back to article The latest tech firm to be accused of tax dodging: Microsoft

Microsoft is the latest tech firm to be tarred with the "immoral" tax-dodger brush after a report accused Redmond of funneling £1.7bn in UK revenues through Luxembourg and Ireland in order to legally avoid paying tax here. The Sunday Times reported that the IT giant was sending its British earnings from new operating system …

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  1. Anonymous Coward
    Anonymous Coward

    The solution is simple

    Change the tax law for large multinationals. For gods sake, the Chancellor and HMRC continuously change it for individuals, so lets do the same with those companies that put in tax regimes that export profits to low or non-tax paying countries.

    For those companies that deliberately export their profits, change the tax regime so that they are taxed on gross revenue or turnover, not gross profit.

    AC, because, well, I work for a little known company that exports it's tax to a well known country associated with cuckoo clocks.

    1. Anonymous Coward
      Anonymous Coward

      Re: The solution is simple

      The problem is that it's often legitimate to export profits to the parent company. It's actually required by the EU for free trade within the Eurozone, it's the improper use of the ability to move profits around which is the problem.

      1. Anonymous Coward
        Anonymous Coward

        Re: The solution is simple

        I don't see much of a problem if the profits *after tax* are exported

    2. Anonymous Coward
      Anonymous Coward

      Re: The solution is simple

      simpler then that, reduce your corporate tax to below Luxemberg and see all the companies leave there for here.

      1. mrfill
        FAIL

        Re: The solution is simple

        From PKF's guide to Luxembourg...

        "The general effective corporation tax rate for resident companies is 22.05%. This

        consists of corporate tax of 21% and a 5% surcharge for the employment fund.

        Companies with taxable income of not more than EUR 15,000 pay tax at 21%.

        In addition, a municipal business tax is payable at rates which vary in different areas.

        The rate is 6.75% in the city of Luxembourg, producing a combined corporate tax

        rate of 28.80%."

        UK Corporation tax is 22%, reducing to 21% for 2013/14

      2. Chad H.

        Re: The solution is simple

        Yeah AC, cos lowering the tax rate worked so well in Ireland. When theres a boom its great, but when you need to kickstart the economy, one of the critical levers to help that is gone.

        What we need to do, is redefine these payments to subsidaries as Dividends, and tax em that way.

        1. Field Marshal Von Krakenfart
          Black Helicopters

          Close, but no cigar; was The solution is simple,

          The problem is not the tax rate, the problem is the way most governments allow lax transfer pricing laws, that is where the ripoff happens. Most of the transfer payments are not for services and product, they are payments for intangible things royalties and licences.

          Have a read of these articles to see how the big corporations use transfer pricing to reduce their tax bills.

          Irish subsidiaries helped Microsoft reduce US tax bill by €1.87bn in 2011

          “Microsoft Ireland Research reported $4.3 billion of profits in 2011, with an effective tax rate of 7.2 per cent. This income equates to about $11 million of profit per employee.”

          Statement from Chairman, Permanent Subcommittee on Investigations CARL LEVIN D (MI) on Offshore Profit Shifting and the U.S. Tax Code (PDF download).

          ... depicting Microsoft’s transfer pricing agreements with two of its main offshore groups. As we can see from the chart, in 2011 these two offshore groups paid Microsoft $4 billion for certain intellectual property rights; Microsoft Singapore paid $1.2 billion, and Microsoft Ireland $2.8 billion. But look what those offshore subsidiaries received in revenue for those same rights: Microsoft Singapore group received $3 billion; and Microsoft Ireland, $9 billion. So Microsoft USA sold the rights for $4 billion and these offshore subsidiaries collected $12 billion. This means Microsoft shifted $8 billion in income offshore. Yet, over 85% of Microsoft’s research and development is conducted in the United States.

          Grubbermants could easily tackle lax transfer pricing laws, if they wanted, however the Amerikian, the UK, the Irish, and just about every other grubberment in the world are quite happy to leave these lax transfer pricing laws in place why??????? Are the politicians afraid that tackling transfer pricing laws may limit their ability to accquire cosy directorships when they retire?????

          Just ask the question sheeple; "who really benefits from this?", always follow the money.

          1. mhoneywell
            Stop

            STOP

            Surely, if we step back, we can see that the problem here is really quite simple:

            - Regulation globally is ill equipped to contend with modern business practices. That was as true ten years ago when, I think, Soros said the world needed to get on top of this problem, as it is today.

            So we're just getting caught up in the Government, and its media mouth pieces, posturing and distracting the public from the real economic problems by pointing at these 'unethical' firms, raping and pillaging their land.

            I don't approve, but I think it's a sorry effort to complain since we opted into capitalism when we last voted.

            In case you'd forgotten, capitalism isn't big on ethics. Look around.

            1. Anonymous Coward
              Unhappy

              Re: STOP

              In case you'd forgotten, capitalism isn't big on ethics. Look around.

