Paradise Papers (& Panama Papers)

Stevo_666

mamba80 wrote:

Stevo 666 wrote:

Pinno wrote:

Global markets are very competitive.
Share price is key to short and long term stability.
Shareholders are fickle.
Maximise profits, share value and dividend yield.

At any cost. That is the bottom line.

Find a 'decent' accountancy service to facilitate the profits.

http://www.taxjustice.net/2017/11/13/bi ... arch-says/

...and no one in commerce would care to admit that it is a model that promotes profit above all else and that larger corporations are leeches on tax systems and become parasitical in the effort to keep driving profits upwards.

Large corporations leeches on the system? I'm calling leftiebollox on that one:
https://www.pwc.co.uk/services/tax/total-tax-contribution-100-group.html

They make massive contributions to the finances of this country - and rising.

Ironic that most people who refer to large corporates like this are usually net beneficiaries of the state themselves...

i m not, so can i comment?

whats the total profit of these companies? without that, cant say if the burden on the avg employee earning 33k and paying 12k in taxes is "fair" let alone leftiebollox lol

Conidering how much ftse directors have seen their pay shoot up, i d hope too that their companies are also paying a little more tax and 1.5bn is a very small increase.

Of course you can - comment is free as they say in the sandal wearers rag

Unfortunately there is no data on the profit that these companies made but as this survey covers all taxes, the profits might be less than you think relative to tax collected.

To put this into perspective however, the amount contributed is approaching 15% of the entire annual tax revenue of the country. From 100 companies.

Stevo_666

Pinno wrote:

Hard to get info on profits by country for Apple.
2016: Global profits. $233bn. Europe, $68bn.

"...Maybe the Irish should be grateful they got even that much. Apple didn't pay any corporation tax at all in the UK in 2012. But more recently things have got a little better here; Mail Online estimates that Apple made £1.9bn of profit in the UK in the year ended September 2014 and paid £11.8m in tax - a rate of 0.6 percent - although it should be emphasised that this figure is based on accountants' estimates of profit generated rather than Apple's own figures, which are vastly lower."

"In its most recent financial results, for Q3 2016 - which was a moderately disappointing quarter for Apple - the company declared revenue of $42.4bn and an income after operating expenses (and additional income) but before tax of $10.5bn, and allocated £2.7bn of that for income tax. (You can read Apple's Q3 2016 financial statement here.) That's a rate of 25.5 percent, which sounds pretty solid, although it would probably be higher if Apple held less of its profits offshore - Tim Cook has stated that he cannot repatriate the firm's overseas holdings to the US because it would cost 40 percent of the total. The statutory rate for corporations in the US is 35 percent; although in practice very few companies pay that much.

In any case, the 25.5 percent is a figure that reflects Apple's global operations, and in many of the territories where it operates the company pays a rate that is far lower.

In 2014 (and this is what caused the recent ill-feeling), Apple is believed to have paid an effective rate - based on approximations of the value that was created there - of 0.005 percent tax in Ireland, where the usual rate of corporation tax is 12.5 percent. That's a rate that is already lower than almost anywhere else in Europe: the UK's corporate tax rate is 20 percent."

"Maybe the Irish should be grateful they got even that much. Apple didn't pay any corporation tax at all in the UK in 2012. But more recently things have got a little better here; Mail Online estimates that Apple made £1.9bn of profit in the UK in the year ended September 2014 and paid £11.8m in tax - a rate of 0.6 percent - although it should be emphasised that this figure is based on accountants' estimates of profit generated rather than Apple's own figures, which are vastly lower."

https://www.macworld.co.uk/feature/appl ... e-3645779/

It is hard to tell with that level of info, but the most likely explanation comes down to what the UK operations of Apple are doing. From what I can see all they are doing in the UK is acting as handlers and resellers of Apple kit, which is a pretty low value add activity. As the Apple link says, the technology, development and IP (all the real value add elements) are in the US which is where most of the tax is paid. This is transfer pricing that I referred to above and is possibly the most subjective area of tax - a fair bit is economics. I sometimes call it an art form

Maybe not very palatable to some but technically nothing wrong with that and they are within their rights to set up like that. Odd thing is that the UK CT rate is pretty low so there is not much incentive to avoid it.

Also worth mentioning is that corporate tax is less than 10% of UK tax revenues. The tax contribution of Apple via PAYE, VAT, business rates etc will likely be substantial.

mamba80

Stevo 666 wrote:

mamba80 wrote:

Stevo 666 wrote:

Pinno wrote:

Global markets are very competitive.
Share price is key to short and long term stability.
Shareholders are fickle.
Maximise profits, share value and dividend yield.

