Margaret Hodge says that like it's a bad thing
Do we really want multinational companies taking advantage of our infrastructure without contributing to its upkeep?
The UK's Treasury Department is said to be ticked off by the Public Accounts Committee and its vocal chair MP Margaret Hodge for scaring companies off Blighty with their investigations into multinationals' corporation taxes. Sources in the department told the BBC and the Daily Mail that senior ministers had been warned by …
they do contribute by providing jobs, which contributes not only to tax revenue but also to the economy.
As do thousands of small, medium and large UK businesses who also provide jobs, but also somehow manage to pay a fair share of corporation tax without going broke.
The big companies may be legal but only through incredibly contrived and convoluted arrangements that are dreamt up by regiments of highly paid consultants. The government need to massively simplify the tax legislation so there are far fewer loopholes to exploit.
A dozen years ago there was a mad rush for sole traders to become owner/managers of limited companies. The accountancy profession should hang its head in shame as it contrived tax-saving schemes to push even a modest painter/ decorator nearing retirement, into become a Ltd. Co.
Owner/ManageXXXX Managing Directors could then (a) shield their personal assets from potential liabilities and more importantly (b) draw lump sums as dividends that are PAYE/ NI free. Sure they pay a bit of Corporation Tax on profits, so then G Brown & Co tweaked the rates to ensure they paid what he called 'the right amount of tax' whatever that is.
There remains the matter of simple tax-free dividends being used for tax-efficient reasons (not something I have a problem with, personally, as it's legal), so if Hodge is gunning for MNCs for tax efficiency then she had better shut down every owner-managed Ltd company at the same time.
Nowhere does it say that you have to arrange your tax affairs to pay the maximum possible, and exactly the same legal tax code is used against people to extract every last penny of tax from them legitimately. Hodge can't complain when the reverse is true, organising one's affairs on a complex global scale to shelter tax, all within the law.
Fact is, the world is much smaller and smarter than it was, corporate tax lawyers are many steps ahead of Governments and there will always be a way of sheltering profits to minimise tax. Change the laws, that's all they have to do.
" I think you'll find they do contribute by providing jobs"
And business rates. In broad brush terms a third of corporate taxes come from each of corporation tax, employer's NI, and from rates. The proportion raised by corporation tax declines still further if you choose to take the view that the employees' taxes are only created by virtue of the company's existence and activity. You could water that down further by including VAT, but I think that would still accrue from other spending choices if (say) Amazon weren't in business.
As ever, the problem is one of arsehole MPs doing some grandstanding for a bit of cheap publicity, when they are the root cause ot the problem (if one even exists). What Podge is forever whining on about can be summed up as "Big clever companies are adhering to the laws my party made, and the 1,000 odd pages of the companies act we rubber stamped without reading, and in doing so they're not paying what I think they ought to".
>>That is unfair. I think you'll find they do contribute by providing jobs, which contributes not only to tax revenue but also to the economy.
Interesting justification: so all companies should pay no tax provided they employ at least one tax-paying person. Hmm. So, can I avoid tax if I employ a cleaner or a plumber who does pay tax? How many employees are needed to pay enough tax to pay for the stable, rule-of-law society, its education, health, transport system and so on that the "multi-national" finds so attractive?
Do you really, honestly believe that some parasite like Starbucks makes no profit and still runs a business in GB? So they are a lovely charity? Wonderful how Amazon takes all those pounds for goods without earning any money in GB. Wonder if I can try that on the Inland Revenue - yes, I know some pounds get into my bank account from a British bank account; but really, I make no money from GB, so why are you asking me for tax?
Next you will tell us that the overpaid "leaders" of these firms are underpaid and can barely afford the polish on the chauffeur's shoes, working purely for love.
Sorry, I do not find the unbridled free market, apparently available only to "multi-national", mainly USA firms is good for the host countries whose population and environment are fleeced by them, just so the government, elected and paid by the population, can enjoy sponsored freebies and retirement consultancies.
> Interesting justification: so all companies should pay no tax provided they employ at least one tax-paying person.
I find this position rather puzzling.
Tax is paid on all movement of money both in and out of companies already. Corporation tax is a double dipping tax anyway.
VAT is paid on most things that the company sells.
Tax is payable on share dividends.
Income tax is paid on pay being given to employees and board members.
To suggest that the money flowing through companies is not taxed to the hilt already is rather absurd, which is why I am mystified at the hysteria surrounding corporation tax.
The governments of all the western nations tax to an extraordinary level already. My wife showed me her pay slip for the month the other day and almost half was extracted for one due or another. It's a wonder that the average joe can even survive even with a fairly well paid job these days.