              That's true, but what's unethical about complying with the law to legally minimise your tax exposure? That might be against the supposed spirit of the law, but it would be no different from the many MP's who made (and continue to make) ludicrous expenses claims "because they are within the rules". Or the many MP's who undertake significant personal work commitments outside of Parliament because there's no rule that says being an MP should be a full time job (just a full time salary, full time pension, and full time pay-off if you're careless enough to not be elected next time round).

              Be assured that the situation can be made worse, and the government are on that case far more so than business. The draft Finance Bill for 2013 is over a thousand pages long. How many MP's do you think have read any of it? It'll be the usual misbegotten, poorly drafted legalistic twaddle, create new loopholes, exemptions and contradictions, and the very length of it tells you that it has had no proper scrutiny and that it will be too complex.

              Some people never learn. Unfortunately many of them are called MP's.

      3. Destroy All Monsters Silver badge
        WTF?

        Re: The solution is simple

        > corporate tax to below Luxemberg

        1) It's "Luxembourg"

        2) Can you check for me how much the corporate tax is for Luxembourg? I can't remember exactly. I can, however, with 100% assurance tell you that it is not low.

      4. DavCrav Silver badge

        Re: The solution is simple

        "simpler then that, reduce your corporate tax to below Luxemberg and see all the companies leave there for here."

        I'm not sure whether you were a moron by birth or whether you had to take classes. This is a popular refrain among those for which thinking isn't a top priority, to continually lower tax rates until they all reach zero. Monaco has zero corporation tax. That'll be great. The point you seem to be missing is that the "competitor" countries are not real countries. Bermuda, Monaco, Leichtenstein, etc., are tax havens. They work on being parasites on other countries' infrastructure. A few parasites suck blood from the host (the rest of the world in this metaphor) and make a nice living off it. If more countries become parasites, the host dies.

        It's the same as the complete wanker from Germany who once said "why can't every country be an exporting country like us?"

    3. Arctic fox
      Thumb Up

      Re: "AC, because, well, I work for a little known company that exports it's tax"

      I am often somewhat sarky about AC postings - however in your situation I entirely understand!

    4. john 112

      Re: The solution is simple

      Ac:

      Because you like your job. Did you consider a salary is also an economic good for you and for your country? Even more so than a tax.

      Sounds like MS has found a way to contribute to your economy despite imprudent tax policies. Quick! Outlaw that as well!

      1. Ragarath

        Re: The solution is simple @john112

        So every company in every country has to pay their workers, what has this got to do with tax?

        Having a salary is all well and good, but when that is then taxed to the hilt because the government does not have enough money to run the country, what is the point in even trying to earn a living.

        We all know that is the businesses paid their tax it still probably would not mean much lower bills, but would ultimately improve our lives by actually allowing the government to afford the services we want/need. And remember the businesses are using those services also, so why should they not pay?

  2. Anonymous Coward
    Anonymous Coward

    Hmm...

    I was thinking that there appeared to be a split between the IT companies who employ people in the UK and those who don't.

    Facebook, Google, ebay, Amazon et al employ relatively speaking few people in the UK. Microsoft, IBM, HP, et al employ vast amounts of people.

    I wonder how much tax they've paid, how much they've avoided and who's next...

    1. Anonymous Coward
      Anonymous Coward

      Re: Hmm...

      In a recent thread on Amazon, I had a look at what Amazon were paying, and what they were avoiding, and it appeared that Amazon pay about two thirds of the notionally "full" tax bill. In aggregate national terms, one third of tax liability is business rates, one third is corporation tax (the bit you can try and avoid), and one third is employer's NI. So if you can avoid most of your corporation tax, then you'd avoid roughly one third of the taxes you might otherwise incur.

      Obviously the detail is a lot more complicated, but that's how it looks to pan out for Amazon with several thousand UK employees and UK distribution centres. Google and eBay I'd expect to be different because there's no physical delivery, and arguably they'd be proportionately worse in tax evasion (if following the transfer pricing tax avoidance model) than Starbucks or Amazon because these two can't avoid the payroll taxes or rates on its stores, whereas Google and eBay probably don't have much in the way of UK staff or premises.

      Taking Google, they are reported as paying £6m of UK tax in 2011. According to their investor presentations they make 10% of global revenues in the UK, making total UK revenues around $3.7bn. Group pre tax margin is around 33%, so that implies UK taxable profit ought to have been around $1bn (after losing say $0.2 or 0.3bn for tax deductibles), and at prevailing tax rates that would have further implied a UK tax liability of $260m, say £170m. So by Google's standards, Starbuck and Amazon are tax saints (although only because they can't avoid the rates and payroll taxes).

