With my 'GOOGLE-GOGGLES' on...
...it looks like 1.3 new pence....these goggles are brill!!
Google is to pay £130m to settle a tax dispute with the British Government over how it account for revenues booked in the UK. More importantly for Treasury coffers Google will now "pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our U.K. business,” a Google spokesman wrote in an email …
No it isn't, ot is an end to being able to get the correct amount of tax against 10 years of mega profits.
These non tax paying corps distort the would commercial world, not paying tax means they have 20% free money to buy smaller businesses to their advantgae, apply pressures in others and make more oligopolies.
And you are one of many falling falling for their shite.
"And you are one of many falling falling for their shite."
Do you Daily Mail readers that scream about all of the "tax avoidance" really think that they could continue operating in the country for a decade without the government stamping on them?
The behaviour doesn't seem to be moral, but it is following the laws. The problem is not the likes of Google, it is deficiencies in the tax laws that Google (etc) is showing up.
The problem with it being a deficiency in the tax laws is that makes it the government and the MPs fault and they can't admit to this.
The international tax system is simply no longer fit for purpose.
Now if I work in India I have to pay an Indian withholding tax. That is I have to pay Indian tax on the work I do there, they will then give me a certificate that says I've paid this tax and I can then claim this back against any tax the UK authorities might want to charge me on the same piece of work. If Indian tax is higher than UK tax, I lose out.
Now this strikes me a much more sensible way to work in an international environment. If Google (and all the others, it ain't just Google) had to pay UK corporation tax on work done in the UK and were then given a certificate to hand to the Irish authorities that says they've already coughed up this much. Then the UK would get the tax due on the UK bit of business. So instead of paying the lower rate of tax between the 2 countries, they have to pay the higher one.
Of course there are still a million and 1 tricks played by accountants.
So for example Starbucks claim that Starbucks UK makes no profit on any coffee sold in the UK because for every £1 worth of coffee they sell they have to pay £1.01 to Starbucks Logo Inc of some tax haven somewhere. This sort of thing is just pure bollocks and should be outlawed. Money spent of real R&D should be recoverable or there will be no new products, but money spent on other spurious bits of IP shouldn't.
"So for example Starbucks claim that Starbucks UK makes no profit on any coffee sold in the UK because for every £1 worth of coffee they sell they have to pay £1.01 to Starbucks Logo Inc of some tax haven somewhere. This sort of thing is just pure bollocks"
Pure bollocks indeed, since that's just fiction. Starbucks didn't make a profit in the UK because they paid too much for their leases, end of story. They paid the market rate for their coffee (which we know because they also sold coffee to others, at the same price), as the law requires them to do - and if they hadn't, then they'd be moving profits _from_ Switzerland _to_ the UK, since their coffee purchasing and processing does actually happen in Switzerland (along with most of Europe's).
This really is all just some not very well-disguised antisemitic propaganda, and it's a crying shame that so many gullible dupes like you have fallen for it.
Maybe they should have fought against the 20million euro EU fine which found they did exactly that (along with other such scams). The only reason coffee trading is done in Switzerland, is the same reason metals and other goods are traded there - THE TAX ADVANTAGE.
So rather than your ridiculous conspiracy claims how about writing some actual facts...
"Starbucks Manufacturing, based in the Netherlands, is the brand’s coffee roastery in Europe. It sells and distributes roasted coffee and ancillaries Starbucks outlets in Europe, the Middle East and Africa. The investigators reported that Starbucks Manufacturing has paid a ‘very substantial’ royalty to a UK-based group company for ‘coffee-roasting know-how’, and was also found to pay an inflated price for its green coffee beans, bought from a Swiss-based group company.
They said that the royalty for ‘know-how’ could not be justified, and that the unrealistically high price the roaster was expected to pay to buy its green beans from another group company meant that the roaster could not actually generate sufficient profits to pay the ‘know-how’ royalty.
This is illegal under EU law and the European Commission has ordered the Netherlands to recover the unpaid tax from Starbucks, and to cease the tax benefits the group previously enjoyed."
also see here ... http://www.theguardian.com/business/2015/oct/21/starbucks-and-fiat-tax-deals-with-eu-nations-ruled-unlawful
There was nothing about Jews or Nazis in the article at all, you must have reading between the lines down to an art form.
[To the sane people: yes I know he's a mindless troll, but I'm curious to see how he can stretch logic to such a breaking point]
DaveDaveDave - be civil, thank-you.
On the anti-semitic propaganda accusation - I can detect no proxy here for "Jews control the Federal Reserve / world financial system" madness.
You have done your fellow commentard a disservice - to the point of trolling.
If I were to hazard a guess it could be that there are large sections of Mein Kampf that read like the anticorporate conspiracy bollocks you can find depressingly easily on the Internet. Just replace 'World Jewery' with 'New World Order' or 'bankers'. We all love a boogeyman on which to blame all of society's ills, especially if they're rich.
That said, Google need to pay some damn tax.
Is it the same reason that Starbucks started coughing up, despite the fact that they hadn't broken any laws as they are written, the bad reputation they got was costing them business and that lost business was worth more than they would have paid tax. When they paid they made a public fuss about it so everyone knew.
So, stop buying Apple, stop using google, stop using any of these companies that are taking the piss.
We don't hear much about Microsoft? What's with them all these years and licence fees?
I now understand!
