
WeWork Gets Tax Rebate Meant for Its Small-Business Tenants - Turukawa
https://www.bloomberg.com/news/articles/2019-08-20/wework-gets-u-k-tax-rebate-meant-for-its-small-business-tenants
======
Turukawa
I provided some of the data used in this article (via FOI-request, used at
sqwyre.com).

The scale of the number of the hereditaments (taxable units) is remarkable and
overloads local tax authorities. We're talking thousands, with regular tenant
changes. Even in central London, there are only a handful of municipal staff
to deal with all businesses.

What you end up with is equivalent to a denial-of-service attack against rates
authority staff. They're overwhelmed.

That's the real risk to communities. If tax relief claims are industrialised,
it puts endless pressure on the services those taxes were supposed to pay for.
These are local taxes, so that's libraries, community centres, road
maintenance, etc.

WeWork may not be a tech company when it comes to what they're selling, but it
is when it comes to how they deal with tax.

~~~
munk-a
> If tax relief claims are industrialised, it puts endless pressure on the
> services those taxes were supposed to pay for. These are local taxes, so
> that's libraries, community centres, road maintenance, etc.

I can understand how the existing system may have issues with this - but the
total presence of WeWork definitely doesn't qualify for a rebate... and if the
filing rate of the company seems absurd then the government should reject all
the filings by that company and fine the company trying to abuse the system.

Unlike computer logic where weird edge cases can be exploited due to the speed
and complexity of the system... when it comes to taxes this stuff is going in
front of human beings and the government can always bring a hammer down.

~~~
mars4rp
Government works on law not on what makes sense, if the punishment you are
describing is not in the law. they can't do it! and have to process all the
filings.

~~~
joe_the_user
_Government works on law not on what makes sense, if the punishment you are
describing is not in the law. they can 't do it! and have to process all the
filings._

I think just about all legal systems have catch-all regulations that allow for
fines for abuse.

Moreover, law isn't actually mechanical rules like computer science - people
who skirt the law systematically often find themselves facing serious legal
problems and intention is a big consideration in some (but not all)
regulations. "Obstruction of justice", "contempt of court" and so-forth are
broad statutes that let courts lean on those abusing the system. etc.

The actual problem, I'd note, is that courts and cities are much more hesitant
to go after large, monied interests as compared small interests. A local crank
doing what Uber, Airbnb or others do could go to jail, these companies just
count their money.

~~~
treeman79
A banker mailed a building brick by brick via post office. Was cheaper than
standard shipping.

[https://www.ksl.com/article/32424611/vernal-bank-built-by-
br...](https://www.ksl.com/article/32424611/vernal-bank-built-by-bricks-sent-
through-the-mail-mdash-partly-true)

~~~
whatshisface
If the postage was appropriately priced for the size and weight of his
packages then the USPS didn't lose anything from his clever plan.

~~~
Benjamin_Dobell
From the sibling link:

> _This massive shipment was noteworthy not only for its size, but also
> because it destroyed one of the Uintah Railway Company 's trucks. The
> truck's brakes failed and it started coasting backwards after breaking a
> drive chain while struggling uphill, loaded with several thousand bricks.
> The truck then turned over and caught fire. The driver was not injured, but
> most of the bricks were lost._

I imagine USPS pricing didn't account for that incident!

~~~
crooked-v
That one's completely the company's fault. If anything bricks should be much
easier to balance across trucks than other collections of shipments, because
the shipper knows they all weigh the same.

------
aresant
This is a massively complicated and nuanced issue that has kicked around the
Supreme Court in the UK.

Here's the game:

1) There are taxes levied on business users of commercial office property in
the UK.

2) Independent small businesses may apply for tax relief if they rent a space
that has a rateable value of less than £15,000. (1)

3) The intention of this relief was to provide small business users with a
fighting chance to be able to afford office space.

4) The "total rateable" value" of a massive open coworking space is obviously
higher than £15,000 but if you're a business renting 2 desks maybe you should
qualify for the small business relief?

5) Coworking landlords figured out that they could qualify for the tax breaks
THEMSELVES if they cut their own properties into dozens (or hundreds) of small
plots or pieces called hereditaments.

6) Then in effect you have these hundreds of hereditaments claiming the small
business tax and collecting rent from a small business.

WeWork is a slightly worse abuser of the game played by virtually all
coworking operators in the UK.

The "coworking" lobby has published a study outlining their view (1).

At the core Her Majesty's Revenue and Customs set up a system that didn't
count on the inevitable "enterprise" player paying tax attorneys to abuse
them, and the two sides should probably sit down and sort out something
reasonable.

But instead they're suing eachother to oblivion and employing armies of
attorneys :).

(1) [https://www.gov.uk/apply-for-business-rate-relief/small-
busi...](https://www.gov.uk/apply-for-business-rate-relief/small-business-
rate-relief)

(2)
[https://lep.london/sites/default/files/The%20affordability%2...](https://lep.london/sites/default/files/The%20affordability%20crisis%20-%20business%20rates%20aren%27t%20working%20for%20london%27s%20open%20workspaces.pdf)

