Don't do it ...
Don't do it Facebook ...
Facebook is to pay millions more in taxes in the UK, a day after it was revealed that HMRC paid Facebook six times more to advertise on the site than the ad platform paid HMRC in taxes during 2014, according to reports. Facebook is, it says, undergoing a major overhaul of its tax structure. A spokesman for the free content ad …
Most perms in IT probably paid more than that in income tax too!
Good to see the government make sure their suppliers are all good UK (corporate) tax paying citizens before they purchase their services.
Oops! Surely this is just a one off....er....anybody want to back that horse? No, thought not.
Still, I'm sure the inevertable tax rises in the next budget are because we've all shared the pain and they really have left no stone unturned in their persuit of finding every penny they can save or raise through existing taxation so the a little extra from you and me is a really a last resort to be able balance the books. Mmmm.....look over there at that big company that pays less tax than a middle earner.....hear those bells ringing to tell you something.....
The new law is over 500 pages long. I have no idea how much tax law the UK has, but I doubt that there is a shortage. The new law is vague. The only practical solution is to negotiate an agreement with a tax man. In a banana republic, this would result in a poor government and rich tax men. I would expect that Google's accountants are not dim, and that they bought a piece of paper that says they have paid all the required back taxes in full.
The fun comes when the government tries to explain why that piece of paper is worthless, and why Google should buy another piece of paper.
I am not shocked. As far as I am aware Google, Starbucks, Amazon and such were entirely in the letter and spirit of the law. To take more money off the companies would seem to be breaking the law including EU law.
Unfortunately when the law doesnt do what these people want they (gov) use lynch mob mentality to stir people into causing problems. This does seem to bring question over the idea of a civilised society.
This isn't a tax problem, it's a law problem. The law is an arse in this instance. You obey the stupid law that someone(s) told you that you *must* follow at all times, despite it being stupid, and then you find that you get your own arse hauled over the coals — in public too — for doing so. Meh.
Google, Facebook etc should have stuck to their guns and *not* paid anything they didn't legally have to, in order to force the stupid law makers to realise their mistakes, get together and fix the broken laws, not make shady backroom deals.
This isn't a tax problem, it's a law problem. The law is an arse in this instance
I believe the law has not actually been tested in court in relation to tax-dodging US corporations. By pretending that their UK business is overseas or has profit-erasing charges from overseas, the Globocorps are engaging in (amongst other dodgy practices) transfer pricing. That's accepted as illegal in almost all countries and international tax treaties. If a UK manufacturer or retailer did this with their components or retailed products they'd be hit quickly and hard by HMRC. And that law has been tested in DSG Retail and others v HMRC (2009)*.
But for some reason, when you're a huge software or communications services HMRC are utterly ineffectual, and don't go after the likes of Starbucks, Google, Facebook, Amazon. And even when HMRC are finally embarrassed into doing something, they settle for pathetic sweetheart deals like this.
So to say that the law is an arse is probably (until proven so in court) incorrect. HMRC and their political masters from all political parties are the arses. And even when HMRC have the political backing to move forward, they'd need a different model of enforcement, by contracting out all the legal work to top flight tax barristers, and hiring a professional project manager (and ITSec support) to bring in each of these companies in turn. You don't take a knife to a gun fight, and the globocorps have weaponised their tax affairs with top-dollar lawyers and tax accountants, and HMRC can't rely on their mid-grade civil servants (or the bunglers of the Clown Prosecution Service) to get a result.
* Warning! Warning! Barrack room lawyer alert!
"But for some reason, when you're a huge software or communications services HMRC are utterly ineffectual, and don't go after the likes of Starbucks, Google, Facebook, Amazon."
Start with the low hanging fruit.
If Starfucks insist their IP is overseas let them ship their ventichailatte with 20 spoons of sugar in it from the Caymans or wherever direct to the consumer (pretty sure somewhere around there produces sugar) let them go for it. If they can keep their prices low enough they might even come under the vat / duty limits on imports.
Maybe the average punter might find the delivery timeframe unacceptable.
"Google, Facebook etc should have stuck to their guns and *not* paid anything they didn't legally have to, in order to force the stupid law makers to realise their mistakes, "
Nice idea but these companies paid a lot of money to the lawmakers to make that "stupid law" first.
So it's not stupid for them at all and they got what they paid for. Sticking to it too hard might reveal the buyers and the corruption and that is something the buyers don't want.
Just one case more as total corruption is the norm in every major country now and laws are bought at will. EU and elsewhere.
It's not even a crime to buy anyone in EU Commission: Pay whatever amount of money so that Commission will introduce a directive. Any content the payer chooses. That's how bad it already is.
Same applies to Congress in US, of course.
While I appreciate that the corporation tax figure is derisory, as already pointed out, it undoubtedly reflects Facebook following the laws regarding transfer pricing etc. If they have not, then it is HMRC's duty to challenge and/or prosecute them.
What is always omitted from these headlines is the other taxes paid by facebook etc. Assuming that Facebook's UK employees are paid more than the median average, say £50k each, then Facebook paid c£5 million in employer's national insurance alone last year.