At any cost. That is the bottom line.

Find a 'decent' accountancy service to facilitate the profits.

http://www.taxjustice.net/2017/11/13/bi ... arch-says/

...and no one in commerce would care to admit that it is a model that promotes profit above all else and that larger corporations are leeches on tax systems and become parasitical in the effort to keep driving profits upwards.

Large corporations leeches on the system? I'm calling leftiebollox on that one:
https://www.pwc.co.uk/services/tax/total-tax-contribution-100-group.html

They make massive contributions to the finances of this country - and rising.

Ironic that most people who refer to large corporates like this are usually net beneficiaries of the state themselves...

i m not, so can i comment?

whats the total profit of these companies? without that, cant say if the burden on the avg employee earning 33k and paying 12k in taxes is "fair" let alone leftiebollox lol

Conidering how much ftse directors have seen their pay shoot up, i d hope too that their companies are also paying a little more tax and 1.5bn is a very small increase.

Of course you can - comment is free as they say in the sandal wearers rag

Unfortunately there is no data on the profit that these companies made but as this survey covers all taxes, the profits might be less than you think relative to tax collected.

To put this into perspective however, the amount contributed is approaching 15% of the entire annual tax revenue of the country. From 100 companies.

though not the same as your PWC link, they could pay more..... i mean i d love a tax rate 23% or better still 13%... good to see hmrc cracking down on vat fraud/collection with sme's, low fruit and all that...

https://www.theguardian.com/politics/20 ... since-2010

Stevo_666

mamba80 wrote:

Stevo 666 wrote:

mamba80 wrote:

Stevo 666 wrote:

Pinno wrote:

Global markets are very competitive.
Share price is key to short and long term stability.
Shareholders are fickle.
Maximise profits, share value and dividend yield.

At any cost. That is the bottom line.

Find a 'decent' accountancy service to facilitate the profits.

http://www.taxjustice.net/2017/11/13/bi ... arch-says/

...and no one in commerce would care to admit that it is a model that promotes profit above all else and that larger corporations are leeches on tax systems and become parasitical in the effort to keep driving profits upwards.

Large corporations leeches on the system? I'm calling leftiebollox on that one:
https://www.pwc.co.uk/services/tax/total-tax-contribution-100-group.html

They make massive contributions to the finances of this country - and rising.

Ironic that most people who refer to large corporates like this are usually net beneficiaries of the state themselves...

i m not, so can i comment?

whats the total profit of these companies? without that, cant say if the burden on the avg employee earning 33k and paying 12k in taxes is "fair" let alone leftiebollox lol

Conidering how much ftse directors have seen their pay shoot up, i d hope too that their companies are also paying a little more tax and 1.5bn is a very small increase.

Of course you can - comment is free as they say in the sandal wearers rag

Unfortunately there is no data on the profit that these companies made but as this survey covers all taxes, the profits might be less than you think relative to tax collected.

To put this into perspective however, the amount contributed is approaching 15% of the entire annual tax revenue of the country. From 100 companies.

though not the same as your PWC link, they could pay more..... i mean i d love a tax rate 23% or better still 13%... good to see hmrc cracking down on vat fraud/collection with sme's, low fruit and all that...

https://www.theguardian.com/politics/20 ... since-2010

That's simply because it is where a lot if the tax is lost, not in big corporate avoidance.

If you don't believe me, look at HMRC's own published figures - specifically the graphic on page 5 of the report in the link;
https://www.gov.uk/government/statistics/measuring-tax-gaps/

rjsterry

Stevo 666 wrote:

Arthur Scrimshaw wrote:

Conflicting facts on the Oxfam page - the second paragraph of the Netherlands article states
'With its tax policy, the Netherlands perpetuates poverty and extreme inequality in the world - a world in which the richest 62 people now own as much as the poorest half of the global population.'
The further down the page on another link it states ' Today, 8 individuals have the same wealth as the poorest half the people on our planet. It is time to bring an end to inequality. It is time to Even it up!'

Either way it's a stark comparison but not helping Oxfam's case with inconsistencies?

Typical of organisations like that. Don't let the facts get in the way of a good rant.

Whether it's the fault of the Netherlands tax regime or not, it's hardly something to cheer about. Of course it's unrealistic to expect the tax system alone to solve this or any other of the world's problems, and I'd need some convincing that there is some vast untapped reservoir of tax income that can be tapped, but equally a shrug that that's the way the world is is just sticking our head in the sand. Eventually it will bite us all in the arse as it has done at various points in history.

pinno

rjsterry wrote:

Stevo 666 wrote:

Arthur Scrimshaw wrote:

Conflicting facts on the Oxfam page - the second paragraph of the Netherlands article states
'With its tax policy, the Netherlands perpetuates poverty and extreme inequality in the world - a world in which the richest 62 people now own as much as the poorest half of the global population.'
The further down the page on another link it states ' Today, 8 individuals have the same wealth as the poorest half the people on our planet. It is time to bring an end to inequality. It is time to Even it up!'

