      "That is, if you don't accept tax avoidance as a legitimate reason."

      Well, I do accept tax avoidance as a legitimate reason. That some people will manipulate so as to reduce their tax bills lowers the tax bills of the rest of us.

      Yes, *lowers*. Because it puts an upper limit on how much the political class can screw out of the populace. And agreed, tax evasion is by definition not legal but I'd also argue that it's legitimate in a different sense. In that it similarly reduces the impositions on the rest of us.

      True, this is arguing from a very cynical standpoint, that of Mancur Olson. Who argued that the political system is just a stationary bandit (rather than a roving one, he arguing that it was better to have a stationary one as they would farm the population rather than just hunt it) out for whatever can be squeezed from us all. So, people willing to rebel, to disobey, reduce what can be squeezed.

      1. BobRocket

        Re: Yes, but, No but

        Olson argued that farming is more productive overall than hunting, but he never explained who/what was farming whom.

        Perhaps we set up the mad financial system that clearly fails to service human goals in any kind of optimal fashion is because we can't see past the bio/chemical warfare going on in our garden.

        It's just one giant servicie industry, the value is in the deal.

  26. Anonymous Coward
    Anonymous Coward

    what is going on with the register these days?

    It's all climate denial and rants against 'Lefties'.

    What happened to the IT news? If I want rambling right wing justifications for tax avoidance and attacks on 'Lefties', I'll read the UKIP web site or the Daily Mail.

    I'd rather the Reg hacks just kept their political axes to themselves.

    1. Nick Kew Silver badge

      Re: what is going on with the register these days?

      It's been climate denial for years. No point in arguing with pseudo-religious nuts, even when they write for El Reg.

      Worstall on the other hand writes a lot of sense, though he does have a bad habit of couching it in exaggeration and intemperate language on occasion.

      As for the Wail, surely its only purpose is to rouse its rabble to anger. And UKIP, in common with LibLabCon, the Greens, the SNP, Respect, and others, has some sensible things to say if you can ignore the nasty noise and evil and/or illiterate policies. I'd say Worstall has more to offer, even if some of his stories are ... um ... better than others.

    2. Olius

      Re: what is going on with the register these days?

      Hear hear, Cap'n!

      It's turning in to a bit of a rag, isn't it. I can't be the only one thinking of the glory days when it was a worthy competitor to slashdot.

  27. Anonymous Coward
    Anonymous Coward

    One Question:

    I thought tax rules specifically disallowed artificial business constructs such as letterbox shell companies that are used to avoid paying tax? (Such as Vodafone's business setup in Luxembourg?)

    1. Doctor Syntax Silver badge

      Re: One Question:

      That one's easy. EU legislation overrides UK rules.

      1. Hans 1 Silver badge

        Re: One Question:

        >That one's easy. EU legislation overrides UK rules.

        EU legislation is more severe, who would have known ?

    2. Yet Another Anonymous coward Silver badge

      Re: One Question:

      Yes - but if you take them out for a decent lunch they will overlook it.

  28. Zog_but_not_the_first Silver badge

    Call me simple...

    But I can't help wondering what was/is the driver for all of these hideous tax laws with their labyrinthine complexities.

    1. Anonymous Coward
      Anonymous Coward

      Re: Call me simple...

      Because the fairest system is never the simplest one.

    2. Olius

      Re: Call me simple...

      Because if you can save a few folks a fair bit of tax, they might give a meaningful chunk of it to your political party. Step two is to force the electoral commission to relax the upper limit on how much you can spend in your election campaign.

  29. TechicallyConfused
    Thumb Up

    Fresh Air

    If it were possible to read a "breath of fresh air" that is what I would just have done.

    Great article, explained a set of simple issues nice and simply. While I'd love to be able to tax Vodafone £5 Beeeelion just for screwing my bill up so many times ,,,,,, Well, let's just say I wish that the "news" could report this is such simple terms but I suppose it would turn something sensational into what amounts to a "non-event mass with a quantum probability of zero".

    1. Olius

      Re: Fresh Air

      The article may be acurate in some ways, but misses the mark and point in many others. If you have the means, I cannot recommend enough getting some back issues of Private Eye, where they cover Dave Hartnet and Vodafone very very carefully, including Dave's eventual exit to a kushy job with one of the "big 4" accountants that helped write the tax laws in the first place (I forget which one)

      Just because it is a simple read does not make what has happened right. The fact that the author wants to convince us all that what has happened is right, moral and unavoidable should encourage some extra reading and research from all of us.

