2024 UK politics - now with Labour in charge

Well avoidance is reducing your liability below that which your tax authority thinks you should pay. And in neither UK nor Lux has tax been avoided as Both tax authorities were happy.

But the wider point here is that companies need to choose where to base their companies and activities and Starbucks chose Luxembourg for lending as they are free to do. It's no different to choosing a location for any other activity but the misplaced view of some on here is that intragroup loans are somehow dodgy. Maybe Germany, France, Italy and Spain lost out but somebody has to. DB is talking about it as if some wrong has been committed but it hasn't.

Alternatively, if we follow the DB train of thought, should companies be obliged to put their operations in the highest tax country available?

Some people need to get clearer in their minds the difference between tax avoidance and tax planning/mitigation.

Your cap related to earnings is just unfair and will keep widening the wealth gap. It also ignores those who either couldn't or wouldn't save such sums during their late 20s, 30s and early 40s when they were often down to one income and higher overheads with mortgages, cost of kids etc.

It's like the tax relief for higher rate tax payers being twice that for basic rate tax payers, it widens the wealth gap, and is simply unfair.

If the annual allowance is set at a fair level (and as you say there are very few who feel upset with the £60k allowance), there is no need for a lifetime allowance. The alternative is a lifetime allowance and no annual allowance, but that is so much harder to 'police' as fund values fluctuate.

The legislation around the now capped PCLS is messy, and it would be far better to work in rounder figures, so either £265k or £270k, not £268,250. And then the cap needs to be increased ever couple of years to reflect the inflation situation.

All pretty sensible, but I think a better question would be "what level of retirement living standard should be subsidised through tax allowances?" People are free to choose to save more, but there's a valid question around whether it is a good use of a tax break to use it to encourage those who already have a million in their pension to put a bit more in.

The thing about the annual limit is that the amount people are able to put into their pension is likely to increase as they go through their working life, so it makes sense for it to be quite high - I wouldn't have been able to put in anything like £20k when I was 30 for example. £60k per person per year still feels like a really big number to be able to take out from disposable (even if it is pre tax) income.

Pensions should be very simple. Not taxed in. Taxed out. Everything else is noise.

The contribution caps have moved around all over the place. If you have volatile income, they are a pain as you then need to work out how much allowance you have carried forward.

Happy to go with: "What level of retirement living standard should be subsidised through tax allowances?"

As I explained above, the UK was not losing out on tax in the Starbucks case.

I may have missed a trick here but aren't Starbucks UK's financials a mix of:

• Items that arose actually in the UK (e.g. revenues and staff costs); and
• Items provided by other Starbucks companies (e.g. coffee, financing) that to comply with tax legislation, have to be included in the accounts at market rates

Assuming that is the case, then Starbucks UK will pay the "correct" tax vs a UK-based coffee chain as its profit is made up of actual revenues, actual costs, and transfer priced costs at market rate.

Starbucks the global group can benefit from low corporation tax as it can locate some profitable activities (e.g. bulk buying and re-selling of coffee, sourcing of finance) in low tax jurisdictions. This feels like a variation on "economies of scale" where large purely UK-based enterprises benefit from buying power vs one man bands. (e.g. Tesco vs corner shops?) There's a lot of effort required to create a multinational and they take some managing, so isn't being in the position of Starbucks just "the way of the world"?

Full disclosure: I'm not defending Starbucks per se. Their coffee does not do it for me.

Are you saying that Starbucks is deliberately cooking its books so as to underpay its UK tax?

Or are you saying that the accounting standards that apply in Europe are deficient?

Worth noting that for the years end October 2022 and October 2023, Starbucks UK made a profit, so I'm not sure how you justify the claim that Starbucks UK is unprofitable. (Latest accounts per Companies House, signed off by Deloitte: application-pdf).

I don't think "The present international corporation tax system offers great scope for multinational companies to shift their profits between countries to reduce their tax liabilities and creates an uneven playing field" really proves very much.

Per my comment above, large companies enjoy economies of scale vs their small rivals. The playing field is certainly not level here. So non-level playing fields aren't a bad thing per se. They're a long-established feature of the commercial world.

Ultimately, of course, coffee isn't an essential and there are numerous outlets from where coffee can be purchased in the UK, so I think we can conclude that the Great British Public doesn't really care. If they did, they'd buy their coffee elsewhere and Starbucks would go down the pan.

So do we ban multinationals? Or do we have separate legislation to mandate minimum profit levels for multinationals? Or something else?

And finally, TaxWatch may have a point, but they kind of blow their credibility with a headline referring to "dodged" tax. That implies wrongdoing, when the companies concerned are simply acting within the law and paying less tax than the authors think they should.

"Creative accounting" is another term that implies wrong-doing. Like "Dodge", to use the term and then claim you're not implying something is wrong is somewhat dodgy itself!

Starbucks' accounts are signed off by Deloitte. Accusing Deloitte of being either complicit in creative accounting or not competent (*) to spot it is quite a step to take without anything tangible to support the accusation.

(*) This cannot be ruled out e.g. KPMG and Carillion but I think the default position in the absence of evidence to the contrary has to be that Deloitte know what they're doing.

The big 4 accountancy firms are a bunch of crooks, don't ever trust what they do, say or report!

Profitable for the parent company and profitable as an individual entity are two different things.

You start a business making widgets in Birmingham. They take off to the extent that you open shops to sell them. They become even more popular and you open a shop in Milan. The shop has to buy the widgets from the parent company at a price that means the shop just covers it's costs, but the parent company still makes a profit on each widget.

The Italian company should also make a profit eventually. Also how many widgets do you think have been made in Luxembourg?

Problem with moral judgements is that they are wholly subjective, whereas tax liabilities are objective. Per another of my previous posts, if people had an issue with Starbucks' morality on a large scale in the UK then it would long-since have stopped flogging its vile brown dishwater here.

Not necessarily. It's there to sell more widgets to the Milanese than they would buy if they had to order from Birmingham via a website. So long as it increases sales without materially reducing the overall profitability. It could potentially run at break even or a small loss if the additional sales result in a net benefit. 1000 widgets at 15% profit per widget or 2000 widgets at 14% profit.

I don't see too much difference between basing your distribution warehouse near a big European road and rail hub (because fundamentally that is more profitable) and locating your internal finance division in the most tax efficient jurisdiction.

Of course if you are an SME, there is one commercial entity and the distribution hub is probably a cupboard with some wrapping paper, so none of these options are available or rather they are meaningless at that scale.