Either way it's a stark comparison but not helping Oxfam's case with inconsistencies?

Typical of organisations like that. Don't let the facts get in the way of a good rant.

Whether it's the fault of the Netherlands tax regime or not, it's hardly something to cheer about. Of course it's unrealistic to expect the tax system alone to solve this or any other of the world's problems, but equally a shrug that that's the way the world is is just sticking our head in the sand. Eventually it will bite us all in the ars* as it has done at various points in history.

Any other point of view wouldn't be towing the corporate line.

You will have a PM soon [not tax related]

mamba80

Stevo 666 wrote:

mamba80 wrote:

Stevo 666 wrote:

To put this into perspective however, the amount contributed is approaching 15% of the entire annual tax revenue of the country. From 100 companies.

though not the same as your PWC link, they could pay more..... i mean i d love a tax rate 23% or better still 13%... good to see hmrc cracking down on vat fraud/collection with sme's, low fruit and all that...

https://www.theguardian.com/politics/20 ... since-2010

That's simply because it is where a lot if the tax is lost, not in big corporate avoidance.

If you don't believe me, look at HMRC's own published figures - specifically the graphic on page 5 of the report in the link;
https://www.gov.uk/government/statistics/measuring-tax-gaps/

what do you think of the lower tax return from the ftse100 over the last 7 years (in the article i linked too) despite lower rates, which i believe many think actually increases revenues.

rolf_f

Stevo 666 wrote:

Arthur Scrimshaw wrote:

Conflicting facts on the Oxfam page - the second paragraph of the Netherlands article states
'With its tax policy, the Netherlands perpetuates poverty and extreme inequality in the world - a world in which the richest 62 people now own as much as the poorest half of the global population.'
The further down the page on another link it states ' Today, 8 individuals have the same wealth as the poorest half the people on our planet. It is time to bring an end to inequality. It is time to Even it up!'

Either way it's a stark comparison but not helping Oxfam's case with inconsistencies?

Typical of organisations like that. Don't let the facts get in the way of a good rant.

Well no - you are implying that the inconsistency in the numbers that AS gives implies that its conclusion is incorrect. That's only the case if you think that the 62 number is acceptable and the 8 not (always assuming that one of the numbers is correct!).

I think you are guilty of not letting the facts get in the way of a good rant!

rick_chasey

So broadly, the disagreement here is over whether missed tax revenues and economic distortions caused by tax havens are costly or not. I don't think the existence of tax havens is a real driver of state spending efficiencies, and at best, it's a driver to invest more money in countering tax avoidance. So I'm not particularly convinced that the 'competition' havens provide is that beneficial, particularly as most big nations literally cannot afford to be actually competitive in that way.

The defenders of tax havens seem to focus on the micro benefits; benefits to the wealthy individuals and firms and those who profit from their profits, as well as the benefits to the haven itself. They feel the costs re tax are trivial, despite evidence that points to a) the size of the lost tax revenue and b) the cost that has to the process of wealth redistribution, which again, has evidence to suggest is not an ideal scenario.


There's also some confusion around what constitutes a haven, though broadly speaking if a firm like Starf*cks operates at a loss everywhere in the world except for in a jurisdiction that has unusually low tax, it's likely that particular jurisdiction is a tax haven.

But above all, there's confusion around what the criticism of tax havens is. There's confusion that examining the macro benefits and costs of the existence of tax havens is equivalent to being jealous or envious of those who are well off, and that saying that the distortions tax havens create are costly is another way of saying those who use them are committing crimes, neither of which is true.

john80

Stevo 666 wrote:

TheBigBean wrote:

Stevo 666 wrote:

Pinno wrote:

I've asked you this before. If Starbucks derive say £100m in profits in the UK,why shouldn't they should be taxed at the current rate of corporation tax (19%?)? If Apple derive £200m in profits from their activities in the UK, they should be charged 19% of that. Why not? Surely import duties would make Apple products uncompetitive if they served the UK market by export?
I cite Apple because they have come under heavy criticism for their aggressive tax avoidance tactics and use of Tax Havens are a critical vessel for those tactics.

Because according to the law in pretty much every country, not just the UK, taxable profit is different from accounting profit for starters. You start with accounting profit and then adjust for numerous items such as capital allowances, brought forward tax losses, non-deductible expenses, non taxable income such as dividends. It is perfectly feasible to make a large UK accounting profit and not pay UK tax - even without tax planning.