      1. Matt Bryant Silver badge
        FAIL

        Re: Olius Re: Fresh Air

        ".....The fact that the author wants to convince us all that what has happened is right, moral and unavoidable...." Bingo! Another leftie lie! The article does not state it is right, moral nor unavoidable, only that it is legal under the current tax laws (and could be made avoidable by changing said laws), and some of it would actually be illegal not to do under those same laws (wrt Starbucks). If you wish to pretend otherwise then please do point out the lines in the article saying what you claim, or just admit you lied. I'll pretend to be generous and let you claim it was not a lie but simply a mistake due to your continual and excessive hyperventilating having seriously reduced the amount of oxygen reaching your brain, if it makes it easier for you to admit.

  30. Anonymous Coward
    Anonymous Coward

    "OK, maybe it shouldn't be this way. Maybe we should change the system. My own suggested change would be to simply abolish corporation tax and tax dividends and capital gains on shares at normal income tax rates. Done and dusted ... but that's an amazingly unpopular suggestion, if I'm honest."

    I agree that all profits should be treated equally, but I think the problem with removing corporation tax is that it breaks the tax system.

    Wealth is generated, wealth moves around, and ends up somewhere. Gov't (theoretically) says to all things that can have wealth "OK everybody, give us x% of your net generated wealth".

    A corporation can have wealth. If you don't tax their net generated wealth (profits not disbursed) then you have a bunch of untaxed generated wealth. It's all very well saying that eventually it'll be taxed because it'll eventually go somewhere, but I'd argue that the growth of Apple's cash pile says otherwise. A better way, I think, would be to tax undisbursed profit and then give the money back when it's disbursed.

    1. Olius

      It's a good idea, but it may fall down when those profits get distributed very, very carefully...

  31. DougS Silver badge

    "Arms length" transfer pricing

    That's great in theory, but how do you determine the arms length price of an iPhone? Is it what it costs Apple to have it manufactured, not even including the development/support costs, plus a 5% markup? Is it what Apple sells them to resellers (Walmart, etc.) for?

    The people who claim Apple is screwing the UK et al out of money due to their transfer pricing "schemes" would have you believe the former is the figure that should be used, or at least their "Apple is shortchanging the UK by billions in tax revenue" figures are based on that. Apple will argue the latter price is correct, because if it is an "arms length" transaction it should be conducted with Apple's other divisions in other countries being no different than Walmart and any other retailer as far as Apple is concerned.

    If Apple sold its products only through its own brick and mortar (or glass and glue?) and online stores, would the transfer pricing be any different? There would be no benchmark to establish a "wholesale" price, and it would be harder to argue for a specific number.

  32. airbrush

    Petty politics

    I can see where Worstead is coming from when the current government wastes billions on schools no one needs, ineffective reorganisation of the nhs, starts on austerity and ends up following the Labour plan, millions wasted on universal credit, policy made up on the back of a fat packet, Libya, Syria etc etc. Were this a left wing government they'd have been utterly ridiculed, I certainly don't trust them with my taxes. Journalism's always been partisan and lazy but is that good for democracy?

  33. arrbee

    Personally I like the idea of removing all corporation tax laws; this would also remove all the stuff about capital allowances, offsetting against losses, intra-company accounting, etc. As a reasonable quid pro quo we could also remove all limited liability protection laws (especially for partnerships !) - after all, we do have quite a large insurance industry that I'm sure would be ready and willing to fill the gap.

  34. veti Silver badge

    "You'd expect the Daily Mail to get this right"?

    Seriously?

    Come on Tim, you're a journalist and pro-capitalist, you know how this works. The Daily Mail's job isn't to "get it right". Nobody's going to pay them to do that. If you want to see people trying earnestly to "get it right", stick to the Independent (and see where it gets you). No, their job is to say whatever is best judged to attract the most eyeballs over the medium term.

    That's best done by using just enough truth, mixed with unheathly doses of populist bollocks designed to confirm the prejudices of their readers.

    Not unlike El Reg, really.