> If you think our taxes are high then look at the cost of health insurance and treatment in the USA. You'll soon realise what we have is a bargain in comparison.
Which is why they are in such a big load of debt shit at the moment.
One of the main reasons that we experience such a high cost of living these days is due to high taxation.
That we tolerate it to the extent that we do is because in recent history we have not known different.
In the UK, we have an NHS which most people love and appreciate and despite what some ignoramuses declare, it is one of the most efficient implementations to date; far better than that abortion they call a health service in the US.
After that though, a large part of government expenditure is overseas aid, that black hole of Calcutta that we call the EU (which we learn today is a hotbed of corruption for those that haven't been paying attention) and the benefit system. Far too much money is sucked up and pissed out. We need smaller, leaner government and more money in our bank accounts. That's how you get an economy going again.
If Starbucks need not pay a fair share of corporation tax on UK generated profits because "they create jiobs" then why should the small business cafe owner pay his share? And of the jobs the multinationals are providing, a large percentage are at or near statutory minimum wage so generate little contribution from tax and NI.
Any business that wants to come here to trade on equal terms with local entrepreneurs is welcome, those who just want to exploit our system and workers is basically asset stripping the UK economy and they can go hang.
"public humiliation companies like Amazon, Google and Starbucks were put through."
Yeah but it had already been proved they were on the cadge, so therefore they got called up to explain why. If you do the right thing, no one will have any reason to ask you to visit the Headmaster's office!
Its a scare tactics...At the end of the day a companies number 1 priority is to create profit, which also includes reducing tax overheads, they will do this by any "legal" means necessary include sabre-rattling and making threats.
It doesn't matter where a companies HQ is based, as long as they pay fair Tax. Its a very self obsessed company who withdraws from a market simply because they don't get their own way.. and to be honest, we're better off without them.
I thought all the companies had been scared off from the UK by the equal pay act, the minimum wage, maternity leave, health and safety, banning chimney sweeps, the abolition of slavery.
Everytime there is a law to improve the rights/pay/healthy+safety of workers for the last 200 years - the Tories have claimed it will drive companies away and destroy jobs.
Our local ASDA has slowly been replacing their checkout people with self service lanes supervised by a single person over the years.
One has to suspect that closing down half a dozen human operated checkouts has reduced the number of staff proportionally, and presumably this has meant they are employing less people so I think it is fair to say that the minimum wage has destroyed jobs. IT in general is also a huge job killer, I think that most people reading this have probably automated jobs out of existence, I have done; by automating data capture the associated data entry jobs no longer need humans.
As the cost of the staff goes up, the benefits of automation goes up with it and when implemented automation means that there are the fewer people needed to do the job. Already, many companies have realised productivity gains (and employment reductions) of around 100% compared to the systems used a decade or so ago. This is not going to have a pretty social impact in the long term and is probably something that should be addressed by politics. It won't get addressed until there is mass unemployment among graduates who happen to be party members of one of the major political parties.
I say that because we already have mass unemployment on a scale I suspect was last seen in the industrial revolution.
On the main subject, I don't see the problem. The market is only so big and if a multinational won't pay tax in the UK then honestly I don't think it's any great loss if they don't come to the UK. A UK company can do the business and honestly I think that we are better off without businesses not paying tax because businesses evading tax means that the companies not evading tax are at a competitive disadvantage.
My g/f is a manager at ASDA, yes they are adding more of these self-service checkouts, but its mainly about foot print rather than staffing levels. In fact staffing numbers have drastically increased in recent year, this is due to most stores now operating home delivery, and click to collect etc. (Which require large numbers of pickers and delivery drivers).
I actually feel well-disposed towards Ms Hodge !
One of the few bastions of democracy the UK has left - the ability of parliament* (in the form of select committees) to force people, companies, institutions - and occasionally countries - to account. In public.
Instead of whinging, companies should trumpet their engagement with such a process. Oh, and not do anything to be embarrassed about ....
*That's an elected parliament.
Google brought that on themselves by trumpeting their ridiculous corporate slogan around the place, like they're still two guys working out of a garage, while behaving in various pretty unpleasant ways. If you're going to have a corporate slogan like that, expect it to be rubbed in your face at every chance.
What would have been crossing the line is accusing a company who didn't have such a corporate slogan of "evil".
You mean the baseless accusations that the Telegraph have already had to apologise to Margaret Hodge over this story:
An item posted on the Telegraph website last night said: ‘Margaret Hodge MP – Contrary to our report “Hodge faces challenge over family firm’s taxes” (Nov 20), Stemcor, in which Ms Hodge has a small shareholding, has not abused transfer pricing to avoid tax. We accept that there is no inconsistency or hypocrisy in Ms Hodge criticising other companies for tax avoidance and apologise to her for any contrary impression.’