      IBM and HP do employ more people in the UK and will pay more NI, and more business rates, but they've been critcised for avoiding US taxes, so I'm sure they won't be paying any UK taxes they can avoid. Moreover they encourage their customers to offshore work, so avoiding all UK taxes, and removing jobs from the economy.

      So in summary: It's a mess, it loses billions in tax revenues, and motivates all the wrong behaviours. Luckily David Cameron has a finger on the nation's pulse, and is turning his incisive, Sauron-esque attention to the matter of gay marriage.

      1. mrfill

        Re: Hmm...

        Starbucks is a franchised operation so the staff in the shops are employed by the franchisee, not the franchisor. I have a particle of sympathy for the shop owners as they are getting the brunt of the attacks even though they are behaving like all other UK shops paying their corporation tax, NI, business rates and so on like the rest.

        I still wouldn't go anywhere near them though because their drinks are overpriced and indifferent, but that's another matter.

      2. JohnMurray

        Re: Hmm...

        Most of Amazons "employees" are agency workers.

    2. Chad H.

      Re: Hmm...

      Amazon have a whole bunch of low paid warehouse workers in the uk*

      *Who's employment we're kinda subsidising through tax credits. Not only does Amazon benefit from UK consumer spending, we effectively pay them to do it by covering part of the cost of their workers labour, rather than have them pay a living wage.

      1. Anonymous Coward
        Anonymous Coward

        Re: Hmm...@Chad H.

        "Amazon have a whole bunch of low paid warehouse workers in the uk ...Who's employment we're kinda subsidising through tax credits"

        Available to everybody, so hardly Amazon's fault. If the building industry weren't able to rely on such subsidies (and the payment of welfare when there's no work) then nobody would be employed in the UK construction industry full stop. Moreover, tax credits are merely part of a deliberate plan to make the tax system progressive (ie higher earners pay higher tax rates).

        Personally I don't think that progressive tax regimes deliver, and a simpler flat rate of 35% of all earnings over £10k would be easier to adminster, but that's not the view of politicians.

        1. bitwise
          Childcatcher

          Re: Hmm...@Chad H.

          It's a bit of stretch that noone would be employed in the UK construction industry, I doubt all building would just stop one day.

          1. Anonymous Coward
            Unhappy

            Re: Hmm...@Chad H.

            "It's a bit of stretch that noone would be employed in the UK construction industry, I doubt all building would just stop one day."

            My point was that any industry that employes a workforce on low wages depends on implied subsidies like tax credits, council housing etc, and any industry that employes its workforce on low pay and intermittently (eg agriculture and construction) depend on the subsididy of welfare - otherwise the workforce starve. My language was certainly a degree of hyperbole, but I hardly think that deserves downvoting.

      2. Destroy All Monsters Silver badge
        Happy

        Re: Hmm...

        > we effectively pay them to do it by covering part of the cost of their workers labour, rather than have them pay a living wage.

        Why not nationalize them? Then you could have a Queen's Book Distribution Service. Pay the poor exploited underclass good, serious wages with money fresh off the press gracefully granted by Her Majesty's Exchequer.

  3. mrfill
    Mushroom

    " but MPs have said that while their actions might be perfectly legal, they're also immoral."

    Would these be the same group of people who were given such a rough ride recently for ridiculous expenses claims - quite a few being fraudulent? Experts on immorality! God forbid we should get a Prime Minister whose father made millions from tax avoidance schemes. That could never happen could it?

    "The Public Accounts Committee made it clear that it wasn't accusing multinationals of illegal tax avoidance"

    Since when was tax avoidance illegal? Perhaps that is why the PAC didn't accuse them.

    Can the government's horse gets any higher?

    1. Dan 10

      Dodgy

      Any higher indeed. What bothers me most about this is that the capitulation of Starbucks, while great for UK public funds, has established a precedent whereby the government can look at something they don't like, realise there's nothing illegal, therefore set the UK lynch mob of media and screaming masses upon the target and wait for them to cry 'ok, ok, you win!'. How is this different from the insipid whinings about being tried 'in the court of public opinion' by Harman or Wacky Jacky or whoever it was a while ago?

      Sorry, but it's a companies duty to act in the interests of it's shareholders. If I was a shareholder, and the company declared a £10m write-off 'because it seems like a fair thing to do', I think I'd be rather miffed.

      It might seem like a good idea currently, but this is nothing more than tabloid-inspired lynching, and it won't be long before the same approach is tried on other things where we might not be as keen.

      1. Richard IV
        IT Angle

        Re: Dodgy

        "Sorry, but it's a companies duty to act in the interests of it's shareholders. If I was a shareholder, and the company declared a £10m write-off 'because it seems like a fair thing to do', I think I'd be rather miffed."

        There's nothing to stop us changing that first bit - to act in the interests of its shareholders and the society it operates within by maximising distribution ie dividends and tax. Apart from the lobbying wails that this would be "bad for business".