  35. Lee D Silver badge

    Have said all along: If they are doing nothing "wrong" in the eyes of the law, HMRC, etc. then it means that the taxation system is broken, not the companies.

    You can't rely on companies to do the "moral thing". That's not in their remit. They have a legally prescribed duty to their shareholders only. If their shareholders would rather have more more from shares than more customers from doing the "moral right", that's what happens. Hate it as much as you like, that's what things say. Go set up a company and you'll see that.

    As such, if we can't rely on companies to pay tax out of morality, you have to have laws that make them pay tax out of legal compliance. If the laws don't say that, or aren't enforced, then that's the bigger problem. We can't even MAKE them pay this tax, in a court of law.

    So the companies involved are doing what's in their shareholder's best interests (there's a kind-of argument about the moral high ground being better for business, but that doesn't necessarily hold and isn't so obvious or clear-cut as to bind their hands), they aren't breaking the law, and they're still paying no taxes on a multi-million pound income.

    That's the problem - that it's possible, without breaking the law, to do so. That stinks of a taxation system so full of holes that you're losing tax hand over fist and there's nothing you can do about it except change the taxation system. And that takes years precisely because a lot of these kinds of companies will flee or become unprofitable in those circumstances and that greatly affects political support (which, let's be honest, is purchased these days - one way or another - either through loss of business, loss of jobs, or just sheer back-handers).

    Starbacks et al found a loophole which they are able to exploit without comeback from the legal authorities. That's what needs to be fixed. Punishing Starbacks etc. specifically doesn't solve the problem, doesn't stop the untold number of other companies that aren't as famous doing the exact same thing, doesn't get your tax back. Changing the taxation law... does.

    It's like never watching TV live and then people saying that you're not paying your fair share of the TV Licence. You aren't obliged to. You never have been able to. You COULD be made to, but that would involve a change in the law. You are doing nothing "wrong" in the eyes of the law, even if you are freeloading at other's expense. But you don't get dragged through the world's press for doing that.

    I think Starbucks et al probably shouldn't have this kind of arrangement. I don't think they should be able to have millions of pounds of INCOME (profit or not) from UK customers and not pay at least a single-digit percentage of tax on it every year to the UK taxation system. But that's not what the law says in this case. So although they can be dragged over the coals of the media and get a bad image, nobody can force them to pay that "missing" tax because it's simply not due.

    And that, my friends, is because of over-paid politicians of every party crafting tax laws that can be taken advantage of (deliberately or accidentally). Who should be paying the missing billions? Those guys.

  36. Anonymous Coward
    Anonymous Coward

    I've been a regular Reg reader since 1998 but strangely, over the last year or so I've found myself coming back less and less frequently. And this would be why. It's been infested by a bunch of right wing cunts.

    1. Anonymous Coward
      Anonymous Coward

      Irrational rant to attempt to reduce blood pressure

      It's almost as if there was an election coming up soon! The Reg has started its predictable injection of political propaganda in amongst the interesting tech stories and playmobile astronauts that keep us hooked.

      What I'd like to see is two simple rules.

      Rule 1. A tax based on the amount of working tax credit your employees claim, set at something like 90% of profits if all you employ are staff on minimum wage (+ 9.99% for any unpaid interns, deducted before the money goes offshore of course!).

      Rule 2. A nice Saudi Style, 'natives are always right' rule in the courts. This would mean in any commercial dispute, e.g.a UK firm suing Starphone of Vodabucks over copyright infringement, the UK firm was automatically in the right. Firms could easily protect themselves from vexatious legislation by having a UK subsidiary that paid its tax.... If that doesn't work we'll include provision of police and fire brigade services ... 'sorry about the armed robbery and fire, we were busy dealing with a UK cat stuck up a tree'.

    2. Hans 1 Silver badge
      Thumb Up

      +1 for right wing cunts!

      No esto AC porque tengo cojones!

  37. Anonymous Coward
    Anonymous Coward

    I do hope El Reg has a word with the author of this, and asks him to stop trying to insult anyone who cares about injustice. "Sort yourselves out, Lefties" he say.

    "Lefties"? (Nothing wrong with anyone being a leftie, for what it's worth.) But it's not about left & right, is it -

    - 1000 very rich people have their massively illegal behaviour hushed up by our tax authorities, and the government decides that no other authority (eg the Police) should be involved.