One of the few bastions of democracy the UK has left - the ability of parliament* (in the form of select committees) to force people, companies, institutions - and occasionally countries - to account. In public.
Whereas I see a body intent on damaging Britain by using ridiculous arguments about 'moral duty'. As far as I know tax has never been a 'moral duty' only a legal one. So having MPs make out that companies which comply with the laws are 'evil' isn't on, and can only be about damaging investment into the UK. After all it's the MPs who set the legal rules about what taxes must be paid, so they of all people know it has nothing to do with 'moral duty'. Ergo their attempts to publicly humiliate companies who comply with the laws they make, must have a purpose which isn't actually about raising tax income levels.
You sound paranoid and delusional, you really think this is about frightening off investors? You genuinely believe that Amazon and Google will pass up on millions of pounds of profits because Margaret Hodge was mean to them? Bizarre.....
> One of the few bastions of democracy the UK has left - the ability of parliament* (in the form of select committees) to force people, companies, institutions - and occasionally countries - to account. In public.
Erm, I think that you'll find that's what the laws and courts are for.
The government should not be targeting specific companies or individuals under any circumstances. That is an abuse of power and a sign of a corrupt government.
If the government of the day feels that there is a social injustice, the proper means is to change the law and let the courts sort out the details. The reason why we have an independent judiciary is to stop just this kind of thing.
I agree, but t's not quite that simple. You have to allow companies to offset legitimate expenses against income, and that opens the loopholes. Salaries - obviously okay. Materials purchased to make the product - okay again. Software licences e.g. Windows desktops? Yep. How about using software and computer services at a 'partner company' overseas? Reasonable, but who sets the charges? Ditto with intellectual and trademark rights - who decides how much Starbucks UK pays to use the Starbucks name?
You have to allow companies to offset legitimate expenses against income ... Materials purchased to make the product
Yes, but what Starbucks do is totally artificial. The UK operation buys ridiculously expensive coffee beans from the Swiss operation, since that means they can offset that against UK tax and pay virtually nothing in Switzerland (not a country noted for its coffee plantations).
As for paying to use the Starbucks name, what the f*ck? Starbucks UK is not a franchise, so any payment for using the name is another artificial tax dodge to offset against profits.
> Yes, but what Starbucks do is totally artificial.
Well that entirely your opinion though.
On what legal grounds do you assert this?
> Starbucks UK is not a franchise, so any payment for using the name is another artificial tax dodge to offset against profits.
One man's tax dodge is another man's tax efficiency. Your righteous indignation is colouring your perception. In virtually any other field we applaud people for doing clever things for the purposes of efficiency....unless they are business people, where we apparently call them crooks.
"The UK operation buys ridiculously expensive coffee beans from the Swiss operation"
Hmm. 20% above cost actually. And the cost of beans is a terribly minor one for a coffee shop. Even when you add this 20% back in it doesn't make Starbucks UK make a profit.
And there should be some margin paid to the Swiss trading operation, shouldn't there? They are buying the coffee for all Starbucks across Europe. It is right that there should be a margin on such work? Y/N?
"As for paying to use the Starbucks name, what the f*ck? Starbucks UK is not a franchise,"
Starbucks does have franchises though. And they are charged the same rate that Starbucks UK is charged. And there is a value to being able to use the name, no? We would expect a shop called Starbucks to attract more custom than one called Fred's?
It's also worth noting that EU law actually bans the UK from charging tax on royalty streams going to another company based in the EU. Actually bans it. What's more, HMRC did have a look at the royalty rate and Starbucks lowered it (from 6% or so to 4.5% or so from memory). So it really has been looked at and everyone agrees that the practice is, at least now, just peachy.
Finally, even if you add all of these supposed dodges back in Starbucks UK *still* wasn't making a profit. We've even had Vince Cable stating this (as well as FT Alphaville and a number of accountants of my acquaintance).
OK Mr Worstal and others, try this for size:
Starbucks corporate officially tells their shareholders that Starbucks UK makes plenty of money and therefore the UK expansion will continue to be funded. Check it out, it's on their official records, stuff like this has to be.
Starbucks UK HQ tells HMG UK that they don't make much money therefore don't pay much tax. Check it out. it's on the House of Commons records, stuff like this has to be.
Spot the inconsistency?
NB it's very very bad form for a US company to lie to its shareholders.
...who decides how much Starbucks UK pays to use the Starbucks name?
