Paradise Papers (& Panama Papers)

Stevo_666

Rick Chasey wrote:

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.

Try looking at the numbers - posted several times before and as mentioned by the two tax professionals on this thread, a bit of a drop in the ocean compared to other issues.

Also, what are your thoughts on my group moving profits onshore to increase UK tax revenues? (see my post above)

Stevo_666

TheBigBean wrote:

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.

Given the amount of evidence that groups have to produce to demonstrate that transactions are within the arms length range, you would need to come up with some evidence that it is not.

Do you have any?

hopkinb

TheBigBean wrote:

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.

They investigated Starbucks, and found that its royalty payments were at arm's length. They asked for a change in the rate of licence payments to a Netherlands company. Your opinion matters the square root of fcuk all to how much tax a company pays, especially as you freely admit that you have no idea.

BEPs has 15 action points. Most large economies have legislated, or are legislating to put BEPS guidance on their statute books.

"Tax guidance is something I try to minimize." You mean that you minimise the amount of guidance you give to people on tax issues? I would wholeheartedly recommend that you continue that course of action, but I suspect you meant something else.

TheBigBean

I thought to be fair to Starbucks I should actually look at their accounts rather than idly speculate.

Profit of £6.6m y/e Oct 2016. £25.7m y/e Oct 2015. So they have made some profit.

Apparently, Starbucks has suffered as a result of Brexit and profits are down. To be fair, so are their sales.

Royalties of £27m both years.

No dividends have been made either year, so there should be some grumpy shareholders, although perhaps £27m is enough.

They do have franchises though that seem to be willing to pay a lot, so perhaps the image is worth £27m.

TheBigBean

hopkinb wrote:

TheBigBean wrote:

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.

They investigated Starbucks, and found that its royalty payments were at arm's length. They asked for a change in the rate of licence payments to a Netherlands company. Your opinion matters the square root of fcuk all to how much tax a company pays, especially as you freely admit that you have no idea.

BEPs has 15 action points. Most large economies have legislated, or are legislating to put BEPS guidance on their statute books.

"Tax guidance is something I try to minimize." You mean that you minimise the amount of guidance you give to people on tax issues? I would wholeheartedly recommend that you continue that course of action, but I suspect you meant something else.

I am expressing the opinion that HMRC doesn't do enough to challenge it. They agreed a settlement with Starbucks. They are under resourced and go for low hanging fruit. I would expect a company to make a profit, if it is not doing so, but is paying royalties, shareholder interest etc., I would hope there are questions asked.

I minimise the amount of tax guidance I read to that which I need to read. Sadly, that is more than nothing. I do not give tax advice.

One of things that amazes me on this thread is the number of people claiming expertise in pretty much all tax / corporate structuring etc. No one has that expertise.

TheBigBean

That, incidentally, is why I am aware of all the loopholes in some aspects of BEPS.

hopkinb

TheBigBean wrote:

That, incidentally, is why I am aware of all the loopholes in some aspects of BEPS.

BEPS is some guidance on Base Erosion and Profit Shifting, hence the acronym. There can be no loopholes in guidance.

TheBigBean

hopkinb wrote:

TheBigBean wrote:

That, incidentally, is why I am aware of all the loopholes in some aspects of BEPS.

BEPS is some guidance on Base Erosion and Profit Shifting, hence the acronym. There can be no loopholes in guidance.

Loopholes in the proposed legislation.

hopkinb

TheBigBean wrote:

I am expressing the opinion that HMRC doesn't do enough to challenge it. They agreed a settlement with Starbucks. They are under resourced and go for low hanging fruit. I would expect a company to make a profit, if it is not doing so, but is paying royalties, shareholder interest etc., I would hope there are questions asked.

I minimise the amount of tax guidance I read to that which I need to read. Sadly, that is more than nothing. I do not give tax advice.

One of things that amazes me on this thread is the number of people claiming expertise in pretty much all tax / corporate structuring etc. No one has that expertise.

I said myself in a previous post, though maybe not on this thread that I believe HMRC are under-resourced. However, if they received advice from their counsel that they could have litigated on starbuck's royalty payments and have a good chance of winning, they would have done so.

The company is making a profit on its UK activities. It makes the profit because of its brand, for which it pays £27m of licence fees/royalties, which are taxed in the US, which has higher CT rates than the UK. It also spends £130m a year on staff costs and the cost of leasing its premises, which are also an essential part of making those profits. These are tax deductible in law, as are the royalty payments.