    - meantime any ordinary person found guilty of (say) a false benefit claim will be straight in the courts.

    Dearest Author, why are you not upset that these 1000 rich criminals are spared the Police and the Courts?

    1. Tim Worstal

      A small hint

      The one part of this piece the author of it was not responsible for is the headline......

  38. Hans 1 Silver badge
    Mushroom

    Please refrain from writing about stuff you do not understand

    Luxembourg (not luxembough or whatever) is a tax haven. Vodaphone, like many other companies including French bank Credit Agricole, colloquially called Credit Arnaque in France, moved a lot of their funds to Luxembourg where the current President of the European Commission, then Prime Minister, granted them tax-haven-style "discounts".

    Vodaphone, Credit Arnaque etc PAID NO CORPORATE TAX ON THOSE FUNDS ANYWHERE.

    Call me leftie, I do not care, but that is tax avoidance.

    Now, say, if Vodaphone had paid corporate tax on those funds in Germany or UK, nobody would have been upset, but no, they have not. Besides, all this was done under secrecy and only came to light after whistle-blowers made it public.

    That is the thing with tax havens, these should not exist. Guess where Total's (French equivalent of BP) headquarters are located ? How much profits did they make in 2013 ? €10bn, where do they "pay" corporate tax ? Not in France, no, look it up ... ;-)

    1. Matt Bryant Silver badge
      Stop

      Re: Hans1 Re: Please refrain from writing about stuff you do not understand

      ".....moved a lot of their funds to Luxembourg where the current President of the European Commission, then Prime Minister, granted them tax-haven-style "discounts"....." And? Seriously, if you're surprised by that news - that tiny Luxembourg encourages tax avoidance - I'd have to ask just where have you been getting your "news" from for the lat few decades?!?

      ".....Call me leftie, I do not care, but that is tax avoidance....." Call me a rightie, I do not care, but I'd call it tax avoidance too, the difference being I would also point out it was not illegal in any way, shape of form. Now, you may have a moral issue with it but then that is your issue. Until it becomes a big enough moral issue for the majority of voters in the EU states that it predominates as an election issue you are not going to be able to change the laws and make it illegal.

  39. J.G.Harston Silver badge

    "allowed the money to be paid back in installments"

    You can only pay something ****BACK**** if you received it from the recipient in the first place. Vodaphone never paid anything ****BACK**** to the HMRC because the HMRC never paid anything to Vodaphone for them to need to pay back in the first place. Where on earth has this illiteracy come from where A paying a bill to B is described as paying ****BACK**** the recipient?

    1. Bod

      There's an annoying ability for HMRC however to decide taxes are suddenly due if there's a rule change and apply that retrospectively for many years and insist you've now broken the law and owe the tax, even if the law previously said you didn't. Utterly crazy.

  40. Bod

    Tax and the EU

    Under the utopian dream of a European super state, we are all one country in the EU. As one country it should matter not where you pay tax.

    Problem is the media in the UK drives the public into a frenzy saying "OMG, they pay NO tax!", but they do and they pay what's due according to the law in the UK and the EU where the company uses a different EU state to pay the tax.

    I am entitled to work where I like within the EU, move where I like, set up business anywhere within the EU and trade within the EU with no barriers. I can pay my taxes within the EU where I like if the law allows also.

    Now the taxes differ between states. Well, if people aren't happy, then go ahead and flat rate the taxes across the EU. That's the dream of some anyway, centralised taxation. Great, and good luck seeing that money then be distributed fairly to your individual state rather than being swallowed up in Brussels or bailing out Greece.

    Another way of looking at it: you may say it's not fair to pay cheaper taxes in another state within the EU (but perfectly legal), but yet most people would say it's perfectly fair to buy a product from another EU state where it is cheaper (and it's also illegal for anyone to try to block this, i.e. there is no such thing as a grey import within the EU and companies cannot try to control the market in one state by blocking an import from a cheaper EU state. Noting that they can and do however try to block imports external from the EU where they are cheaper).

    Oh, and as a side point, there's the rants about companies not paying tax where they have just deferred the tax and paid it later, or may have even paid more tax earlier. So what? They ultimately have paid the tax due.

    And as already quoted from Lord Clyde, you should never pay a penny more than is due.

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