Then there's transfer pricing which determines how much value add and risk sits where and how much return/profit is earned where. And deferred tax which is only an accounting entry. Etc etc. Go read up more if you want, it's a complex area.

Sure accounting profit and taxable profit are different, but I'd bet the reason that Starbucks pays very little tax is due to allocating lots of the profit to a low tax jurisdiction. I think in Starbucks case, they don't even book an accounting profit. They are essentially running themselves on a charitable basis as there is very little other reason for their presence in the UK.

You're that they were running an accounting loss in the years in question.

A lot of it IIRC was down to the charges for the IP charges which ironically HMRC had looked at and concluded were at arms length. When the media storm broke and Starbucks offered to pay some corp tax for PR purposes they had to agree to arbitrarily disallow some of the charges rather than it being a genuine challenge on a technical basis.

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

hopkinb

john80 wrote:

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

I would argue the exact opposite, IP or brand is all that Starbucks have. The coffee is utter garbage, but like it or not, they were one of the first in the UK to import that style of US west coast coffee place with baristas and a list of frothy milk as long as your arm and charge a premium for it. When my Finnish relatives come here, they don't want to go to an independent coffee shop, or a Costa, or a Caffe Nero, they want to go to a Starbucks. That brand, that IP, that value was all created elsewhere. Without that brand, I expect that Starbucks would make very little money in the UK, just like the average independent coffee shop. They spend a fortune in legal fees protecting that brand, why would they do that if it's worthless? I've said elsewhere, as a tax professional, I am in no way a fan of artifice in tax planning, and I appreciate that IP and other intangibles are difficult to pin down, but for me, this one is pretty clear cut.

Moonbiker

The E.U. loses about 20% of its
corporate tax revenue in tax havens

Source:

http://gabriel-zucman.eu/files/TWZ2017.pdf

rjsterry

Rick Chasey wrote:

So broadly, the disagreement here is over whether missed tax revenues and economic distortions caused by tax havens are costly or not. I don't think the existence of tax havens is a real driver of state spending efficiencies,

Agreed, efficiency means different things to different people anyway - I think a government's spending decisions have more to do with political ideology.

...and at best, it's a driver to invest more money in countering tax avoidance. So I'm not particularly convinced that the 'competition' havens provide is that beneficial, particularly as most big nations literally cannot afford to be actually competitive in that way.

Stevo's argument is that a lower rate than competing countries will draw in more business leading to an overall increase in revenue to the more competitive country but ignores the loss to the one with higher rates. That's fine up to a point but just as raising rates higher and higher will have diminishing returns, the same applies in the other direction. If all countries compete to have lower and lower rates, everyone will lose out as each country chases the remaining revenue.

The defenders of tax havens seem to focus on the micro benefits; benefits to the wealthy individuals and firms and those who profit from their profits, as well as the benefits to the haven itself. They feel the costs re tax are trivial, despite evidence that points to a) the size of the lost tax revenue and b) the cost that has to the process of wealth redistribution, which again, has evidence to suggest is not an ideal scenario.

Firstly there's a question over exactly how much additional potential revenue there is and whether it is really all collectable at a net benefit. Each side of the argument will want to minimise or maximise the extent. This is before you deal with the question of whether, having gained this extra revenue, governments would be able to translate it into the better schools, hospitals, etc. that we hope for. Collecting extra revenue isn't the end goal.

Another part of the problem is that quite a lot of people are only happy with that idea of redistribution if it's someone else's wealth being redistributed. I think it is more helpful to think of taxation as the way we pay for the society that we want to live in. I quite agree that increasing inequality and in particular a perception (however inaccurate) that a large chunk of the population is cheating the rest out of the fruits of their labour is pretty destructive to society. If the issue is not tackled somehow, someone who craves the attention will take advantage of that feeling of being cheated and it won't be pretty.

There's also some confusion around what constitutes a haven, though broadly speaking if a firm like Starf*cks operates at a loss everywhere in the world except for in a jurisdiction that has unusually low tax, it's likely that particular jurisdiction is a tax haven.

But above all, there's confusion around what the criticism of tax havens is. There's confusion that examining the macro benefits and costs of the existence of tax havens is equivalent to being jealous or envious of those who are well off, and that saying that the distortions tax havens create are costly is another way of saying those who use them are committing crimes, neither of which is true.

[/quote]
I think that's not a bad summary.

