I don't think it's that difficult to get. The UK government has been partly naive, though many would say typically liberal, about corporate activity. In truth, the only reason this is coming up now is because some elected politicians equate legal tax minimisation with avoidance. This from a group who were discovered to be minimising illegally expenses, and where local offshore tax havens like Jersey have been allowed to continue to operate for a very long time.
It's politically convenient to blame foreigners while the general population has had their personal wealth diminished through multiple runs of the money printing press.
The rationalisation seems to be that because local firms, unless using what would now be seen as avoidance, cannot avoid profits and so corporation tax, then everyone else should jolly well pay it too. Of course, in the days when Britain's large international companies like BP returned taxable profits to the UK, the accumulation of wealth through extra national activities barely mattered ethically. Now of course, the UK is contracting both in real terms and comparatively.
It's odd. These rules were set by the very people complaining about them. And from what I've heard from some if the participants in the committee, some haven't the first idea about the Companies Act and its meaning.
If Starbucks is willing to reallocate an amount from an expense to profit for the purposes of corporation tax, I have to say, even despite any other consideration, that's its tantamount to a gift. A sensible good will payment, but a gift none the less.
>some elected politicians equate legal tax minimisation with avoidance.
Isn't that exactly what the term means?
>This from a group who were discovered to be minimising illegally expenses
Some MPs illegally claimed higher expenses than they incurred. Generally they resigned as soon as this became public. I'm not saying there's no corruption, but UK politicians are held to higher standards than practically anywhere (in no small part by the strong, activist judiciary and a strong, diverse press).
>The rationalisation seems to be that because local firms, unless using what would now be seen as avoidance, cannot avoid profits and so corporation tax, then everyone else should jolly well pay it too.
How about "companies making profits in the UK should pay taxes on those profits in the UK"? Seems sensible to me.
>It's odd. These rules were set by the very people complaining about them.
a) Who better to look for weaknesses and improvements?
b) A lot of the complaint boils down to: these companies filed fraudulent accounts.
As far as I am aware, they did not and never have 'filed fraudulent accounts' in the UK. They are not lying, they are not committing fraud, they are not breaking the law.
What they are doing is deliberately organising their affairs, subsidiaries and transactions such that the profits they made are actually made in locations where tax is low, e.g. The Netherlands, Ireland, etc.
Essentially, they have a company in the UK that 'licenses' certain IP or buys in certain services from their foreign holding. These licenses and services happen to cost as much as they receive in revenue here, so they make no profit in the UK. However their foreign counterpart makes huge profit by selling these licenses and services at a high mark up.
This is all, as it stands today, entirely legal. Whether it is moral or not is another issue, and whether it will remain legal is also. However, these kinds of loopholes are almost impossible to stop without huge international co-operation, which isn't really in the other states' interests.
>They are not lying, they are not committing fraud, they are not breaking the law.
>Essentially, they have a company in the UK that 'licenses' certain IP or buys in certain services from their foreign holding. These licenses and services happen to cost as much as they receive in revenue here, so they make no profit in the UK.
I know. I think they are lying about these prices, and thereby lying about where their profits are made. As to whether they are committing fraud and/or breaking the law, the MPs will decide that.
When Amazon delivers a £20 book to a lady in Cambridge, how much of that is UK profit? The brand, marketing, procurement, software development, author mindshare, etc. etc. all originate (if not implemented and housed in their entirety) in Seattle. 50%? 10% 1%? Who decides?
At the moment, it seems like the answer to that is: each company involved makes some kind of judgment as to what amount of tax paid will get the local authorities, committees, and press off their back.
Minimisation and avoidance are of course different, for example when minimising or avoiding risk. Part of the issue here is the politically convenient conflating of the two descriptions.
Related to this is your second point, about profits. If indeed a company shows a profit on their yearly profit and loss account, then providing a false declaration to HMRC would be statutorily illegal. You can be sure that HMRC and Companies House will have a look at it, but it's going to be a waste of time for those hoping to find wrong doing, but if there were something wrong their accountants will find themselves with a letter of demand.
There is a great body of precedent in statutes pertaining to the Companies Act, and it is based on rulings not only within the UK, but also from other jurisdictions including the most similar in heritage such as Canada and Australia.
Companies have a duty to further the companies best interests. Usually this means as interpreted maximisation of profit. There are other factors though, including reputation. It is for that consideration that I describe Starbucks voluntary accounts adjustment as one of good will, a valid accounts classification in its own right.
I see what you are saying. Evasion is avoidance by deceit. However minimisation is defined as reducing something to a least possible amount, and so cannot be avoidance, or combined with deceit, evasion, if that least possible amount is determined by measure of its legality.
>It's politically convenient to blame foreigners while the general population has had their personal wealth diminished through multiple runs of the money printing press.
Except that didn't actually happen [inflation], did it? And that inflation that did happen was mainly caused by energy prices and food inflation, not via the money supply.
Well expanding the money supply devalues the currency, and lowers the value of savings when compared to other currencies, or gold or whatever. That is an inflationary factor as you say. The banking system nonetheless had their trading position improved by receipt of new money, and from a money supply point of view, it's an asset swap. The argument was that it's better to take from the savings pool to avoid a plummeting currency.
Another amusing facet of this is that the chairman of the Public Accounts Comittee, Margaret Hodge, is a large shareholder in Stemcor, the Steel Trading company set up by her father and currently run by her brother.
Stemcor paid £163k of tax on £2.1bl of revenue in 2011 [1]
All entirely above board - full tax on operating profit on a company with geniunely high expenses - as refuted by Private Eye. The interesting question is..who 'briefed' the newspapers on this (this wasn't investigative journalism), and who are they being paid by?
Gah! I wish people would stop quoting "x tax on y revenue". Tax is paid on profits, not revenue!
I've noticed this approach to reporting corporate tax in a lot of the Left wing press, particularly the Guardian here in the UK. I guess this is because the numbers sound worse.
The unfortunate thing is that it cheapens the argument; because the numbers are not connected the statement becomes irrelevant. This has a knock on effect. I personally stopped purchasing coffee at Starbucks because of the reporting of how much tax they paid, given their revenue AND their 'imaginative' expenses. I'm not going to do the same when the figures aren't comprehensively explained.
Tax is paid on profit, not revenues, correct. However, the whole point is that profit is a lot easier to manipulate downwards in a multi-national than revenue is.
It's politically convenient to blame foreigners while the general population has had their personal wealth diminished through multiple runs of the money printing press.
The rationalisation seems to be that because local firms, unless using what would now be seen as avoidance, cannot avoid profits and so corporation tax, then everyone else should jolly well pay it too. Of course, in the days when Britain's large international companies like BP returned taxable profits to the UK, the accumulation of wealth through extra national activities barely mattered ethically. Now of course, the UK is contracting both in real terms and comparatively.
It's odd. These rules were set by the very people complaining about them. And from what I've heard from some if the participants in the committee, some haven't the first idea about the Companies Act and its meaning.
If Starbucks is willing to reallocate an amount from an expense to profit for the purposes of corporation tax, I have to say, even despite any other consideration, that's its tantamount to a gift. A sensible good will payment, but a gift none the less.