        Starbucks capitulated on the basis that the £10m sop was cheap to avert a tabloid inspired lynching. It's not the multinationals that deserve the lynching though - it's the idiots who developed and approved the rules and treaties that are so easily exploited by said multinationals. If there's a true IT angle, its the lesson that endless patching can easily leave you with a system that you neither understand nor does what you want. To make matters worse, the developers of this system have a vested interest in it being shit while the approvers will approve nigh on anything if told it's "good for business".

  4. tony
    Happy

    Pensions,

    I'm wondering how much of these "immoral" profits end up being paid out as dividends?

    1. BigG
      Holmes

      Re: Pensions,

      And what proportion of these dividends are paid out in the UK? Far from all of them, one would guess.

      1. Destroy All Monsters Silver badge

        Re: Pensions,

        On would hope.

        But then exporting money tends to depress the strong pound, so exports become easier.

        The strong pound .... of wait ....

      2. tony

        Re: Pensions,

        "And what proportion of these dividends are paid out in the UK? Far from all of them, one would guess."

        That leads to the next question, which British companies "immorally" avoid foreign taxes to pay dividends in the UK?

        But take the current Guardian Baddie, sbux 75% of it's shares are owned by institutional investors and glancing through the list you can see some UK pension funds, I'm guessing msft is no different.

  5. This post has been deleted by a moderator

    1. Destroy All Monsters Silver badge
      Facepalm

      Re: Corporations avoiding tax

      > We have to pay extra tax, in effect, to subsidise the corporations.

      You have to pay extra tax to pay the state.

  6. Kirstian K
    Megaphone

    Correct me if im wrong

    But we pay tax on the price of their products already,

    they then dont pay tax to our goverment for those products,

    meaning were being screwed (no supprise their then),

    and so they are litterally taking our tax as extra profit. (so ive got that right yeah)

    BUT 'if' they do have to pay tax going forward,

    whats the betting they will put their prices up to cover the tax they now hopefully have to pay.

    ALSO why do we pay more for these products over hear inthe UK already compaird to the US for examply,

    I know they say exchange rate, but its also tax.

    these companies should be pinned up against the wall and robbed right back (with interest in my opinion).

    no more robbing everyday man for his small change, lets get these b'stards to pay what they should.

    end of.

    1. Cynical Observer
      FAIL

      Re: Correct me if im wrong

      Consider yourself corrected.

      The tax that you pay on these products (VAT) is not part of the current discussion.

      1. Buzzword

        Re: Correct me if im wrong

        The standard rate of VAT in Luxembourg is only 15%, so if Microsoft is selling all its electronic services in the EU from there, they're saving themselves that extra 5% in the UK. (In Hungary where VAT is 27% they're saving even more!)

        The main topic is corporation tax, but note that VAT actually raises more revenue.

  7. Anonymous Coward
    Anonymous Coward

    News

    This is news? it's been going for years and nobody seemed to care. Install CDs were always labelled with "Microsoft Ireland" or similar.

    This sort of tax dodge must have been invented in the US and the reason is clear, their really high corporation tax levels, which will soon be twice the UK.

  8. Select * From Handle
    Unhappy

    Why has no one posted a "Microsoft Tax" joke yet....

    Yes i can't think of one either but its all setup for a "Tax the Microsoft Tax" type joke.

    1. Anonymous Coward
      Joke

      Re: Why has no one posted a "Microsoft Tax" joke yet....

      A guy from Microsoft walks in to a UK tax office and says "I'm here to pay my tax bill".

      The tax guy laughs and says "You know, I had a guy from Amazon come in asking to do that same thing! How funny, you guys never owe us anything, why now? Come on, lets forget about it and go and get ourselves a Starbucks Caramel chocolate amerilattecino double cream coffee with extra sprinkles? I'll buy. After all, it's not my money.".

  9. breakfast
    Go

    If they won't pay tax, maybe they should pay for infrastructure

    As they aren't paying any tax, but they are still putting vehicles on our roads, employing people educated in our education system and creating rubbish for our landfill sites, maybe there should be some kind of infrastructure charge that could be levied on companies larger than a certain size who pay tax below a certain threshold, just to cover the burden they create by receiving these subsidies from the taxpayer.

    Obviously they would also have to have detailed accounting of this information so the charges could be levied accurately, which would probably prove quite costly and irksome, but that would be a choice they would make if they didn't want to pay regular taxes.

    1. dogged
      Boffin

      Re: If they won't pay tax, maybe they should pay for infrastructure

      The things you mentioned are encompassed in the Business Rates which it's impossible to dodge unless you're a registered charity or illegally operating out of your shed.

      Not even Starbucks can dodge that one.

      I agree that the law needs a change. Companies have to act in obedience to the law whereas acting according to "morality" is often something their shareholders can actually sue for under "Best Interest" laws.

      And they do. And the ones who sue are often pension funds, which also dodge as much tax as possible.