Matthewfalle

john80 wrote:

Stevo 666 wrote:

TheBigBean wrote:

Stevo 666 wrote:

Pinno wrote:

I've asked you this before. If Starbucks derive say £100m in profits in the UK,why shouldn't they should be taxed at the current rate of corporation tax (19%?)? If Apple derive £200m in profits from their activities in the UK, they should be charged 19% of that. Why not? Surely import duties would make Apple products uncompetitive if they served the UK market by export?
I cite Apple because they have come under heavy criticism for their aggressive tax avoidance tactics and use of Tax Havens are a critical vessel for those tactics.

Because according to the law in pretty much every country, not just the UK, taxable profit is different from accounting profit for starters. You start with accounting profit and then adjust for numerous items such as capital allowances, brought forward tax losses, non-deductible expenses, non taxable income such as dividends. It is perfectly feasible to make a large UK accounting profit and not pay UK tax - even without tax planning.

Then there's transfer pricing which determines how much value add and risk sits where and how much return/profit is earned where. And deferred tax which is only an accounting entry. Etc etc. Go read up more if you want, it's a complex area.

Sure accounting profit and taxable profit are different, but I'd bet the reason that Starbucks pays very little tax is due to allocating lots of the profit to a low tax jurisdiction. I think in Starbucks case, they don't even book an accounting profit. They are essentially running themselves on a charitable basis as there is very little other reason for their presence in the UK.

You're that they were running an accounting loss in the years in question.

A lot of it IIRC was down to the charges for the IP charges which ironically HMRC had looked at and concluded were at arms length. When the media storm broke and Starbucks offered to pay some corp tax for PR purposes they had to agree to arbitrarily disallow some of the charges rather than it being a genuine challenge on a technical basis.

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

Of course Starbucks has IP and it's worth millions.

TheBigBean

hopkinb wrote:

john80 wrote:

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

I would argue the exact opposite, IP or brand is all that Starbucks have. The coffee is utter garbage, but like it or not, they were one of the first in the UK to import that style of US west coast coffee place with baristas and a list of frothy milk as long as your arm and charge a premium for it. When my Finnish relatives come here, they don't want to go to an independent coffee shop, or a Costa, or a Caffe Nero, they want to go to a Starbucks. That brand, that IP, that value was all created elsewhere. Without that brand, I expect that Starbucks would make very little money in the UK, just like the average independent coffee shop. They spend a fortune in legal fees protecting that brand, why would they do that if it's worthless? I've said elsewhere, as a tax professional, I am in no way a fan of artifice in tax planning, and I appreciate that IP and other intangibles are difficult to pin down, but for me, this one is pretty clear cut.

This is all true, but the question that HMRC should be asking is given all these costs why are you doing business in the UK? The model seems to be that the reason to do business is simply to sell the IP, but there should be a profit in doing so, and if there isn't, and the IP is all cost, then I don't see why HMRC should allow it for tax purposes.

pinno

Matthewfalle wrote:

john80 wrote:

Stevo 666 wrote:

TheBigBean wrote:

Stevo 666 wrote:

Pinno wrote:

I've asked you this before. If Starbucks derive say £100m in profits in the UK,why shouldn't they should be taxed at the current rate of corporation tax (19%?)? If Apple derive £200m in profits from their activities in the UK, they should be charged 19% of that. Why not? Surely import duties would make Apple products uncompetitive if they served the UK market by export?
I cite Apple because they have come under heavy criticism for their aggressive tax avoidance tactics and use of Tax Havens are a critical vessel for those tactics.

Because according to the law in pretty much every country, not just the UK, taxable profit is different from accounting profit for starters. You start with accounting profit and then adjust for numerous items such as capital allowances, brought forward tax losses, non-deductible expenses, non taxable income such as dividends. It is perfectly feasible to make a large UK accounting profit and not pay UK tax - even without tax planning.

Then there's transfer pricing which determines how much value add and risk sits where and how much return/profit is earned where. And deferred tax which is only an accounting entry. Etc etc. Go read up more if you want, it's a complex area.

Sure accounting profit and taxable profit are different, but I'd bet the reason that Starbucks pays very little tax is due to allocating lots of the profit to a low tax jurisdiction. I think in Starbucks case, they don't even book an accounting profit. They are essentially running themselves on a charitable basis as there is very little other reason for their presence in the UK.

You're that they were running an accounting loss in the years in question.

A lot of it IIRC was down to the charges for the IP charges which ironically HMRC had looked at and concluded were at arms length. When the media storm broke and Starbucks offered to pay some corp tax for PR purposes they had to agree to arbitrarily disallow some of the charges rather than it being a genuine challenge on a technical basis.

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

Of course Starbucks has IP and it's worth millions.