Davedavedave is a marmotte ( see YouTube)
Marmottes live in Les Deux Alpes in France
Every Summer Jews go on a pilgrimage to Les Deux Alpes to wander on the downhill mountain bike trails and to test there faith in god that they won't get flattened by someone doing 50mph down the track.
If you don't believe me you can Google it which is why criticising Google for being tax dodging scum is anti semitic.
At least that's how Davedavedave tells it to his therapist. ..
Perpetuating the VAT myth. "businesses now have to pay VAT in the country of the consumer buying the goods not the business."
This is incorrect. Companies DO NOT PAY VAT.
The new rules mean that VAT they COLLECT from CONSUMERS has to be returned to the country in which the consumer paid the VAT. I.E. they can't collect VAT from the UK and pay it back to Luxemburg. The question is of course did they collect 20% from the UK and pay Luxemburg 3-17% depending on product/service.
What problem? this is quibbling over semantics.
Companies charge VAT on their products and services and they pay VAT for the products and services they buy. When there is a surplus - and in Amazon's case this will be vast - they pay the difference to the relevant authority.
The change of VAT rules could mean that retail customers end up paying a bit more for their geegaws. But enough to suppress demand? Amazon would be unaffected in such a scenario - or more likely would as it is so dominant in Europe that benefit at the expense of weaker competitors.
Corporate tax is the now big battleground. I don't see Amazon ever paying much here - it will just build some more data centres, or buy some more businesses, or invest in warehouse robots. All good things, of course.
Again you proagate the myth. It's not semantics as you get the line "They don't pay much corporation tax, but at least they pay VAT" which makes them appear less avaricious.
"Corporate tax is the now big battleground." It might be, but you put VAT in the mix and VAT is not a corporate tax, they do not pay it. < That's a FULL STOP.
They collect it on behalf of Govt's, you talk as if it's a tax on companies, or in the same breath as company taxes and people will think it is a company tax when it is not. It is the same when companies talk about the NI they pay when that is not a company tax either, for good or not, it's an employment tax.
Don't know where the demand supression came from.
You don't see Amazon ever paying much tax here, OK, so what happens when NO company pays tax here?
Do I assume people with such views are paid enough to have private health insurance, pay for private schools. Who builds the roads, private companies and we have tolls everywhere. Who stops your twat neihbour buliding a 3 storey extension to block your light has a kennel compond with 500 howling dogs and starts drug dealing filling your street with people who might not agree with you living there?
I guess the haves move out and leave the rest living in Detroit?
They do pay their employees though, and their employees pay income tax. In fact in most cases the employers pay the income tax on their employees salaries "as they earn".
The problem for the government is that if google decided that they didn't need that humungus new place near St. Pancras then there would be no income tax.
If Amazon decided to deliver all their sales from the continent, then there would be another stack of people who need benefits, and another load of income tax that wouldn't come into the exchequer.
It's a ransom.
'They do pay their employees though, and their employees pay income tax. In fact in most cases the employers pay the income tax on their employees salaries "as they earn".'
First sentence correct, second sentence incorrect. It's much the same as VAT; they're tax collectors, at their own expense, on behalf of HMG. They're also tax collectors on behalf of HMG in respect of employees' NI contributions. But they do pay employer's NI.
However it's fair to say that they are responsible for generating income tax and VAT by providing employment and selling stuff. They will also be spending money on goods and services which will also result in income and corporation taxes (they'll also be charged VAT but this will be offset against the VAT they collect).
They do pay their employees though, and their employees pay income tax. In fact in most cases the employers pay the income tax on their employees salaries "as they earn".'
No - they largely pay the minimum wage so their employees pay no tax and are almost certainly in receipt of some government subsidy like housing benefit. The number of companies that are subsidised to rip us off is rising by the hour!
"This is incorrect. Companies DO NOT PAY VAT."
I am almost 100% this is not technically correct either. It varies with the company size and the country.
- do not have to pay VAT on some purchase (if both side have a VAT number and can sell VAT free for the good concerned). This gets even more complicated for purchase across countries
- have to pay VAT on certain purchase, but can claim it back on their VAT balance with the tax man.
- cannot claim back VAT on all expenses (e.g. it used to be the case to not be able to claim back VAT on French motorway tickets and I think, still to date, you can only recover a part of VAT on petrol in travel expenses)
- in the UK, on small companies, you cannot claim back VAT on many expenses (I am just thinking of some expenses where we cannot claim VAT back with building free-holding company I belong )
I am not a qualified accountant but I think what is being said here is that VAT does not appear on a company's Accounts, other than in the Balance Sheet as an amount that has been collected by the company which is to be passed on to HMRC. VAT Registered Companies are nothing more than collecting agents for HMRC.
There are companies out there who produce zero-rated goods who receive regular payment of their Input Tax from HMRC because their Output Tax is zero. (Food companies for example).
so why don't we just annex the Caymans and Bahamas and make them subject to UK law? The Bahamas could presumably have their independence reversed by an Order in Council as the queen is head of state, while the Caymans are still a British overseas territory and Parliament could impose laws - or again an order in council could impose British law.
The Cayman Islands was created as a tax haven by the UK govt, which still has ultimate jurisdiction.
This recent docu (still on iPlayer) put this point very nicely during the last 10 mins of the prog:
Conspiracy theorists might also like to imagine that keeping the Cayman population well fed and infrastructured is part of the US-UK axis defense policy.