~~~
munk-a
Laws are hard and the legal system is complicated but (4) is where it breaks
down to me. If there was a company leasing 100k worth of space in total they
clearly shouldn't qualify, if the client is leasing 10k worth of space, maybe
they should qualify... if that company mostly closes but has time to run out
on their lease which they use by sub-leasing the property then still, _maybe_
they should qualify, their sub-leasors probably should qualify assuming the
property isn't marked up in the sub-leasing.

Any company attempting to declare stewardship of multiple hereditaments should
have the book thrown at them. Anyone using subsidiary companies to distribute
their hereditaments should also have the book thrown at them... I'll just
assume the UK got into this weird tax system because real-estate investors
tend to have an out spoken amount of power in politics and tend to create some
of the most absurd tax loop holes... especially since there is a specific
coworking lobby.

------
Guthur
Any company with local revenue of over $100 million and world wide revenue of
nearly a billion should just not be eligible for tax breaks. It's really just
that simple.

Frankly just remove tax breaks completely and make the whole system simpler
and cheaper.

~~~
squirrelicus
Tax breaks and similar incentives exist to nudge the market in the direction
the government would like. I may not approve, as a conservative person, as I
always advocate for a simple flat tax on all entities. But I'm not the
politicians who decide they want to incentivize various behaviors in the
market.

The real point I want to make is in order to simplify the tax structure, you
rob the politicians of their main economic design power. No more tax
incentives for solar, high efficiency windows, developing in high crime areas,
and the like. I'm willing to pay that price, but are you? (The royal you, i.e.
us).

The final point, the real crux of the matter, is that politicians cannot
predict all the consequences of the tax breaks they create. If tax breaks
exist, people should try to get them, otherwise the whole incentive structure
doesn't operate. Then some people who were not intended to get the break find
edge cases in the legal language to exploit. If the politicians can't predict
all the edge cases of the incentives they design (which they can't) then we
end up with things that seem outrageous until you read the law and go "oh,
that's the loophole. Shitty, but seems legal.". This is why the federal code
is so complicated. People making the tax code more complicated over time to
try to specifically target the incentives. Just like a legacy codebase, in
fact. Except that it's subjective when you evaluate it.

Edit: typos

~~~
Barrin92
the other alternative is always to collect taxes in a straight-forward manner
and hand out subsidies rather than tax breaks. Not that subsidies are not
potentially also subject to abuse, but they seem at least somewhat more robust
and controllable than the labyrinth that is the modern tax code.

~~~
clarkmoody
The politics of tax reform are poison as well. There will always be winners &
losers with any change, so opponents of change will always be able to say,
"this proposals raises taxes on ___." Fill in the blank with whatever polls
the best.

Of course politics has zero room for nuance, so we shouldn't hope that the tax
code will become simpler in the foreseeable future.

~~~
squirrelicus
Politics has vastly more time for nuance when politicians are allowed to do
their jobs instead of being Twitter celebrities constantly on the lookout for
the next scandal, both defensively and offensively.

I suspect if we didn't hear from our politicians for 2 years, everyone across
the country would like the outcome.

~~~
clarkmoody
Eh, politics was devoid of nuance long before Twitter.

~~~
squirrelicus
Shifting the blame through scandal to take attention away from your failure
and ignorance is the longest political tradition of humanity.

But in the days of Twitter, you can't take a breather.

Devoid is an overly strong word. There has never been zero nuance, and there
isn't zero nuance today.

------
gtirloni
_> The New York-based company that revolutionized the commercial property
business_

Has it?

~~~
munk-a
Not only did it revolutionize the commercial property business - it also then
proceeded to disrupt that revolution with a counter-revolution.

(And no, it absolutely hasn't revolutionized anything, but when you're a tech
company everyone feels obligated to give you more credit for some reason)

~~~
adonnjohn
Except they're not really a tech company.

~~~
barbecue_sauce
Tech adjacent maybe?