As a British citizen, in a country of finite and shrinking resources for public services, how do you reconcile the fact that a British born and based company with no off-shore links, subsidiaries, holding companies etc, have to pay 19% corporation tax and Starf*cks* get away with paying very little (in terms of Corporate tax)?

I'm not talking about whether it is legal or otherwise.

*Excellent.

pblakeney

Pinno wrote:

As a British citizen, in a country of finite and shrinking resources for public services, how do you reconcile the fact that a British born and based company with no off-shore links, subsidiaries, holding companies etc, have to pay 19% corporation tax and Starf*cks* get away with paying very little (in terms of Corporate tax)?

I'm not talking about whether it is legal or otherwise.

They obviously never watched the documentary on how easy it is to "go Dutch".
That these loopholes exist should be what is sorted.

hopkinb

TheBigBean wrote:

hopkinb wrote:

john80 wrote:

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

I would argue the exact opposite, IP or brand is all that Starbucks have. The coffee is utter garbage, but like it or not, they were one of the first in the UK to import that style of US west coast coffee place with baristas and a list of frothy milk as long as your arm and charge a premium for it. When my Finnish relatives come here, they don't want to go to an independent coffee shop, or a Costa, or a Caffe Nero, they want to go to a Starbucks. That brand, that IP, that value was all created elsewhere. Without that brand, I expect that Starbucks would make very little money in the UK, just like the average independent coffee shop. They spend a fortune in legal fees protecting that brand, why would they do that if it's worthless? I've said elsewhere, as a tax professional, I am in no way a fan of artifice in tax planning, and I appreciate that IP and other intangibles are difficult to pin down, but for me, this one is pretty clear cut.

This is all true, but the question that HMRC should be asking is given all these costs why are you doing business in the UK? The model seems to be that the reason to do business is simply to sell the IP, but there should be a profit in doing so, and if there isn't, and the IP is all cost, then I don't see why HMRC should allow it for tax purposes.

Why do they do business in the UK? I suppose as you say, to increase profits from their US developed brand when looked at from a global perspective. Why do HMRC allow royalty payments, or payments for coffee, or payments for recipes for tax purposes, or deductions for financing? Because that's the law.

hopkinb

Pinno wrote:

Matthewfalle wrote:

john80 wrote:

Stevo 666 wrote:

TheBigBean wrote:

Stevo 666 wrote:

Pinno wrote:

I've asked you this before. If Starbucks derive say £100m in profits in the UK,why shouldn't they should be taxed at the current rate of corporation tax (19%?)? If Apple derive £200m in profits from their activities in the UK, they should be charged 19% of that. Why not? Surely import duties would make Apple products uncompetitive if they served the UK market by export?
I cite Apple because they have come under heavy criticism for their aggressive tax avoidance tactics and use of Tax Havens are a critical vessel for those tactics.

Because according to the law in pretty much every country, not just the UK, taxable profit is different from accounting profit for starters. You start with accounting profit and then adjust for numerous items such as capital allowances, brought forward tax losses, non-deductible expenses, non taxable income such as dividends. It is perfectly feasible to make a large UK accounting profit and not pay UK tax - even without tax planning.

Then there's transfer pricing which determines how much value add and risk sits where and how much return/profit is earned where. And deferred tax which is only an accounting entry. Etc etc. Go read up more if you want, it's a complex area.

Sure accounting profit and taxable profit are different, but I'd bet the reason that Starbucks pays very little tax is due to allocating lots of the profit to a low tax jurisdiction. I think in Starbucks case, they don't even book an accounting profit. They are essentially running themselves on a charitable basis as there is very little other reason for their presence in the UK.

You're that they were running an accounting loss in the years in question.

A lot of it IIRC was down to the charges for the IP charges which ironically HMRC had looked at and concluded were at arms length. When the media storm broke and Starbucks offered to pay some corp tax for PR purposes they had to agree to arbitrarily disallow some of the charges rather than it being a genuine challenge on a technical basis.

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

Of course Starbucks has IP and it's worth millions.

As a British citizen, in a country of finite and shrinking resources for public services, how do you reconcile the fact that a British born and based company with no off-shore links, subsidiaries, holding companies etc, have to pay 19% corporation tax and Starf*cks* get away with paying very little (in terms of Corporate tax)?

I'm not talking about whether it is legal or otherwise.

*Excellent.

I would say it's a relative drop in the ocean compared to other factors impacting the tax take. Figures are in "tax gap" posts that Stevo and I put up.

There may well be British companies with valuable IP who are sending royalties & licence payments back here from other jurisdictions, leaving minimal profits in those countries.

pinno

PBlakeney wrote:

Pinno wrote:

As a British citizen, in a country of finite and shrinking resources for public services, how do you reconcile the fact that a British born and based company with no off-shore links, subsidiaries, holding companies etc, have to pay 19% corporation tax and Starf*cks* get away with paying very little (in terms of Corporate tax)?