"To put this in context, the company paid paid £20.4m in taxes in 2013 on sales of £3.8bn"
And what context is this?
Remember, corporation tax is paid on *PROFIT*, not *SALES*.
Why is it every time tax is discussed, two numbers that are completely irrelevant to each other are entered as some kind of evidence?
And if they declared some profit in the countries where they extract the money, this wouldn't be an issue.
As I used your IP i.e "@Graham Triggs" in this post, which tax evading shell company will internally charge me 99.999% of the revenue generated by this commercial posting?
These are no loop holes, they are there by design. Tax havens were invented by the UK, but I'm not sure whether 'they' think they might be out of control with the exploitation by mega corps and the growing voices saying something needs to be done.
Still the new spying bills will let Govt's know who to silence if the shit starts hitting the fan and a big way.
Nothing to do with religion, unless you consider being a neo-Nazi some form of religion - or if you're the kind of antisemite who blames 'the Jews' for antisemitism. Everything to do with a new spin on old-fashioned antisemitic propaganda, though, as you can tell, in part, from the use of the same language with only one word missing.
It seem you had one too many at the pub.
We are speaking about tax avoidance. I care not about the founders or owners of google, amazon, etc.
The problem is big companies all avoid tax all ove the world, and the problem is caused by tax on benefits for companies ad tax on income for people.
This causes a transfer of income to companies, and then tax comoetition and cost transfer. In my opinion if you do this, it is fraud. Spanish law says it is fraud, but if you are a big co, you wont get sued. In the uk it seems similar, and I don't think it is easy to fix.
So, 20.4million corp tax implies around 52million profit which is around 1.3% of the quoted 3.8billion turnover. Turnover sufficient to keep f#ckloads of people employed, profit enough to keep the shareholders happy, tax enough to keep the exchequer on side. Don't know what the fuss is about. Yeah thanks for the £130mil bunce, it'll come in handy right about now. Don't do it again though, otherwise keep up the good work.
Any accountant can make profits dance anywhere they like, for a multinational.
You can reduce profits in the UK by charging the UK firm a fee for use of IP, but ensure that said fee winds up in a place not taxed.
Google's global margins are around 27%.
Any sensible tax system would look at the UK sales, and if the company was declaring lower margins, simply tax the company as if it's UK margins reflected the global ones.
At a stroke this would remove any incentive for companies to structure in ways that focused on tax, but would have no effect on structure for logical business purposes. E.g. if Ireland has the best sales staff or L'burg the best IP lawyers, keep using them.
It's also something that every other country could implement as well.
Ok, I'll accept that a tax system along those lines could be fair - it would also have to say that if the UK company is seeing higher margins here, it also gets to pay tax as if it's UK margins reflected the global ones, and will not face any double taxation from anywhere else.
What if the costs are such that it's cheaper to pay an L'burg lawyer to do the UK company's UK legal work in Luxembourg? Costs will go down if the work is done there, so profits increase, taxes go up? I'm sure no-one will complain about any work that could be done here going overseas because it's good for the tax system ;-)
Your L'burg lawyer thing is irrelevent. In fact it's worse than that because right now they can, and do Uk co legal work for MORE than a Uk lawyer, but the tax advantage of funnelling millions/billions through L'burg makes it sensible to hire them.
The L'bourg lawyer is relevant - as you've pointed out, they can charge more (etc) , or less. Either way, if what you want is to stop the funnelling of millions / billions through those lawyers, then make the tax system here simpler. Remove the thousands of loopholes then, and more importantly, remove the anonymity shields for money moved through law firms. [The lawyer can charge more or less, I don't care - as long as the rules are consistent: if a company's margins are below their global average, then tax them less, if they're higher, tax them more. Both sides of that particular coin, or neither]
While we're making changes, can we please stop MPs grandstanding about who pays what, as if they are somehow better than anyone else, commenting from their duck ponds, their relatives' houses, and so on [and, to any MPs reading, yes, that's a while ago. I don't care - until you've all paid back all expenses that the rest of us don't get] /rant
This has all the hallmarks of what went on about 10-20 years ago with "big oil", "windfall profits", and "obscene profits" that were in the media at the time. The governments (and not just the US) reacted and started changing tax laws. Not all governments, and the tax laws were not done uniformly which allowed for loopholes and ways to weasel a bit with the numbers. The reason things are imbalanced has to with politics, elections, and sovereignty (along with national pride, etc. It took some time, but the accountants are sharper than the governments and have figured things out.
What is probably needed is for the governments to sit down together and sort it out. Not just a few, but, for example, the EU, many countries that run their own laws. They should be uniform laws one would think.
But, if they all worked to together (impossible dream) then came up with a uniform tax code, we wouldn't be seeing these things.
You appeared to have traded in Worstall for a Tumblr SJW.
Turnover has no bearing on profit.
VAT is a tax on consumers, not businesses.
Companies use whatever tax laws are in place to minimise tax bills.
The benefit of Google is Google not what they pay in taxes. They could pay zero, we'd still all be much better off than not having Google.
'The Tumbler SJW jibe is silly' may very well be true but a Sovereign Currency issuer doesn't need tax revenues to pay its bills.
It spends money into existence at will.
It then destroys this money through taxation.
Money not taxed out of existence is inflationary.