Its sole shareholder is another group company, and in any case, distributions are made from post tax profits.

I am a CA and a CTA, and am a tax risk and transfer pricing specialist in the financial services industry, but during my working life I have worked on all aspects of UK corporate tax compliance across various sectors. I have made some comments on this thread because it's loosely within my sphere of interest. I am not as enthusiastic a fan of tax avoidance as Stevo, :shock: , and in any case, corporate tax avoidance a) does not impact the exchequer as much as people think, and b) is getting increasingly difficult and carries a big reputational risk which boards are increasingly unwilling to take.

However, there seems little point in commenting further, as it seems that people think companies should be taxed on the basis of some half-baked drivel that they have dreamed up in the bath, and no amount of factual information will shake them from that view.

Yes, there have been egregious examples of tax avoidance, especially as the economy is undergoing a paradigm shift in terms of globalization and digitalization, and taxation systems have taken a while to catch up. There will also always be criminals, who simply evade tax.

Good luck folks.

hopkinb

TheBigBean wrote:

hopkinb wrote:

TheBigBean wrote:

That, incidentally, is why I am aware of all the loopholes in some aspects of BEPS.

BEPS is some guidance on Base Erosion and Profit Shifting, hence the acronym. There can be no loopholes in guidance.

Loopholes in the proposed legislation.

Whose legislation? Write to your MP and complain if it's the UK legislation.

Stevo_666

TheBigBean wrote:

One of things that amazes me on this thread is the number of people claiming expertise in pretty much all tax / corporate structuring etc. No one has that expertise.

Who do you think is claiming that?

TheBigBean

I was agreeing with your reasonable post until

some half-baked drivel that they have dreamed up in the bath, and no amount of factual information will shake them from that view.
.

Stevo_666

hopkinb wrote:

However, there seems little point in commenting further, as it seems that people think companies should be taxed on the basis of some half-baked drivel that they have dreamed up in the bath, and no amount of factual information will shake them from that view.

Why do you think this thread was started and has run to so many pages?

john80

Maybe a change is required to tax law to remove IP costs as a cost for tax purposes. Sure allow companies to protect their IP from theft or copy in a legal sense. This is blatant profit shifting in the case of Starbucks. When your IP covers how you serve coffee from a machine that is not even your design you are taking the piss.

The reality of Starbucks offer to the UK consumer sums up this thread. We all know they are not interested in Britain or its population through their tax structure but a significant number of idiots in Britain still spend their money there. Christ they could have Jimmy saville serving the customers and they would probably still line up for it whilst being all passive aggressive.

rjsterry

hopkinb wrote:

TheBigBean wrote:

I am expressing the opinion that HMRC doesn't do enough to challenge it. They agreed a settlement with Starbucks. They are under resourced and go for low hanging fruit. I would expect a company to make a profit, if it is not doing so, but is paying royalties, shareholder interest etc., I would hope there are questions asked.

I minimise the amount of tax guidance I read to that which I need to read. Sadly, that is more than nothing. I do not give tax advice.

One of things that amazes me on this thread is the number of people claiming expertise in pretty much all tax / corporate structuring etc. No one has that expertise.

I said myself in a previous post, though maybe not on this thread that I believe HMRC are under-resourced. However, if they received advice from their counsel that they could have litigated on starbuck's royalty payments and have a good chance of winning, they would have done so.

The company is making a profit on its UK activities. It makes the profit because of its brand, for which it pays £27m of licence fees/royalties, which are taxed in the US, which has higher CT rates than the UK. It also spends £130m a year on staff costs and the cost of leasing its premises, which are also an essential part of making those profits. These are tax deductible in law, as are the royalty payments.

Its sole shareholder is another group company, and in any case, distributions are made from post tax profits.

I am a CA and a CTA, and am a tax risk and transfer pricing specialist in the financial services industry, but during my working life I have worked on all aspects of UK corporate tax compliance across various sectors. I have made some comments on this thread because it's loosely within my sphere of interest. I am not as enthusiastic a fan of tax avoidance as Stevo, :shock: , and in any case, corporate tax avoidance a) does not impact the exchequer as much as people think, and b) is getting increasingly difficult and carries a big reputational risk which boards are increasingly unwilling to take.