The problem with the "Company X employee people who pay tax" is these people use servivces paid for by the tax they pay, so it's cancelled out. What's left is a corporation that happily uses the country infrustructure to earn revenue, but pays nothing for it and that's wrong.
What's left is a corporation that happily uses the country infrustructure to earn revenue, but pays nothing for it and that's wrong.
I've got an assignment for a few weeks in Dublin coming up, I normally fly over, stay in a hotel Mon-Fri and fly back again, naturally I will be using the country infrastructure while I'm there. My company will bill my Irish client from the UK and hence for tax purposes I will only incur a UK liability on the revenue I received from my Irish client. Is that wrong?
"My company will bill my Irish client from the UK and hence for tax purposes I will only incur a UK liability on the revenue I received from my Irish client. Is that wrong?"
Clearly missing something I think. Double Dutch should be thrown into the mix, possibly. Consult your tax lawyers.
Yes, what people including the media are missing is total in-country spend.
So as we have here, from a government perspective do you want Facebook to build a new HQ in London, with all the local jobs and money being put into the local economy, or do you simply want Facebook to continue to operate offshore and legally only pay a marginal amount tax.
A few years back I thought the UK government understood the value of total in-country spend and saw an opportunity created by current US taxation laws which encourage US companies to 'hold' monies off shore rather than repatriate them and incur US tax. Hence why it promoted the UK as somewhere to do R&D eg. Google cars.
So, they are decinding the tax they are willing to pay again, this time paying tax on the profits generated by the "Majority" of reveunue raised in the UK. When will these fuckwits realise that their public position will only recover when they pay tax on all thier UK derived profits.
When will these fuckwits realise that their public position will only recover when they pay tax on all thier UK derived profits.
Why would Zuck and other US CEO greedsters give a toss about their public reputation? Most of those taking a stand (probably like you and I) don't and wouldn't use Facebook. Most of those who do use Facebook are too busy posting cat pictures and (to others) dreary detail of their lives, and wouldn't understand the issues, nor care. After all, they don't pay Facebook.
The only reason that these companies are offering token and voluntary changes is in the hope that this will head off a full and fair implementation of UK tax policy that would cost them a whole lot more, as for public reputation, that counts for nothing until they see user numbers declining because of the company's behaviour. Look at Amazon's employment practices as well as its tax affairs, and its corrosive impact on other internet retailers - but do those behaviours have any measurable effect on sales? Not that I can see, because people will always buy as cheap as possible.
When will these fuckwits realise that their public position will only recover when they pay tax on all thier UK derived profits.
If you had read the article it clearly stated that Facebook was building a London HQ. This is a significant change to Facebook's tax status in the UK. It is effectively an admission/acceptance that Facebook no longer simply has 'independent sales agents' operating in the UK, but has a business based in the UK; which will change the way in which Facebook's UK turnover will be assessed for UK tax purposes.
However, I don't expect Facebook like other companies to be paying much corporation tax, because given the choice: pay corporation tax or invest in the business, they will invest in the business...
A Google driverless car
has been involved incaused an accident with a bus after it swerved to avoid some tax.
I'm a little surprised that ElReg hasn't picked up on this accident. The driverless Google car (travelling at 2 mph) pulled out in front of a bus (travelling at 15+ mph), expecting the bus (on the main road) to give way...
For all the "not FB's problem, a law problem" types.
What is your vision of our country when _all_ businesses structure their companies to avoid tax and _no_ corp tax is collected? Are you an alright jack?
Lat time I looked, FB's 850 drones all use public infrastructure/services, are you all advocating higher personal taxes to have moderately pot-hole free roads, healthcare, policing (although the IPBill will cover a lot of that, just sending serco round to ferry ordinary Joe crims to jail, then raid their bank accounts to pay for board and lodging at HMP) and education.
@ AC - No, I think everyone should pay the amount of tax that they are due to pay, and there is clearly a problem that has arisen from the globalisation of trade, but that still can only be dealt with by changing the "rules" and then applying them.
In terms of filling potholes etc, corporation tax is actually a very small piece of the funding - see here - and the bulk of the revenue comes from income tax, NI and VAT all of which are generated by the trading / employment of people in the UK.
"No, I think everyone should pay the amount of tax that they are due to pay, "
Yes, but this is only small part of the whole truth: When you have a lot of money you buy laws which guarantee that you don't have to pay anything at all.
Much cheaper than actually paying taxes. And that is the norm, not an exception nowadays.
When bribery on top (EU Commission/US Congress) is legal, only those who bribe the most, are successful.
Facebook also pays other taxes, not just corporation tax. There's employer's NI, there's business rates, there's the taxes they withhold from their drones' salaries (income tax, employee's NI etc); there's also things like VAT to consider. If our Glorious Government has set the tax system sensibly, then the only time CT is non-zero is when you're hoarding profits (or paying them out as dividends) rather than spending them (as salary, as other benefits to your employees, as services from other companies).
In turn, and again assuming the tax system is set sensibly, individuals who receive dividends get a reduction in the income tax they're expected to pay on them, capped by the total CT paid by the company - so the tax situation is identical whether you're paid by dividends or by salary.