Government controls its contribution to inflation by increasing/decreasing both spending and taxation.
The Deficit is the net increase/decrease in the Governments inflation contribution.
Private banks also create and destroy money (via lending and repayment), any credit not destroyed is also inflationary.
Central Banks control this contribution to inflation via interest rates on lending/repayment.
The UK Government target for inflation of 2% is higher than current inflation.
The Central Bank has responded to this by cutting interest rates to stimulate lending, had they not done so inflation would be well negative.
The only other control is the Deficit which George is trying to reduce, this is deflationary and is directly opposed to what the Central Bank is doing.
(if the Gov. taxes more than it spends there is a scramble to collect the tax tokens before the taxman exercises his penalties so you will sell your goods cheaper than the next guy to ensure you have some of the scarce supply)
@DaveDaveDave Again? You need to get out more.
For balance maybe it's anti Palestinian too? Those Hindus have a lot to answer for, all those gods not paying tax, Budhists, always looking out for the down-trodden (insects), but what about the rich and as for those slimey-[meat]ball Pasterfarians....
This isn't about more tax it's about all entities paying their fair share,
I'm sure Osbourne would love to be able to reduce some tax that are paid, in fact he already has changed the levels of taxes. Other may contribute, but off the top of my head: inheritance down, corp down, lowest threshold personal tax down, highest threshold personal tax down, VAT up. Maybe if the big corps paid theirs the mid threshold personal tax rate could be reduced too and get more votes for it too.
I could see why a little gas might be good for you.
Your blood pressure might be a bit high and you sound anxious, try a small amount of Nitrous Oxide, but don't over do it, you just need to relax, the world doesn't rest on your shoulders.
As for your tax ideas, cloud cuckoo land. Where are they working again?
Sounds like just about all levels of taxation are down, but VAT is up. So, moving to a flat tax. That is inherently unfair to those with the least. The economic middle class and below.
Corporations need to pay taxes from whence they derive their sales. Shouldn't make any difference where they're headquartered.
"The benefit of Google is Google not what they pay in taxes. They could pay zero, we'd still all be much better off than not having Google."
What utter tosh! and your proof that not having Google would mean we wouldn't have something better?
The benefit of a Doctor is having healthcare, so they should pay no tax. The benfit of eduation is learning, so teachers should pay no tax. The benefit of Cadbury's is Cadbury's, so they should pay no tax, oh, they don't. The benefit of your comment is having you to make it, therefore I grant you you power of no tax paymets...
Tell your story to ex-employees of Divshot, Oyster, Kikscore, Postini, Songza, Slide..... All bought with money, 20%ish of which should have been paid in tax by Google to various Govts as the cash was taken out of their economies.
Tax laws should be written on one piece of paper with no get out clauses. Make it so IP can't be charged between the same company or limit it to a small % of revenue.
However they aren't because whilst us peons pay our taxes there are those that lobby government or are in fact in government that believe taxes are beneath them.
This will never change and only comes to light during times of austerity when people start asking questions of where is all the money.
Also does anyone actually believe that this tax avoidance is limited to US multinationals? It's obvious to me that if there is a loophole then everyone that can, will use it.
"However they aren't because whilst us peons pay our taxes there are those that lobby government or are in fact in government that believe taxes are beneath them."
Maybe if enough of us peon chipped in to a kickstarter fund for a lobby company to put our points over we might get something back too! Oh...wait...isn't that what our MPs are supposed to do?
"Tax laws should be written on one piece of paper with no get out clauses. Make it so IP can't be charged between the same company or limit it to a small % of revenue."
As soon as you start adding a few "make it so that..." clauses you end up needing a bigger piece of paper.
In international terms tax laws are in a competitive environment. Various governments have found the consequences of this on excise duties - the margin over French duties hit a level at which the booze cruise was invented. The end result is that it becomes a race to the bottom.
What Osborne has said about this makes me laugh. Apparently the taxes that Google have paid "were on profits made under a Labour government"
Osborne has been chancellor since May 2010. Why has it taken so long to get this tax? The only logical answers are that the Tory's coalition partners, the LibDems (remember them), somehow managed to convince the tax office that the taxes shouldn't be collected, or alternatively Osborne is useless. Down vote for answer 1, up vote of answer 2.
Ah, It'll be fun times when he's PM and Trump is POTUS.
Was he trying to help Google pay less now then they might under new OECD tax avoidance proposals.
Was it a desperate grab of a bit now to help his defecit reduction performance, than a larger sum later.
Was it Google; Help me out guys, I made an announcement about getting more tax and it's failing miserably. I'll cut you a better deal if you're first and there could be pay back as I get to be PM when Cameron fcuks up the euro thing.
Thare are many more options, the only when you can discount is that Google have paid the correct amount of tax the would be paying if the tax regime was structured in an equitable way.
Somehow, it seems most Western governments are enamored with overly complex tax schemes that do nothing but make honest people borderline criminals. The US income tax season is the annual lie to the ferals event over here because you almost certainly filled out some form incorrectly and by signing committed a feral felony. Given it is very easy to misunderstand or more accurately not to even understand the tax code (the feral income tax code over here is something like 80,000 pages of shyster), it is very likely this case was nothing more than one group of bean counters and tax shysters incorrect interpretation disagreeing with the tax man's also incorrect version; just that the incorrect versions are different.