I'm not talking about whether it is legal or otherwise.

They obviously never watched the documentary on how easy it is to "go Dutch".
That these loopholes exist should be what is sorted.

I'm waiting for a response Blakey. There seems to be an acceptance of the fact that in the UK PLC, there is not a level playing field and the likes of Apple and Starf*cks get unfair advantage over British based companies. But I know you see that.
One could argue that there is not a British mobile phone producing company who could replace or compete with Apple but that isn't the point.

Spencer's Cafe in Cheltenham (who served the best cheesecake in the Solar system), could not afford the high street rates. They had been in business for eons. They moved to a premises off the high street. It was not the same. They sold out to a Turkish guy who, give him credit, maintained the standard of the original Spencers.

The original site was then occupied by... Starbucks. You could argue that Spencers were not making enough profit (despite being very busy) but there's more to it than that. Business rates went up and up to the point where small outlets could not afford it, so the only one's capable of paying the extortionate rates were the bigger fish. One of those bigger fish being Starbucks. Of course, if Starbucks had to pay the going rate of corporation tax, then the ease in which they could open an outlet would be compromised.
How do Cafe Nero, D'Nisi and the like (home grown coffee house chains) feel about that unfair advantage?

TheBigBean

hopkinb wrote:

TheBigBean wrote:

hopkinb wrote:

john80 wrote:

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

I would argue the exact opposite, IP or brand is all that Starbucks have. The coffee is utter garbage, but like it or not, they were one of the first in the UK to import that style of US west coast coffee place with baristas and a list of frothy milk as long as your arm and charge a premium for it. When my Finnish relatives come here, they don't want to go to an independent coffee shop, or a Costa, or a Caffe Nero, they want to go to a Starbucks. That brand, that IP, that value was all created elsewhere. Without that brand, I expect that Starbucks would make very little money in the UK, just like the average independent coffee shop. They spend a fortune in legal fees protecting that brand, why would they do that if it's worthless? I've said elsewhere, as a tax professional, I am in no way a fan of artifice in tax planning, and I appreciate that IP and other intangibles are difficult to pin down, but for me, this one is pretty clear cut.

This is all true, but the question that HMRC should be asking is given all these costs why are you doing business in the UK? The model seems to be that the reason to do business is simply to sell the IP, but there should be a profit in doing so, and if there isn't, and the IP is all cost, then I don't see why HMRC should allow it for tax purposes.

Why do they do business in the UK? I suppose as you say, to increase profits from their US developed brand when looked at from a global perspective. Why do HMRC allow royalty payments, or payments for coffee, or payments for recipes for tax purposes, or deductions for financing? Because that's the law.

Only to extent it is an arm's length transaction. Hence why would I ask the question. BEPS is dealing with the interest side of this, perhaps something else will deal with the royalties side. Although, I don't have much hope, as there seem to be lots of ways around BEPS.

hopkinb

TheBigBean wrote:

Only to extent it is an arm's length transaction. Hence why would I ask the question. BEPS is dealing with the interest side of this, perhaps something else will deal with the royalties side. Although, I don't have much hope, as there seem to be lots of ways around BEPS.

It was found to be arm's length by HMRC themselves.

As regards BEPS on intangibles - Actions 8 & 10, plus increased disclosures as a result of Action 13.

Stevo_666

hopkinb wrote:

Pinno wrote:

Matthewfalle wrote:

john80 wrote:

Stevo 666 wrote:

TheBigBean wrote:

Stevo 666 wrote:

Pinno wrote:

I've asked you this before. If Starbucks derive say £100m in profits in the UK,why shouldn't they should be taxed at the current rate of corporation tax (19%?)? If Apple derive £200m in profits from their activities in the UK, they should be charged 19% of that. Why not? Surely import duties would make Apple products uncompetitive if they served the UK market by export?
I cite Apple because they have come under heavy criticism for their aggressive tax avoidance tactics and use of Tax Havens are a critical vessel for those tactics.

Because according to the law in pretty much every country, not just the UK, taxable profit is different from accounting profit for starters. You start with accounting profit and then adjust for numerous items such as capital allowances, brought forward tax losses, non-deductible expenses, non taxable income such as dividends. It is perfectly feasible to make a large UK accounting profit and not pay UK tax - even without tax planning.

Then there's transfer pricing which determines how much value add and risk sits where and how much return/profit is earned where. And deferred tax which is only an accounting entry. Etc etc. Go read up more if you want, it's a complex area.