I would have thought that Starbucks UK should be demanding compensation from the parent company for having to trade under a name that is synonymous around the world with watery, bitter, unpleasant beveages bearing little or no resemblance to coffee!
Jus de chaussette as the Belgians call it.
The guy in the icon probably enjoys his drink more!
>We already do that. It's called VAT
Not quite.
VAT is charged once the nominal price of the goods or service has been established and only really affects non-business consumers.
A VAT-like tax applied on total business receipts rather than its individual transactions would encourage suppliers to trade margin for more competitive prices, particularly in the B2B market. Otherwise, as you rightly imply, you'd end up taxing the consumer rather than the supplier.
And no, you don't *have* to make allowances for "legitimate expenses" - employers' NI, rates (and indeed income tax) don't have such a provision, they're just a cost of doing business (or of existing).
We, including you I presume, choose and elect them. We have full access via their MP surgeries, letters, email and the next election. I suggest you stop voting for them because of their party membership and start voting for the individual.
Be grateful for those who have the nous to question and push, even for UKIP (much as I abhor their isolationism and ignorance).
Too right! ... the "Businessmen" should agree on a stock response as follows:
You (Hodge et all) are the "Lawmakers" ...
If you don't like what we're doing then MAKE SOME NEW LAWS!
And then speak about how if they don't minimise their tax bill they're not doing their duty to their shareholders and they're at a competitive disadvantage to their competitors.
And then get up and leave!!
*Sigh* Directors of UK companies (and infact pretty much any company anywhere in the world as demonstrated by both case law and statues) have no duty to their shareholders to either minimise tax or maximise revenue. Anyone suggestion they do is promoting a fiction.
*Sigh* Directors of UK companies (and infact pretty much any company anywhere in the world as demonstrated by both case law and statues) have no duty to their shareholders to either minimise tax or maximise revenue. Anyone suggestion they do is promoting a fiction.
But, they have a duty of care to their shareholders (well, their shareholders money). And companies that display a gay abandon to their shareholders can - and will - face the wrath of corporate investors. Mrs Miggins with her £100 worth of shares in BT doesn't scare them. Scottish Widows (for example) with their £100,000,000 worth of shares does.
If the UK government were serious about a lot of things it says it is, then we'd see taxes used a lot more to influence behaviour. Here's a good example ... want to reduce road congestion by 50% ? Tax firms that don't have a homeworking/flexworking policy. Let the managers explain to the shareholders why they have to pay a tax they could avoid by more enlightened working practices.
Don't do what the vicar says. Do what he does.
Not just you.
Hodge and her family own a multimillion pound business called Stemcor (founded by her father) that indulges in just the same kind of tax avoidance that she criticises ("Transfer Pricing"). I believe her personal share is worth well north of £1m, although a lot more than that is held in trust funds (wonder why).
There isn't anything illegal about any of this, it is just a bit hypocritical when she goes off on one.
I suppose that depends on whether you consider a shareholding worth > £1 million (personally, with a lot more shares held in trust for her children, I wonder why that might be - surely not to minimise tax liability, no perish the thought) to be "very small". Fact: Stemcor pays << 0.1% of revenue in tax.
"Very tiny" according to Ms Hodge. I'm not sure I'd call a couple of million shares 'tiny' if they are worth over £1m. That's just those in her name, as opposed to trust funds.
She may have no say in how the company is run, but she could always give away the shares if she doesn't want to benefit.
Anyway, the Islington children's care business was far worse.
It seems only reasonable that everyone should pay tax on PROFITS earned within a sovereign country I have to on my business and PAYE and VAT etc ...Etc. The way the multinationals get round it is presumably charging inflated amounts for intellectual property within the firm, 'rights' to licence trade names and remote management charges from a head office in a tax haven.
1] They are not going to re-locate HQ to GB because of said tax advantages.
2] they are equally not going to stop doing business here because they are obviously making a profit.
Stop listening to the big lobbyists Mr HMRC and please do your job, someone is paying you to do it - oh yes its us isn't it - should we stop?
Well THEN you have to have a debate on the transfer pricing of a McDonalds paper cup.
How much is it worth as a blank cup?
How much is it worth after the logo is added?
Did you print the logo in the UK? or Luxembourg?
And you need to pay a police force to figure that stuff out and detect "deviations".
THATs why we have WTO agreed laws on transfer pricing. Its not simple.
And if your sovereign government breaches its treaty obligations, expect retaliation!
If you're the CEO of a multinational company and you can't defend your tax policies in public, you're a pretty poor CEO in my opinion.
The only companies that the PAC are frightening off are the ones who can't justify their policies and I don't think we really want them.