"Western governments are enamored with overly complex tax schemes "
Because they keep adding bits to say you _can't_ do something when it's exploited instead of saying what you _can_ do in the first place.
They could say you can do A, B and C and not pay tax on that income, but everything else is taxable. Then when Accountant Z comes up with scheme D it's not allowed as it isn't A.B or C.
The reason is simple. Everyone wants the simple tax where you list your income and calculate your tax easily with one or several percentage rates (depending on whether one believes in a flat tax or progressive system)
The hitch comes because most people believe certain levels of income and certain things should be exempt from taxes, or taxed at a different rate. Or the government wants to encourage certain behaviors like saving for retirement or your kid's college education, upgrading your home to be more energy efficient or use renewable energy, giving money to charity, etc. Once the door has been cracked open to deductions, there will be more and more of them as time goes on. Some of them, even if well intentioned, will end up allowing certain people to pay little no tax, so when that comes to light that's seen as a problem by those who are paying full whack and the tax code must be fixed to prevent that. And eventually you end up with the mess we have in the US, and you guys over in Blighty no doubt have as well.
For corporations it is a lot more complicated, because you can't tax based on revenue. Well, I suppose you could, but that would pretty much eliminate all low margin businesses like grocery stores or restaurants, where expenses are typically 90%+ of their revenue. So once you accept that you must tax on profit, the question is: how do you calculate profit? Well easy, revenue minus expenses, but then people get clever and say certain things should be expenses - if you buy a new car for your business expected to last years they'll want to depreciate it over its expected lifetime instead of taking the full cost off this year's revenue. CEOs are getting paid too much so you only allow deducting the first $1 million of salary, which leads to them getting compensated in other ways with options so you have to come up with even more complicated rules about how to handle stock based compensation.
Then it is further complicated by that fact that many companies do a lot of business overseas, where they have their own tax laws and companies have to file taxes in many different countries, and something that is a deduction in one country is not in the other and vice versa so minimizing your tax burden becomes a super complex problem that is worth paying people a lot of money to solve. When things are that complex of course loopholes will eventually be found.
And that ignores the problem of companies lobbying for favorable tax treatment, or doing special negotiations for special treatment like Apple did with Ireland.
A couple of things that are overlooked, one the consumer/final purchaser ultimately pays all the taxes levied on the manufacturer, distributor, retailer, etc. as well as any sales tax (US) added to the bill. These taxes buried in the cost of goods, whether they are duties, excise taxes, VAT, or income tax on profits.
One issue, sideways addressed, is whether a complex tax system is inherently unfair to those who do not have resources to manipulate it. Thus would replacing with a simpler, VAT/Excise/Sales tax only system be fairer; everyone pays based on their consumption not income. Also, this type of system would considerably lessen the amount of private information the various (incompetent) tax agencies would need to protect from hackers. A basic security rule is if you never have the information you can never give it up.
"Thus would replacing with a simpler, VAT/Excise/Sales tax only system be fairer; everyone pays based on their consumption not income."
As has already been mentioned further up the comments sections, flat rate taxation on consumption is inherently unfair to those at the lower end of the income scale.
Regarding "fairness" (due diligence here: IMHO the only fair tax is no tax) can only be addressed by radically changing taxation systems and scrapping what is already there. Current systems are not fair by any stretch of the imagination. A flat rate is as close as it gets to fair. However, we need to go much further than that.
1) Tax Loopholes are designed so they can only be exploited by large corporations, institutions and governments. These parties can pay expensive tax lawyers, consultants, lobbyists. politicians, etc.
This results are massive avoidance and an increasingly heavier tax burden for individuals.
Eventually, (after losing 30 % during the collection phase) governments introduce and manage schemes that improve the body public's quality of life (roads, schools and the like). Unfortunately, this is done usually in an inefficient, wasteful and frequently corrupt manner. Said inefficiencies are generally addressed by raising taxes and hiring more consultants (not necessarily in that order).
Relatively speaking, smaller companies and individuals will end up very paying significant taxes on their profits (20 - 40 % as opposed to 2 - 3 % for the giants).
Fair? I think not, since the larger companies and their shareholders just progressively take a larger share of the pie each year. This impact is further compounded by putting more and more people on the dole.
Not sustainable and eventually it will break (or governments will print more monopoly money to keep the party going). Not a very good business model, IMHO.
2) Individuals also pay relatively high income tax rates even if they might qualify for some (relatively insignificant) tax breaks.
On the other hand, larger companies frequently receive corporate welfare, subsidies and other massive tax breaks. The same companies are firing people, moving offshore and killing off their smaller, less competitive rivals who can't muster the same influence for better tax treatment.
Relatively speaking, the cleaning woman ends up paying more of her money in income taxes than the guy who buys and sells companies for a living (10-25 % vs 0 %).
The cleaning lady still might get some tax credit or welfare, but she will never be able to buy and sell companies (which could reduce her tax burden and even make her richer) as she struggles to make ends meet, feed her children etc.
It's a good system for keeping the poor poor and the rich richer. Research clearly indicates this is what is happening. Today, 64 people have more wealth combined than the 3 billion poorest. That's a lot of poor people and a very small number of mega-rich people. You can decide whether its fair or not.
3) Only the end-consumer pays VAT (including the cleaning lady).