    2. Cynical Observer
      Facepalm

      Re: If they won't pay tax, maybe they should pay for infrastructure

      but they are still putting vehicles on our roads, employing people educated in our education system and creating rubbish for our landfill sites,

      Vehicles on roads - Vehicle Excise Duty, Excise Duty on Fuel, (Can't count VAT on fuel as that can be reclaimed). Let's not forget the vehicle manufacturers who benefit by selling these - a further economic benefit that it's convenient to ignore.

      Employing People Educated in the system. : NI; PAYE; not to mention the fact that the employees are not a drain on state resources.

      Rubbish for Landfill... Some of that responsibility lies with the end user and how they dispose of and/or recycle their rubbish. Some of it is covered by payment of business rates - I believe that they are not inconsequential.

      In short - any discussion has to focus on PROFITS and whether or not profits should be taxed in the country of origin or else where.

      1. JohnMurray

        Re: If they won't pay tax, maybe they should pay for infrastructure

        Only if the fuel buyer is regstered for vat can it be reclaimed, and the vat is charged on the fuel cost AND the fuel duty.

        NI ?

        Most of amazon workers are employed by agencies. Their pay is around the minimum wage (£6.19). They would qualify for working tax credit if their hours were not so high !

        PAYE ?

        See above.

        Now, how many workers are economic migrants working for foreign registered employment agencies ?

      2. Kevin7
        FAIL

        Re: If they won't pay tax, maybe they should pay for infrastructure

        "Employing People Educated in the system. : NI; PAYE; not to mention the fact that the employees are not a drain on state resources."

        No, actually. National Insurance is protection from sickness, unemployment and old age.

        Pay As You Earn is a general income tax that contributes to all public services. Unless you earn approximately £25,000 employees actually *are* a pull on State resources because you are not a net contributor until you reach that level.

        1. Anonymous Coward
          Meh

          Re: If they won't pay tax, maybe they should pay for infrastructure

          "No, actually. National Insurance is protection from sickness, unemployment and old age."

          Cobblers. If they did proper accounting then the huge unfunded liabilities of the National Insurance Fund would have it shut down. At present it operates at a supposed surplus, but that's because so many benefits aren't actually funded from the NIF, but come out Government's main cash hemorrage pit, the Consolidated Fund. And the big clue to all this is the government borrow around £120 billion a year.

          NI is a tax, same as any other. It all sloshes into the governments hands, they then waste and mis-spend it. Their lack of honesty and competence is the main reason that we still pretend that NI isn't tax, and that the NIF is somehow different to the Consolidated Fund.

  10. b166er

    This is hardly news now, is it?

    Basically, any global corporation with offices in Ireland, Lichtenstein, Bermuda etc are tax-dodgers.

    I reckon there should be a Border Tax rate mechanism, that taxes any money crossing any border.

  11. amanfromMars 1 Silver badge
    Megaphone

    A nest of vipers in our midst ... poisoning all with apparent impunity and immunity from prosecution

    And while we are on the subject, let's be having a clear explanation for this elephant in the room

    Or do one have to invite Anonymous to do what they do best and challenge them to do their worst and crash the system good and proper if the Establishment and governments are in corrupt cahoots with each other and against the global masses?

    I trust in Global Operating Devices that is not too alien a message for y'all to understand. It couldn't be much plainer, methinks.

    1. Anonymous Coward
      Anonymous Coward

      Re: A nest of vipers in our midst ... poisoning all with apparent impunity...

      Being Northern Irish that was a mildly interesting read, but it's not just the politicians its the bigotry, and tribal politics that exist within people themselves e.g. look at the current situation over a flag, talk about not shitting where you eat. Even if we had real politicians with real abilities, what would it change? As long as political parties identify as Nationalist or Unionist the story will remain the same. Civil Servants run this country.

      Oh and also, http://www.ninis2.nisra.gov.uk/public/pivotgrid.aspx?dataSetVars=ds-2303-lh-37-yn-2011-

    2. Dan Paul
      Devil

      Re: A nest of vipers in our midst ... poisoning all with apparent impunity and immunity

      Completely AGreed, Oh Martian One. Anonymous should also direct it's "talents" towards the Koch Brothers, Mitt Romney, Karl Rove, Donald Trump, Bill O'Reilly, Sean Hannity, Rush "Limberger" and many other GreedECapitalists and "Foundations" (tax dodges) that have failed to pay their FairShare. Publicize their FinancialFauxPah's and drop a dime to the Feds with proof of their Tax Evasion Strategies.

      It is plainly obvious that the FatCats and the ElectedRats are in cahoots. They don't even exhibit any shame for their (mis) deeds. Unfortunately, this has been the case since the phrase "Military/Industrial Complex" was coined and nothing short of Revolution will change it.