Sure accounting profit and taxable profit are different, but I'd bet the reason that Starbucks pays very little tax is due to allocating lots of the profit to a low tax jurisdiction. I think in Starbucks case, they don't even book an accounting profit. They are essentially running themselves on a charitable basis as there is very little other reason for their presence in the UK.

You're that they were running an accounting loss in the years in question.

A lot of it IIRC was down to the charges for the IP charges which ironically HMRC had looked at and concluded were at arms length. When the media storm broke and Starbucks offered to pay some corp tax for PR purposes they had to agree to arbitrarily disallow some of the charges rather than it being a genuine challenge on a technical basis.

The idea that Starbucks has IP is frankly laughable and if a independent coffee shop tried this nonsense they would be laughed out of town. It is a problem when tax is avoided in this way and shows just how easy IP can be used to avoid tax.

Of course Starbucks has IP and it's worth millions.

As a British citizen, in a country of finite and shrinking resources for public services, how do you reconcile the fact that a British born and based company with no off-shore links, subsidiaries, holding companies etc, have to pay 19% corporation tax and Starf*cks* get away with paying very little (in terms of Corporate tax)?

I'm not talking about whether it is legal or otherwise.

*Excellent.

I would say it's a relative drop in the ocean compared to other factors impacting the tax take. Figures are in "tax gap" posts that Stevo and I put up.

There may well be British companies with valuable IP who are sending royalties & licence payments back here from other jurisdictions, leaving minimal profits in those countries.

^^^
This.

I've posted the yax gap data more than once in addition to you doing it, but as above, the facts don't often get in the way in arguments like this.

Fyi my own group is a real life example of one making outbound royalty charges from the UK to foreign subsidiaries, thereby increasing UK tax revenues. I'm upset that nobody has thanked me yet It's also a good example of tax competition working for the UK as the competitive UK corporate rate compared to continental equivalents was one of the drivers of this arrangement.

Stevo_666

rjsterry wrote:

Rick Chasey wrote:

There's also some confusion around what constitutes a haven, though broadly speaking if a firm like Starf*cks operates at a loss everywhere in the world except for in a jurisdiction that has unusually low tax, it's likely that particular jurisdiction is a tax haven.

But above all, there's confusion around what the criticism of tax havens is. There's confusion that examining the macro benefits and costs of the existence of tax havens is equivalent to being jealous or envious of those who are well off, and that saying that the distortions tax havens create are costly is another way of saying those who use them are committing crimes, neither of which is true.

I think that's not a bad summary.[/quote]
Except for the small point that Starbucks makes most of its profits in the USA, currently one of the highest corporate tax jurisdictions on the planet.

rick_chasey

Don't really know why that's relevant.

And anyway, I thought all their profits were made in Bermuda?

Stevo_666

Rick Chasey wrote:

Don't really know why that's relevant.

And anyway, I thought all their profits were made in Bermuda?

Because of what you said in the first para of what I quoted above.

rick_chasey

Stevo 666 wrote:

Rick Chasey wrote:

Don't really know why that's relevant.

And anyway, I thought all their profits were made in Bermuda?

Because of what you said in the first para of what I quoted above.

May well be but the EC found them to be evading tax via a tax haven (Netherlands), and ordered the Dutch gov't to recover €30m of tax from Starf*cks to return to the respective nations.

rick_chasey

I would have thought, given your massive concern for the gov't deficit not so long ago that firms moving their profits offshore to avoid paying UK tax is the last thing you would want, but anyway.

TheBigBean

hopkinb wrote:

TheBigBean wrote:

Only to extent it is an arm's length transaction. Hence why would I ask the question. BEPS is dealing with the interest side of this, perhaps something else will deal with the royalties side. Although, I don't have much hope, as there seem to be lots of ways around BEPS.

It was found to be arm's length by HMRC themselves.

As regards BEPS on intangibles - Actions 8 & 10, plus increased disclosures as a result of Action 13.

There are many things that are considered arm's length in the sense that HMRC doesn't challenge them. That doesn't mean I agree it is arm's length. The key question is how much would an independent coffee shop pay for the brand? Not having done that research I have no idea, and perhaps Starbucks are charging the correct amount.

I have only looked at the interest side of BEPS, so I didn't know that it has other bits. Tax guidance is something I try to minimise.

Stevo_666

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Don't really know why that's relevant.

And anyway, I thought all their profits were made in Bermuda?

Because of what you said in the first para of what I quoted above.

May well be but the EC found them to be evading tax via a tax haven (Netherlands), and ordered the Dutch gov't to recover €30m of tax from Starf*cks to return to the respective nations.

Doesn't change my point above. I'll check out your €30m point later.