Companies buy, sell and transform products. They must pay and deduct Vat at each step before passing the VAT onto the consumer. You, the consumer (already taxed on your income, BTW) end up paying the full whack. No deductions on the Vat paid on your rent, petrol, food etc. In other words, by paying 30 % income tax and 20 % VAT you are spending 50 % of your income on tax. And you aren't even in the super-tax bracket.
In good times, no one worries too much about this.
In bad times, countries increase VAT to extract more revenue from an already burdened consumer middle class. It changes little for the corps, until their consumers can no longer afford to buy anything. Which is what is happening now, funnily enough.
Fair? Not really, but its an easy way for revenuers to play shell games with everyone's money.
Of course, the economy will eventually collapse and we all go back to barter which is much harder to tax.
Well done, VATman.
So, to conclude this rant, let me say just a few more things:
Modern taxation systems are inefficient, positively medieval instruments for gathering revenue and rife with intended and unintended consequences. Trickle down is not working. To spread the wealth, we need to stop taxing those who have a chance of creating more wealth: such as small businesses, self employed people, and other hard working service providers. We need to quit giving money (directly and indirectly) to those who reduce or sponge up overall wealth: government bureaucracies, megacorps, state-funded institutions that generate massive amounts of red tape and regulations that strangle economies and the small businesses. Oh, did I forget to mention the central bankers? Let's fire them too.
How do we begin?
We abolish income tax and all other taxes, no exceptions.
We tax all individual transactions a nominal amount (0.3 % on the seller and 0.3% on the buyer). This includes capital gains, stock trades, Amazon sales and the individual purchase of peanut butter. No exceptions, automate the whole system and remove lobbyists, tax officials, tax accountants, offshore havens, lawyers and other system parasites from the ecosystem.
Automatically transfer these payments into the government's kitty and start making them live within their means. The joy generated just from not having to file income tax returns should be enough to raise GDP by 2 or 3 % on its own.
The actual transfer of wealth form the new scheme would need to be assessed after a trial period. Given that only 20 % of the economy is effectively taxed today, it could only improve.
The problem is that you are proposing is a regressive tax system, and those systems tax the poor more than the rich, and the differences in class increase dramatically. Now we have something similar as the rich pay relatively almost no tax, but the middle class do pay.
Then for instance you band VAT such that essentials (however you define them) are taxed differently or exempt to make it less regressive. But the target is a simpler taxation system that is less burden overall than the current one.
it's interesting that I've seen US TV shows that include tax returns as the element of a story or characters questioning if something is deductible. And the impression I get is that in the US this is a big issue. By comparison for the average Brit, I get the impression that annual TAX return is a non-issue. We've already paid at work (PAYE), supermarket (VAT) and on modest savings (deducted at source). We have nothing left to declare.
Then for instance you band VAT such that essentials (however you define them) are taxed differently or exempt to make it less regressive.
But that just leads to the Jaffa cake/biscuit argument. We're already getting close to the point where internet access is defined as a necessity, when that happens Google will just declare itself an ISP and argue that it's therefore an essential and should pay less tax.
The moment you allow exceptions, and it's well-nigh impossible not to, you open the door to lawyers exploiting loopholes. The legislations ends up as warts on top of warts on top of warts.
one the consumer/final purchaser ultimately pays all the taxes levied on the manufacturer, distributor, retailer, etc.
Sorry, but that's absolutely 100% wrong. There is no simple answer, which is why this is not a simple topic. Not everyone has the ability to raise their prices to cover an increase their taxes - not if your product is something that's essentially identical to everyone else's (like gasoline/petrol) You can't simply charge more to make up for an increase in taxes, because that may be counterproductive if a lot of your customers go to the station down the street. Gas is gas, there's no reason to pay a pound more to fill your tank just because the station's owner got a big tax bill.
In some cases the consumer pays the taxes because the price is able to be raised when taxes are raised. In some cases the owner/shareholder pays the taxes because the price is not able to be raised when taxes are raised and therefore the owner must accept less profit. In some cases the employees pay the taxes because the price is not able to be raised when taxes are raised and instead of forgoing profit the owner doesn't give his employees a raise or fires one of them and makes the others work harder.
It is probably very rarely 100% of one and 0% of the rest, but more likely some combination of the above. Which gets hit the hardest depends on the demand curve for that product, the ability of consumers to go elsewhere for the same or similar product, and the ability of employees to find a better job.
It is nowhere near as simple as seem to think it is.
If companies always paid out their profits as dividends that would be fine. You could tax the dividends at whatever rate you feel should be taxed, and ignore taxing the corporations and save tons of hassle. The dividend rate would be important, because one of the reasons for double taxation at the corporation and personal level for corporate income is to pay for the liability shield the corporate structure affords its shareholders (versus a sole proprietorship or partnership where the owners have unlimited liability)
The main problem though is what if they don't ever pay dividends to allow their owners to avoid paying the taxes? The value of the stock would increase over time to reflect the greater assets (cash or whatever they used that cash to buy) and the owners could choose when to take their money by selling the stock, instead of getting regular dividends and regular tax bills. Especially in places where the long term capital gains rate is lower than that of normal income, that would basically guarantee the rich getting richer at even a faster rate (than they already do) than the poor and middle class do - who can't choose to delay taxes or get a special lower rate on their income.