@ farnz "Facebook also pays other taxes". Easy there, income taxes are paid by employees, VAT by consumers, dividends are paid to share owners and are in most countries not taxed as high as salary. Check with Buffet. But they do employ people. FB pays taxes on profit, and there lies the problem as they can fix the books much too easily.
See here's the problem, you don't seem to understand what Corporation tax is. Very few people do because it's intentionally misrepresented by ministers and media.
Most of what you mention is covered by business rates, next would be "pot holes, police, hosptials et al" if the corporation uses the roads they will have vehicles and they will pay road tax for those vehicles. When it comes to tax on economic activity pretty much everything is a personal tax. Then there's PAYE and NI contributions, and all sorts of other wildness.
At the end of the day a person pays all the taxes, if corporations pay corporation tax then they will either pass that price on in their products and services or they will cut back in other things. Higher income tax means corportations that want to keep staff sweet raise their wages, again this is reflected in the cost of things. Same with national insurance or more or less any tax. They will always work their way through the system for someone paying more.
Anyway all in all it doesn't matter at what point tax is collected, you always pay the tax.
(1) Governments produce hideously complex and convoluted taxation laws at national and international level.
(2) Large corporations can afford the smartest people to navigate these taxation systems to maximum effect.
So it is inevitable that the groups best positioned to benefit from these systems are the largest corporations, not the governments. The corporations are following the law, and have a duty to their shareholders/stakeholders not to incur unnecessary expense.
If you want to change this - rationalise the system and make it much *much* simpler.
But this requires the governments of different countries to agree - and some of those *are* benefiting from the current system.
So perhaps governments should consider that they are in *competition* for the tax revenues in the international market?
Actually it seems to be more like:
(1) Large corporations produce hideously complex and convoluted taxation laws that they can navigate themselves to maximum effect without the electorate noticing.
The people writing tax laws, and the people enforcing tax laws, and the people running large corporations, tend to be that exactly same people. Perhaps not always at the same time, but almost always using Private Eye's "revolving doors".
It's not quite as exciting as all that. UK based salesmen closing deals with UK customers always would be a "permanent establishment" in the UK and the profits from such would always be subject to UK corporation tax.
So, what they're saying is that "our large customer salesmen are based in the UK". Everything else flows from that.
Including, funnily enough, that Facebook UK will now be paying royalties to Facebook Ireland. Because tax is indeed levied where the economic activity takes place and some good part of Facebook's economic activity is all that development work done in California. Meaning that, under those usual tax laws, Facebook UK *must* pay a royalty from that UK income. And that royalty moves through Ireland, to Bermuda and then, maybe yes, maybe no, into the US.
What the net effect of this will be is going to be interesting. I can see the tax bill rising, yes, but I wouldn't expect it to be by all that much.
How to look like your doing something good while shafting the UK tax payer even more...
Sales may be booked in the UK, and revenue in the UK may increase hundreds, maybe even thousands of times. But Facebook UK will still need to license the use of the Facebook logo from Facebook Ireland and its Dutch sandwich partner, so the opportunity for profit in the UK will be wiped out.
I have just had a nasty letter from the tax wankers about an overpayment of tax credits.
That was from 2 years ago when I did a lot of contact work and had an infrequent work patten, and at the time I tried to reason with them, but no. If you are an honest(ish) IT bod then the tax office only want to own your first born. Their whole system is shit, be it for drones or corps.
Dear Tax Office,
isn't it about time you started being transparent in your dealing with domestic and corporates alike. Isn't it about time that you have an adaptive system that can actually mange and be fit for purpose. Isn't it about time you went for the worst offenders rather than some families that yoyo around an imaginary threshold.
Sort your fucking shit out
The UK benefits system, including tax credits isn't set up to help those in work and/or with variable work patterns.
The problem with tax credits is that your payments for the current year are based on your income from the previous year and get paid monthly. However, these payments are only 'provisional' because your income is re-assessed at the end of the tax year and at this point you can find yourself with a massive liability.
A few years back I had a bad couple of years so got a lot of tax credits, only problem received a rather large payment in my final couple of months of the year which took me over the threshold, so had to repay all the monies received that year... Interestingly, if you can be bothered, if you reregister every year (ie. renew the claim) they will deduct the monies you owe from these future claims... But - as intended - it is a lot of work for not much real benefit and it is less hassle to simply pay up and drop out of the system.
Two things, tax return deadlines, and whichever tax evasion initiative they are running at the moment. They pick a group of people they think aren't declaring all their income, and encourage them to make a voluntary disclosure before they get caught. They haven't done one for large American multinationals yet, but they have done groups such as builders, plumbers, e-bay traders and dentists.
I've just been reading "The Great Tax Robbery: How Britain Became A Tax Haven For Fat Cats And Big Business" by Richard Brooks. It's a good read, written by an ex-tax inspector doing some investigative journalism.
However it's hard to actually comprehend how all this tax avoidance malachy is actually done - it really does seem to be down to big business and accountants working with HMRC to set favourable, and highly complex tax laws which allow multi-nationals to circumvent paying much (any?) company tax.
Gives multi-national companies an even bigger advantage over small/medium sized businesses.
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