However, there seems little point in commenting further, as it seems that people think companies should be taxed on the basis of some half-baked drivel that they have dreamed up in the bath, and no amount of factual information will shake them from that view.

Yes, there have been egregious examples of tax avoidance, especially as the economy is undergoing a paradigm shift in terms of globalization and digitalization, and taxation systems have taken a while to catch up. There will also always be criminals, who simply evade tax.

Good luck folks.

As I've said a couple of times, it might all be drivel dreamed up in the bath but it an awful lot of people think the opposite of the bit in bold. Even a number of our MPs. Instead of exhorting those who want loopholes closed or whatever to get the law changed, maybe those who know that there isn't some vast untapped reservoir of tax revenue should be the ones writing to their MPs and publicising this more.

pinno

hopkinb wrote:

However, there seems little point in commenting further, as it seems that people think companies should be taxed on the basis of some half-baked drivel that they have dreamed up in the bath, and no amount of factual information will shake them from that view.

I beg your pardon, when one is in the bath, one has singing and equally laborious scrubbing to do. Anything else is a waste of time.

rjsterry

An interesting table from HMRC's 2017 Tax Gap report



Their figures are disputed, particularly for avoidance by large corporation but they'd have to be a very long way out indeed for that to be the biggest issue.

By the way, tax gap includes avoidance, evasion, errors, etc. More here

https://www.gov.uk/government/news/uk-t ... t-minority

Stevo_666

rjsterry wrote:

An interesting table from HMRC's 2017 Tax Gap report



Their figures are disputed, particularly for avoidance by large corporation but they'd have to be a very long way out indeed for that to be the biggest issue.

By the way, tax gap includes avoidance, evasion, errors, etc. More here

https://www.gov.uk/government/news/uk-t ... t-minority

True, but Hoppy and I have already posted or linked this several times and made this point and it seems to have gone over people's heads or they chose to ignore it.

Stevo_666

john80 wrote:

Maybe a change is required to tax law to remove IP costs as a cost for tax purposes. Sure allow companies to protect their IP from theft or copy in a legal sense. This is blatant profit shifting in the case of Starbucks. When your IP covers how you serve coffee from a machine that is not even your design you are taking the wee-wee.

The reality of Starbucks offer to the UK consumer sums up this thread. We all know they are not interested in Britain or its population through their tax structure but a significant number of idiots in Britain still spend their money there. Christ they could have Jimmy saville serving the customers and they would probably still line up for it whilst being all passive aggressive.

It is perfectly acceptable for third parties to charge for IP so why would it not be valid tax deductible cost for intra group transactions provided it is done at arms length?

Also tax authorities are happy to tax IP income, so do you think it would be fair to deny a deduction for IP expenses?

rjsterry

Stevo 666 wrote:

rjsterry wrote:

An interesting table from HMRC's 2017 Tax Gap report



Their figures are disputed, particularly for avoidance by large corporation but they'd have to be a very long way out indeed for that to be the biggest issue.

By the way, tax gap includes avoidance, evasion, errors, etc. More here

https://www.gov.uk/government/news/uk-t ... t-minority

True, but Hoppy and I have already posted or linked this several times and made this point and it seems to have gone over people's heads or they chose to ignore it.

One might surmise from that chart that it's mostly the fault of SMEs dodging payroll taxes and VAT... so it is all those middle class people paying their builder cash in hand for that new loft conversion

I wonder where the likes of Uber/Deliveroo/etc fit into this. I know Hermes were having their collar felt for claiming all their drivers were self employed.

Stevo_666

rjsterry wrote:

Stevo 666 wrote:

rjsterry wrote:

An interesting table from HMRC's 2017 Tax Gap report



Their figures are disputed, particularly for avoidance by large corporation but they'd have to be a very long way out indeed for that to be the biggest issue.

By the way, tax gap includes avoidance, evasion, errors, etc. More here

https://www.gov.uk/government/news/uk-t ... t-minority

True, but Hoppy and I have already posted or linked this several times and made this point and it seems to have gone over people's heads or they chose to ignore it.

One might surmise from that chart that it's mostly the fault of SMEs dodging payroll taxes and VAT... so it is all those middle class people paying their builder cash in hand for that new loft conversion

I wonder where the likes of Uber/Deliveroo/etc fit into this. I know Hermes were having their collar felt for claiming all their drivers were self employed.