Look at Berkshire Hathaway. It is a huge holding company (would probably be considered a hedge fund if Buffett had started it in 2002 instead of 1962) that consists of many dividend paying stocks like utilities and railroads. However, Berkshire Hathaway has never paid a dividend. It uses its excess cash to buy more companies, thus the stock is now $200K/share. In all those dystopian futures were one or a handful of corporations own everything, what would be the best way to get there? Don't tax them at all, so they keep buying up other companies until there are only a few, or one, remaining. Think of the lobbying power large corporations have today, even though there are thousands and thousands of multi-billion dollar corporations in the world. Imagine the power they'd have over governments if there were only five, or one. They'd own the governments, own the military.
The other problem, even if they did pay out their profit as dividends, is what about shareholders who live overseas? Do you make them pay US taxes on dividends from a US company? If you do, non residents might prefer to own shares in companies based in countries that have lower or no taxes on dividends, causing less investment in the US and a weaker dollar.
Why not just treat dividend payments and capital gains as a form of increase in assets, therefore a form of income? The limited liability shield also makes it more likely owners take risks, start companies that will hopefully soon hire their first employees, and so on - which is not something we should discourage - so keep corporation tax, but simplify it. Charge corporation tax on the amounts paid out (including for acquisitions as well as in dividends) not the amount held in a company for re-investment in new technologies, new products, new jobs? That would address your point about US taxes on dividends from a US company - every shareholder, regardless of domicile, would pay the relevant local taxes on that income, and the company itself (in your example) would pay US taxes on the payout. If companies want to use shares for acquisitions, fine - but treat it as a form of payout too (after all, the acquisition is designed to reward someone, isn't it?)
Yes, it lets you take more risks, but more risk isn't automatically good. Companies that don't make good on their debts raise the cost of credit for everyone. Paying more for being a corporation and getting that liability shield allows the corporation go bankrupt without creditors coming after the shareholders, but has a cost that everyone bears, and they should pay it for it somehow.
Good idea in principle. The problem is that the average person in the street is incapable of budgeting for future outgoings. They see money in their pay packet and they spend it. When Gordon Brown cocked up Family Benefit payments (erroneously paying out too much and then having to reclaim it back later) it wrong-footed a lot of families because they took it on good faith (the guvment ne'er makes a mistook, right?) that this was their money to spend. Supposedly this money should have been ring-fenced by its recipients for essential outgoings but clearly this didn't happen in practice. My feelings at the time were that families affected by the mistake would paradoxically have felt better off if they had never had any of the money in the first place
UK Tax Codes indicate how much one is allowed to earn before any tax is payable, but the system doesn't trust you because it forecasts how much you are going to earn over the payroll year and that "allowance" is then divvied out to you in monthly/weekly dollops (depending on how frequently you're paid).
The allowance is a blanket one in that it is the same for the average person in the street and so is not designed to cater for all situations. With the advent of RTI it begins to be within the realms of possibility for HMRC to individually tailor people's tax according to their personal situation, but I'm sure their priorities are somewhat different.
Most people on low incomes have no chance of saving cash for a rainy day as they are generally always playing catch up trying to cover all their outgoings (hence the hell of pay day loans etc. which shafts them even more).
Given the generally crap quality of life they endure (obv. not compared to "3rd worlders" but in comparison to their peers, which is what matters in terms of their self esteem, stress levels which has massive impacts on health), if they do get some "spare cash" then it's likely to be spent on some short term enjoyment, just to give a little ray of sunshine in the general bleakness as there's sweet FA for them to look forward to.
In general, people need a non poverty income, half decent quality of life, before thinking about future budgets.
The big issue is multinationals get to shift money around intracompany.
I have run my own company for 18 years and I pay more corporate tax as a percentage than these multi-nationals.
The only way a small business (which is the largest group of employers in Australia) to reduce their tax burden is to create 3 companies in different countries and start this transfer pricing/licencing crap.
How the hell are any small/medium businesses expected to ever compete with entrenched larger multi-nationals when the playing field is so skewed against them.
The sole reason for a business is to make money - that's even included in the tax code in Australia.
If you have a business that never makes any profit and all money goes as fees to another group company than you are NOT conducting a business.
You can spend your way out of corporate tax by investing in the country you are situated.
This includes building offices for R&D and employees, charitable causes etc… but if all your money goes in fees to a group company then you should have your business registration cancelled.
Any additional taxes collected for health care and education etc that are not universally collected across European states would all have to be spent on the thing the collected the tax for so as to avoid things like road tax being used as petty cash by polititians.
I personally would tax and control money leaving Europe so "Tax Havens" cannot allow people and companies to dodge their responsibility and further to promote investment in Europe and it's people rather than whomever gives them a kick back.
Basically Europe is being bled dry by the uncontrolled avarice of the wealthy and controling imports at European level would benefit everyone here, more buying power and oversight to finally get some sort of balance against the multinationals and those unwilling to pay their share.
It is a sad day when you cannot trust the polititians you elect to collect and spend your tax money to benefiting you and your state rather than themselves and their cronies, if they are not going to have the death penalty for corrupt politians then the next best way is to control what our taxes are spent upon and have constant oversight by an impartial and responsible body not able to benefit from fraud.
"In order to kind of fix this you would have to block transfers todirectly or indirectly to tax havens. That includes ireland."