It's also worth noting that the PAC are cross party and unanimous on issues of tax, these anonymous briefings are just posturing in the run up to an election by Tories who are too weak to show their faces.
So we have just given up competing completely?
Well you have to understand competing means winning and losing, and that's not very fair on the loser(s). So it's not that we've given up on it, but we're working on changing societal attitudes towards it, and helping the people understand that in our (future planned) socialist utopia we won't need such primitive concepts as that. We'll have true equality...
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Corporation tax raises £40 billion per year. There are 2.4 million unemployed. The average wage is £25k.
£40 billion could be better used by companies employing 1.6 million people at £25k a year. Or ALL 2.4 million unemployed at £16k a year. And don't give me that crap that British people don't want to work -- not long ago there were only 1 million unemployed, so there are AT LEAST 1.4 million who want to work but either can't find a job or would be worse off if they took one.
Having zero corporation tax would attract foreign companies to set up their headquarters in London. It would also put domestic companies on an equal footing with large multi-nationals. And save time/money spent preparing accounts doing more productive things, like running a business.
So many people on this thread think more tax is the answer to everything. Ten years ago government spending was 35% of the economy. Now it's over 50%. Are we really better off for it?! Were we really living in Dickensian conditions under Blair's harsh 35% of GDP spending reigme? Remember, for every job the government creates, you lose two in the private sector.
According to the NY Times 2012/07/01:
"President Obama has criticized outposts like the Caymans, complaining that they harbor giant tax schemes. But here in Wilmington, just over 100 miles from Washington, is in some ways the biggest corporate haven of all. It takes less than an hour to incorporate a company in Delaware, and the state is so eager to attract businesses that the office of its secretary of state stays open until midnight Monday through Thursday — and until 10:30 p.m. on Friday.
Nearly half of all public corporations in the United States are incorporated in Delaware. Last year, 133,297 businesses set up here. And, at last count, Delaware had more corporate entities, public and private, than people — 945,326 to 897,934.
……
Delaware today regularly tops lists of domestic and foreign tax havens.”
Businesses in the UK also have similar opportunities to do similarly, some closer to home than Luxembourg.
In doing this, corporates save money and can offer lower prices to customers for goods and service supplied. Governments lose tax money, but could simply raise the lost income by imposing additional taxes on sales, except that they wish to avoid exposing the reality that the end consumer always pays every cost and the cost of the state is extraordinarily high. The indirect methods of corporation taxes and employee income taxes keep the voters happy in the belief that they aren't really paying those taxes when spending their take home pay. Honest and transparent tax policies would not include using companies as tax conduits by the back door.
We accept that tax must be a part of our lives but few people are happy about paying it. This is an interesting and backward problem I have discussed a number of times with a few people. We want our so called 'essentials' such as school, healthcare, etc but few are happy with them. We dont get to choose because we dont pay for the service (directly) so we complain about waiting times and poor service in the NHS as well as the shockingly poor education constantly interfered with by the state etc.
When these topics come up there is a common pattern of I dont wanna pay any more so force the- rich, business, millionaires, etc to pay more. Even when the 'tax dodge' is legal (as an ISA is) there are then cries that these people can afford to pay more and the poor people who have ISA's dont have so much money. This is the green eyed beast.
But nobody thinks this through. Why does it cost so much in tax that the 1% end up paying for the 99% even after dodging tax legally? Do the 99% want more managers in various public sector positions? Do the 99% want to be spied on? Do the 99% want the IT infrastructure changing in public departments every yr only to say it was scrapped/not fit for purpose/in need of replacement? or do the 99% want the money to go to education, health, police, etc?
The reality is successive govs offer various candy apples and people shout yey. Then the gov borrows a load of money on the promise of our children and hand out some candy apples. And with every bribe comes a cost. The hefty price of tax isnt because multinationals are avoiding paying excessive tax here (legally). Its because the people (including on the reg) say the gov should take more money from them because we shouldnt have to pay more.
Maybe we should insist they spend less but spend it wisely. But that might just be my thoughts
My simple answer. If all the multinational tax dodgers, leagl or not, were told to fuck off or pay tax, they will pay tax. I suppose 75% of a few billion is still better than 100% of nothing. If they threaten to leave, shedding jobs, then those openings would be taken by small local companies, employing locals and paying tax as they could not afford the top accountants that find loopholes.
If starbucks and the like were all told to piss off I doubt that people will stop buying takeaway coffee etc. They will just use the local shops that sell the stuff.
Does anyone here think that we will ever have a government who will grow enough of a backbone or set off balls to do this ??