      1. Someone Else Silver badge
        Go

        Re: A nest of vipers in our midst ... poisoning all with apparent impunity and immunity

        Well, actually, Anonymous has, according to their own admission, already dealt w/ Karl "Turdblossom" Rove.

        Can't wait for the shoe to drop on the next one on your list.

  12. Destroy All Monsters Silver badge
    Thumb Down

    "list of shame"

    What kind of shame is that, then?

    The same one invented by Good Honorable Citizens and People In Power And Need Of Money on which ..err.. "money lenders" were once put?

  13. Doozerboy

    Get rid of corporation tax entirely....

    0% corporation tax - Why not?

    Just tax dividends more highly, and let companies use more of their profits to reinvest in jobs, R&D etc etc.

    1. Chad H.

      Re: Get rid of corporation tax entirely....

      Unless you redefine these payments to sister companies as Dividends, it doesnt solve the problem. Microsoft's divident is paid in the US.

    2. Kevin7

      Re: Get rid of corporation tax entirely....

      For donkey's years there's been a suggestion that you get rid of corporation tax and take a share in profits instead. Say you were taxed at 20% of your profits then benefit from success and then don't tax you as heavily in the lean times. The problem is, there'd be just another new wheeze to show the richest companies in the world weren't actually making any money...

      1. Anonymous Coward
        Anonymous Coward

        Re: Get rid of corporation tax entirely....

        > there's been a suggestion that you get rid of corporation tax and take a share in profits instead.

        Umm, what exactly do you think corporation tax currently is???

  14. Peter Galbavy
    Black Helicopters

    Note that it's VAT that's low in Luxembourg and Corporation Tax that's low in Ireland. A clever company will use everything in it's power to lower it's tax liabilities - this way it can make it's prices lower and/or profit larger, helping it to out-compete the smaller companies that don't have the luxury of multiple national offices.

    I don't agree with this un-level playing field but I do accept that it's 100% legal. All this slating of the companies rather than the tax laws stinks of diversions and conspiracy to me.

    What is you wanted to loosen your ties with the EU and you didn't want to appear to be the party doing it, how would you whip up public opinion enough to seemingly force you to derogate your involvement in the free market or even more radically initiate leaving the EU in some way?

  15. Anonymous Coward
    Anonymous Coward

    Whilst I personally believe such avoidance to be wrong and unethical, the whole issue of ethics here is somewhat trite. It's a legal issue not an ethical one.

    If such actions are not illegal, then the government (this is a politically backed debate) should either quit whining and STFU or change the law.

    If they can't change the law because of yet some more EU bollocks (there's well in excess of 170,000 pages in the acquis communautaire) then they should either STFU or leave the EU.

    Demonising something that is not illegal smells of a revenue raising witch hunt by a bankrupt government which is espoused by the media.

    The government have stoked the fire, now the media will inflame opinion. It may have the desired result in the end, but it's not effective governance.

  16. Anonymous Coward
    Anonymous Coward

    All Microsoft Training revenue goes to Luxembourg too...

    Try to order a course from Microsoft. It goes through Microsoft Sarl in Luxembourg.

    Quelle surprise.

    1. Destroy All Monsters Silver badge

      Re: All Microsoft Training revenue goes to Luxembourg too...

      Because of the 15% VAT? Which is still 15% too high of course.

      Not a surprise at all. I hear taxes are being raised in Luxembourg in 2013.

      1. Anonymous Coward
        Anonymous Coward

        Re: All Microsoft Training revenue goes to Luxembourg too...

        Luxembourg's position but E-Books: Distortion of competition

  17. tkioz

    I'm honestly staggered that MPs are actually doing the right thing for a change... it's about time big multinationals were called on their tax dodging bollocks.

    1. This post has been deleted by its author

    2. Anonymous Coward
      Anonymous Coward

      "I'm honestly staggered that MPs are actually doing the right thing for a change... it's about time big multinationals were called on their tax dodging bollocks."

      The issue though is that is responsible governance is not just about doing the right thing, it's more about doing the right thing in the right way, and for the right reasons. Currently (imo) only 1 of those 3 prerequisites is being met fully, and at least one, not at all.

      The EU is making moves to tackle tax avoidance. However, for those of us voters in Europe who do not want to sell our sovereignty and our political souls to Brussels, this may be well seen as yet another creeping form of federalism.

      Unfortunately the underlying politics here are, in some (or even many) ways, highly contrived.

  18. David Webb

    I just looked at my Windows 8 receipt (I bought online via Microsoft) and it doesn't suggest at all that MS are selling through Luxembourg, it states that it's being sold via MS Germany:

    Seller of Record

    arvato distribution GmbH

    Benzstrasse 5-7

    33442 Herzebrock-Clarholz

    Germany

    So the sale is from Germany but the payments go through Lux? Is that quite legal?