Hence flat rate of tax across Europe, any tax havens outside of Europe would be useless as money leaving Europe has a higher premium negating any benefit
Is that many of these companies set up in the UK to carry out this kind of low/no tax trading with the full support of the UK government.
Things like the "costs plus" arrangement allows a company to channel all sales overseas and not charge VAT whilst running a "marketing" operation which reclaims the VAT it spends.
This gives a massive advantage over the local businesses and the only taxes paid are payroll related.
The key problem is the government set this up and encouraged its use assuming it would never be as big as Google or amazon have made it. Now they see how big it is
they want to change the game.
That's the sad reality although it could of course be a massive anti septic* conspiracy!
* urban dictionary should help. ....
no one ever consider the number of other companies now gone and struggling due to this mammoth monopoly moving into all parts of our lives?
Just think of the majority of marketing-spend, £billions, is now going to google, previously (I mean 15 to 20 yrs ago), local and national newspapers could earn good returns from adverts places, this has now mostly gone. Gone to google.
As we know other Int. companies are going the same too, Amazon, etc.
To be allowed to do this while paying just pennies in tax is criminal and our tax laws must be changed.
HMRC sold out and did a under the table deal to avoid a lengthy investigation and signed off by Cameron / Osborne (anybody noticed he looks like a smiling lizard creepy !)and his Mandarins to get a PR moment, saying they are getting tough. Shame they haven't shown the same backbone standing up to the EU !
This is what happens when you allow sycophant lawyer politicians into power, they're easily corrupted.
While you or I pay nearer to 40% if you include VAT and income tax together, these corporatocracies are laughing at how easy it is to avoid paying their way, they're worse than benefit fraudsters
I occasionally nip over to the Grauniad, just to check that it is *still* churning out bollocks like this.
And so now with El Reg.
Much squeaking amongst the (increasingly AC) Commentards, very few asking why the parasitoid Governments need to bleed off so much tax, from everyone, but many "outraged" at (entirely legal) tax avoidance.
Where have the bright ones gone?
> Tax avoidance is legal and is to be encouraged because governments are parasites. Readers who express outrage at tax avoidance are by inference stupid. Yes, where have the bright ones gone...
Tax is indeed obscenely high, corruption is rife. Everybody knows it which is why they feel no morale problem with paying as little tax as possible.
Oooh touchy ! Noticed that in a few replies - is that part of the new socially conscious El Reg thing?
Parsing approximately correct (although it was parasitoid, not parasite).
We obviously disagree about whether it is daft to express "outrage" at companies not-breaking the law.
That's pocket change compared to the €17Bn the Irish government is actively fighting to NOT get paid from apple!
To put that in context, 1 company has possibly avoided paying 20% of the bailout, 25% of the 2016 budget, and equal to the annual tax take to year end May 2015!
They have promised that if apple is ordered to pay this money, they will take the matter to the European courts to argue that they shouldnt' get it!
Sung to the tune of “Mud Mud Glorious Mud” by Flanders and Swann
Tax tax, avoidance of tax
Nothing quite like it for scratching the back
To avoid tax tax, avoidance of tax
Let’s have a Double Irish to start off this hack
To avoid tax tax, avoidance of tax
We’ll add a Dutch Sandwich to save to the max
To avoid tax tax, avoidance of tax
We’ll base in a haven with sun and no tax
To avoid tax tax, avoidance of tax
We’ll licence for the rights from ourselves to be lax
To avoid tax tax, avoidance of tax
The EU is wonderful and it’s a fact
To avoid tax tax, avoidance of tax
Nothing quite like it for scratching the baaaack
£4 billion UK revenue
According to financial reports 27% net profit.
By my numbers I make that £1 billion profit (I'm rounding down here)
20% corporation tax = £200 million in one financial year
I'm no accountant but £130 million for 10 years doesn't seem such a good deal.
p.s. I am not an accountant
p.p.s wont someone think of the children
Usual clamour yet nothing really gets done to curb tax mitigation loopholes and worse, the crafty movement of profit out of the U.K. To more favourable tax locations. HP UK for example files financials that suggest a good whack of corporation tax. However, it's immediate and ultimate UK Parent 'funds' HP UK and does so by borrowing huge sums of money from abroad and pays equally huge amounts of interest, net result is a huge loss and therefore a net zero UK corporation tax liability. HP are not the only one by any means and these practices extend even to distributors too.
I get totally cheesed off when the media shouts about the usual suspects but carefully avoids naming so so many others, including banks and financial institutions. Either close the gaps or stop bleating.
...the multinationals are politically unpopular. They know the game is up.
Sorry Drew, but they don't and it isn't. And they don't really care about popularity, they care about profitability, which will always require the minimization of tax.
They'll pay more, sure, but they won't pay anything approaching the levels of tax expected of a purely domestic competitor who isn't finessing the system.
...the multinational ends up paying little to no tax because no country sees the full revenues or profits.
And that is why little to nothing will actually change. Making too much money? Increase the charges from your offshore supplier, that you happen to own.
If people actually knew the extent of what was possible with multiple companies in multiple jurisdictions, they'd insist their politicians and civil servants actually did some real work and sort it out (Lower, flatter, simpler taxes that are coordinated globally is the only way).
Faffing about with doubles and sandwiches is the very small tip of a very large and ever growing iceberg.
Just remember kids, tax evasion is illegal and possibly immoral, tax avoidance is neither of those things.
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