Nothing wrong with paying your builder in cash - it's the builder not declaring the VAT that's the problem

The largest blocks are black economy, plain old carelessness and differing legal interpretations (of complex matters). Funny, but I can't find an indignant rant thread about people who are careless with filling in their tax returns

rjsterry

A bit of a review of the criticism of the HMRC's figures here

https://fullfact.org/economy/tax-gap/

The hidden economy seems to be the biggest area of contention (perhaps not surprisingly), and as you might expect, Mr Murphy thinks that multi nationals are avoiding a lot more than the HMRC estimate.

rjsterry

Stevo 666 wrote:

Nothing wrong with paying your builder in cash - it's the builder not declaring the VAT that's the problem

Sure, but pressuring someone else to commit tax fraud so that you can save some money is pretty low in my book.

Stevo_666

rjsterry wrote:

A bit of a review of the criticism of the HMRC's figures here

https://fullfact.org/economy/tax-gap/

The hidden economy seems to be the biggest area of contention (perhaps not surprisingly), and as you might expect, Mr Murphy thinks that multi nationals are avoiding a lot more than the HMRC estimate.

Hidden economy is probably probably one that is hardest tomestimate by its very nature.

I wouldn't expect a tax activist like Richard Murphy to claIm anything else, although it is pretty clear that HMRC have done a lot more work on it than he has.

Most amusing is the claim to have estimated the extra avoidance by big corporated from the Paradise papers, which go back to 1950. I'm surprised they haven't extrapolated that there are children working down the mines being exploited by big corporations

Stevo_666

rjsterry wrote:

Stevo 666 wrote:

Nothing wrong with paying your builder in cash - it's the builder not declaring the VAT that's the problem

Sure, but pressuring someone else to commit tax fraud so that you can save some money is pretty low in my book.

Pressuring? I don't remember ever paying anyone in cash and putting pressure on them not to declare the VAT.

Cash transactions are still pretty widespread. I went down to the local chippy the other day, bought fish and chips and paid cash - does make me an accessory to tax evasion? :roll:

rjsterry

Stevo 666 wrote:

rjsterry wrote:

Stevo 666 wrote:

Nothing wrong with paying your builder in cash - it's the builder not declaring the VAT that's the problem

Sure, but pressuring someone else to commit tax fraud so that you can save some money is pretty low in my book.

Pressuring? I don't remember ever paying anyone in cash and putting pressure on them not to declare the VAT.

Cash transactions are still pretty widespread. I went down to the local chippy the other day, bought fish and chips and paid cash - does make me an accessory to tax evasion? :roll:

It's not the paying cash itself, it's the telling a builder he needs to offer a substantial discount as he'll be paid in cash. I'm not suggesting this absolves the builder, but expecting it to be offered as an option is a bit much.

pinno

Way off topic.

S'alright rjs - found the solution - Yorkshire solder ring. 2 x 28mm elbows. :roll:

Back OT:

No anomalies in my SA Stevo.

rick_chasey

Not entirely sure the SME tax issue is relevant to the paradise papers and offshore tax avoidance.

And I don’t really see why one makes the other ok.

pblakeney

Stevo 666 wrote:

rjsterry wrote:

Stevo 666 wrote:

Nothing wrong with paying your builder in cash - it's the builder not declaring the VAT that's the problem

Sure, but pressuring someone else to commit tax fraud so that you can save some money is pretty low in my book.

Pressuring? I don't remember ever paying anyone in cash and putting pressure on them not to declare the VAT.

Cash transactions are still pretty widespread. I went down to the local chippy the other day, bought fish and chips and paid cash - does make me an accessory to tax evasion? :roll:

Were you offered a receipt? That tends to be a give away. And why a receipt is a legal obligation in some countries, to the extent that you can be punished for not taking one from a supermarket.

mamba80

rjsterry wrote:

A bit of a review of the criticism of the HMRC's figures here

https://fullfact.org/economy/tax-gap/

The hidden economy seems to be the biggest area of contention (perhaps not surprisingly), and as you might expect, Mr Murphy thinks that multi nationals are avoiding a lot more than the HMRC estimate.

Did think the same when i first read the HMRCs figures, public body charged with collecting tax, says its doing a good job...... also, when does "failure to take reasonable care" or "legal interpretation" became Avoidance? and would nt a properly funded and staffed HMRC be more able to check things like this a little better?