    1. Yet Another Anonymous coward Silver badge

      Yes because got that 100euro DVD you bought, Microsoft Germany had to pay 110euro to Microsoft Luxemburg for that copy, who then had to pay 120 euro to Microsoft Bermuda for the rights to the name.

      You should be thankful that they are prepared to lose all that money to sell Windows to you - it's a public service really.

  19. Why Not?

    Claim vat back against corporation tax?

    Maybe only allow them to claim vat back against corporation tax?

    set the corporation tax at >30%, but let them claim their vat back against the corporation etc.

    If they have no profits they can't claim vat back.

    If imports attract vat then we get 20% of all transactions, UK based companies can claim some of their input vat back. Non UK companies pay 20% on everything regardless

    You can set vat reclaim based on SIC code.

    Yes the transfer price thing has been going on for decades so New Lie could have fixed it but didn't.

  20. Anonymous Coward
    Anonymous Coward

    "The committee has suggested that tax laws need to be changed internationally so that large corporations have nowhere to hide their profits."

    So, you are going to get every country to agree on a set tax rate then? There will be more than a few countries that won't as they like the current system. If Ireland changed its system, it would see those six workers out of a job and then it would repeat for all other companies that do that the same thing. The Cayman Islands also has a zero tax rate. Maybe what the governments of the world need to do, give the companies that exploit tax loopholes exactly what they are paying for; nothing. If the company needs to use the legal system, tell them to sue where their headquarters are. Provide no local tax breaks and if they need to file bankruptcy protection, tell them to file where their corporate headquarters is.

  21. Tanuki
    Go

    Tax-avoidance is both legal and ethical.

    Personally, I commend any and all legal actions, whether carried out by individuals or companies, that reduce their tax-bills. Businesses have an obligation to maximise their shareholder-value and dividends; at an individual level I consider myself to be vastly overtaxed and am happy to spend a few grand (tax-deductible of course) on a good tax-planning accountant every year.

    I'm only glad I don't actually get all the Government I'm paying for.

    1. Yet Another Anonymous coward Silver badge

      Re: Tax-avoidance is both legal and ethical.

      Exactly and it should apply to everyone:

      Why can't I claim back all the food I buy as operating expenses?

      I should be allowed to declare that my home is registered in the Caymens and not pay council tax

      I should be able to pay YAAC-Bermuda for the rights to my name so I make a loss on my salary and claim benefits.

      1. Anonymous Coward
        Stop

        Re: Tax-avoidance is both legal and ethical.

        > Why can't I claim back all the food I buy as operating expenses?

        Because you can't.

        > I should be allowed to declare that my home is registered in the Caymens and not pay council tax

        You can, if you really live there, but trade in the EU.

  22. ukgnome
    Joke

    I bet Apple are wishing they took out a patent on complicated European tax schemes now.

  23. Anonymous Coward
    WTF?

    Tax heavens

    So, politicians are now shocked about something the large corporations and the rich have doing for decades with their approval? Whats next, pigs flying?

  24. J@TQD

    Do what India is doing to them ...

    The UK Government should follow India's lead and introduce Withholding Tax deduction. In India any foreign company selling into India has to pay tax equivalent to 50% of the corporation tax payable in their home country. This means that all revenues are taxed successfully.

    The way that India polices this is to put the onus on the home company to deduct the tax when paying the invoices of the foreign entity.

    I am sure the UK Government can make this happen in the UK.

    Currently India has forced Microsoft etc to pay hundreds of millions of dollars in 'avoided' tax. The consider this to evaded tax as the companies have intentionally looked for loopholes.

    So when Microsoft UK pay Microsoft Ireland/Luxembourg or Starbucks pay their foreign entity they will need to deduct this tax from the invoice and remit this amount to the UK HMRC.

    It has not stopped investments into India and I am sure it will not here. The problem in the UK is that we give them all the low tax we can and yet they see fit to abuse the system.

  25. Paul Hovnanian Silver badge

    "50% of the corporate tax payable in their home country?"

    So I sell to India through an independant distributor located in the Bahamas. Zero tax owed.

    "I am sure the UK Government can make this happen in the UK."

    The Bahamas, a member of the British Commonwealth. And the UK government can't even lean on them? Good luck with all of the other tax havens that can just tell HMRC to bugger off.

    In my opinion, the best tax system is one that operates on events within your borders and ignores international corporate structures. The latter are beyond your jurisdiction, so there's no point in wringing ones hands over them. Implement a sales tax. When goods change hands within your jurisdiction you collect a percentage.

    1. Anonymous Coward
      Anonymous Coward

      > When goods change hands within your jurisdiction you collect a percentage.

      The problem with this is the WWW.

      If you buy something from another country and it is delivered to you, where did that transaction actually take place? It could be in the country of the guy selling to you, or the country in which you bought it.