~~~
apexalpha
In what way?

~~~
barbecue_sauce
A lot of remote work is tech work, and that is who I would assume is WeWork's
primary customer.

------
rabbitonrails
My attempt to read this potentially important article on my iPhone X was
murdered by four successive layers of popup screens asking for cookie consent,
then a subscription, then 2 advertisements.

------
sdorker
This is a common business model. Eg Terminal.io gets R&D credits for the
employees it hires on behalf of other startups.

------
espeed
WeWork remains woefully insecure [1] -- IP is likely leaking out of it like a
sieve -- and with a real-estate structure that's positioned as a too-big-too-
fail [2], what could possibly go wrong...

[1] The Cyber-Insecurity of WeWork – Shared Offices and Cracking WiFi with
Weak WPA2 Passwords

[https://www.digitaloperatives.com/2018/10/10/the-cyber-
insec...](https://www.digitaloperatives.com/2018/10/10/the-cyber-insecurity-
of-wework-shared-offices-and-cracking-wifi-with-weak-wpa2-passwords/)

[2] The CBINSIGHTS research report (WeWork strategy teardown)...

"WeWork’s $47 Billion Dream: The Lavishly Funded Startup That Could Disrupt
Commercial Real Estate"

[https://www.cbinsights.com/research/report/wework-
strategy-t...](https://www.cbinsights.com/research/report/wework-strategy-
teardown/)

~~~
cnst
Re: The Cyber-Insecurity of WeWork – Shared Offices and Cracking WiFi with
Weak WPA2 Passwords

Sorry, but the password complaint is just ridiculous. What's exactly the point
of a strong password if it's still shared with a million (or whatever) WeWork
members across the globe, and could easily be figured out by simply asking
just about anyone (of course, noone actually remembers it, as you only enter
it once), or by taking advantage of one of the many ways to get a sample of
the offering?

They list [https://www.xkcd.com/936/](https://www.xkcd.com/936/), which is
indeed a great one, but what WeWork should reply to them is this,
[https://xkcd.com/538/](https://xkcd.com/538/), which is the truth.

~~~
espeed
Both practices are bad. Sharing passwords and weak passwords is doubly bad.
Don't do that. A $47 billion company like WeWork should know better.

~~~
delfinom
Yep. If WeWork is pushing free WiFi and framing themselves as a "psuedo-tech
company", they should also be heavily advocating VPN usage their "members".
Not doing so means they are probably eavesdropping.

~~~
cnst
What you say makes no sense — why would they advocate for you to use a VPN
such that a third-party could eavesdrop on your communication, when they
already provide a business-quality connection through a business carrier?

I am not aware of any issues using a VPN at WeWork; it works great; I'm sure
lots of businesses use it, too. It especially works great because there are no
stupid captive or landing pages like you get at so many other places, and the
password just works, too.

------
benj111
So as I understand it, tennants _should_ be able to request the money back
from Wework?

~~~
Turukawa
Yep. If I were a WeWork tenant and would ordinarily qualify for the Small
Business Rates Relief, I'd be asking them about that...

------
jessaustin
This reminds me of when I worked overseas for Lucent; they hired an accountant
who tried to file such that they would get a tax deduction that was supposed
to go to the employee. Fortunately IRS saw through that shenanigan.

------
anigbrowl
Like Theranos, WeWork is a company that just seems to be one grift on top of
another, getting away with it by doing it in plain sight.

~~~
munk-a
WeWork trying to sell themselves as a billion dollar company seems pretty
overambitious, but I don't think it's anywhere near the level of repeatedly
lying about actually doing business and the progress of research and
development.

If WeWork were filling with S1 never having actually rented out space in
practice - then they'd be like Theranos.

------
sabujp
there should always be penalties for abuse, e.g. dosing people with GDPR
takedowns

------
nodesocket
In return for offering tenants flexible month to month office space at heavily
discounted rent, WeWork get’s the business tax break. I don’t see any reason
for outrage.

~~~
munk-a
Here's the specific way they're accomplishing eligibility from the article:

> Here’s how the tax arrangements work: WeWork divides each of its properties
> into dozens or even hundreds of individual areas. Each of those spaces,
> known as hereditaments, is then separately assessed for tax purposes.

> That allows the company to claim back the taxes on any area that is empty or
> small enough to be eligible for relief if they are occupied by a small
> company with no other offices.

I feel like pretty much any company could qualify under these conditions, if
you declared your office building a desk access pool and declared income on
each segment as an individual employee. It seems super weird that WeWork
should be able to consider contiguous office space as separate isolated
offices.