      You can't pay tax in both places because that would be unfair. So a rule has to be created to define where it happened. It is easier to do that in the company's location: one central place rather then the beurocratic nightmare that would occur if a country had to handle all the tax situations in all the countries that they sell to. So you then locate the company notionally in the country with the best tax advantage, which is what is happening, in a manner of speaking.

  26. Keep Refrigerated
    Trollface

    Oh good...

    So is the Great Derpy British public going to boycott Microsoft products such as their OS and preinstalled hardware like they stoically did with Starbucks? No?

  27. Yet Another Anonymous coward Silver badge

    Should extend to everyone

    So if I work for Microsoft and get paid 50p/hour (call it training/apprenticeship so minimum wage doesn't apply)

    Then I pay no NI, get supp benefits, council tax discount, free school meals, etc

    Once a year I fly to Guernsey and do a REALLY hard days work for Microsoft Guernsey Inc for which I get paid say 50,000, and I pay local (0%) tax on. I have a Guernsey credit card to pay for all the little toys that I need to survive the other 364 days of grind at my 50p/hour job.

    1. mrfill
      Happy

      Re: Should extend to everyone

      I never realised Bernie Ecclestone posted on this forum

  28. southpacificpom
    Devil

    Quick way to solve this

    Any company that does not pay the correct tax for sales made should not be allowed to sell their products in that country.

    1. Oninoshiko
      WTF?

      Re: Quick way to solve this

      did you not read the article?

      "Fellow "tax-avoiding" firms Amazon, Google and Starbucks have all told UK officials that they follow international tax laws, but MPs have said that while their actions might be perfectly legal, they're also immoral."

      That means they are paying the correct tax, which is to say "what is required by law." If said MPs are not happy with that amount of tax, the correct response is to change the law. Once the law is changed such that the correct amount if tax is what said MPs want, MSFT/GOOG/AAPL/etc. will began to pay it.

      If they are not paying a "moral" amount and cannot be charged with a crime, it is the MPs fault for writing immoral laws.

  29. scottyman
    Stop

    I don't really have a problem with any of it - as long as VAT is being paid and recognised, where is the issue?

    This aspect is already covered in European tax law, and I agree totally with some of the earlier comments about a corporation's duties to it's shareholders to maximise the profits.

    There isn't a moral argument either, this is invented bollocks - to whom is the corporation's moral obligation? UK.gov? I don't think so. Once again it's to it's shareholders.

  30. silent_count

    Gotta love the pollies.

    Under Australian law (I'm not intimately familiar with English law but I can't imagine it being all that different) the director(s) of a company have a legal obligation to achieve the best outcome for their company. So when you hear your politicians (ours do the same shit too) ranting about legal but immoral behaviour by companies, just remember that the companies in question are obeying the laws which were written by... you guessed it, the very same politicians who are doing the ranting.

    Incidentally, when was the last time you heard of a politician, of any political flavour, voluntarily paying more taxes in order to comply with some imagined moral imperative?

  31. Tony Paulazzo

    immoral

    Not moral; inconsistent with rectitude, purity, or good morals; contrary to conscience or the divine law.

    I'm pretty sure corporations don't act for the good of anything other than their own existence, ergo, by their own nature are already immoral. Much like banks.

    Immoral liars (or professional politicians if you prefer)... misdirection... bullshit - what's the real story here? Can't believe the papers are parroting the politicians... Black is white, dogs lying with cats, the 21st is fast approaching!

  32. despairing citizen
    Big Brother

    Pot to Kettle

    "MP's said......that while their actions might be perfectly legal, they're also immoral."

    As opposed to twisting the letter of the expenses rules into a pretzel to claim as much money as possible from the publc purse (legal, bot imoral) or fiddling their expences claims (both illegal and imoral)

    Personally I don't really expect many CFO's to take any notice of the moralility lectures from 650 members of an organisation that has a severe credability gap when it comes to probitity in public office, especially when membership of that organisation is based on winning a popularity contest in which the majority of eligible voters either didn't vote, or voted for somebody else, and have no way of removing unfit members that, for example, go off moonlighting on reality TV shows, rather than doing the job their paid (along with expenses) to do.

  33. Nelbert Noggins

    Sorry, but as I said in the previous tax minimisation article...

    Nobody in Government can try and name call multinational companies for minimising tax through legal means after the "it was within the rules" excuses that Government ministers pulled when they knowing made immoral claims. This is more "seen to be doing something" and deflect from the root cause.

    I'm not going to say that sorting out Global tax laws is a simple task, but trying to whip up public backlash because the laws themselves are broken is just "seen to be doing something" pantomime at it's worst. None of the companies have broken the law, just used them to their advantage in a way the Government didn't expect.

    In the same way that Gordon Brown as PM couldn't blame the previous Chancellor for the financial screw up, the Government can't blame companies and individuals for operating inside the law to their own advantage. Doing so would highlight how broken the system and previous decision were,

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