back to article US taxman joins UK politicoes on hunt for Amazon cash

Amazon is fighting the US taxmen over a $234m unpaid bill. The Internal Revenue Service (IRS) told the online superstore in November that it owed taxes in 2005 and 2006, and also challenging its tax deductions, according to a court filing seen by Reuters. But Amazon has countered that the IRS is overestimating how much its " …

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  1. Beau
    Facepalm

    Nothing New!

    Nothing new here, just the USA's way of running things.

    The poor pay taxes and stay poor, while the rich get richer, so?

    1. Anonymous Coward
      Anonymous Coward

      Re: Nothing New!

      Same in the UK too. It's basic neo-classical economics and it's the way the world is (for now). We are fed the lie that we need this disparity and we swallow it. The elite wish to keep themselves in power and the poor subjugated. Heaven forfend that there should ever be social mobility, democracy or accountability.

    2. Anonymous Coward
      Anonymous Coward

      Re: Nothing New!

      At least in the US you can be born poor and then end up as head of state. In the UK that is decided by birth.

      1. The First Dave
        WTF?

        Re: Nothing New!

        Citation Needed.

        1. Grumble
          FAIL

          Re: Nothing New!

          @The First Dave Well the Queen IS Head of State. At the moment if she dies and Prince Charles succeeds HE will be Head of State and he was born to be.

      2. Anonymous Coward
        Anonymous Coward

        Re: Nothing New!

        AC 12:27

        >At least in the US you can be born poor and then end up as head of state.

        aahhh Ha hahahahahahahahahaha... ahhh, <sniff> haa haaaa.

        Yeah, right. Nice one mate!

      3. streaky
        WTF?

        Re: Nothing New!

        "At least in the US you can be born poor and then end up as head of state. In the UK that is decided by birth."

        * but you have more chance of winning the lottery and an 8 year term does horrible things to institutional memory - everybody has to relearn everything ever 4/8 years.

  2. Thomas 4

    A question of worth

    To Mr Taxman: "These patents and trademarks? They not really worth the paper they're written on. Mere trifles, pay them no mind."

    To somone looking to license them: "Prepare to remortgage your company HQ."

  3. frank ly

    Ninja Accountants

    " ...that price comes off the UK subsidiary's tax bill as an expense, .."

    No. It comes off the profit figure, hence leading to a proportionate reduction in the tax bill.

    Also, the US parent would see a profit of 50p for every box sold (minus selling expenses, whatever they could be made to be). The cost of the boxes to the US parent would be booked as an expense hence the total corporate books would show expenses of £1.50 and income of £0.5 (= expense of £1 plus whatever 'buying expenses' they can dream up). So, that expense can be moved to anywhere convenient for the company. Mix that in with licensing deals involving subsidiaries in a different country and no single tax authority can follow what is really happening.

    Welcome to the money merry-go-round, where profit and loss are fluid, complex and sometimes imaginary.

    1. Anonymous Coward
      Anonymous Coward

      Re: Ninja Accountants

      Also, the US parent would see a profit of 50p for every box sold (minus selling expenses, whatever they could be made to be).

      In reality they wouldn't be sourcing the boxes from Amazon US ... the original source of the boxes (and thus the destination of the "profit" on them) would doubtless be Amazon somecountry where somecountry is a place that is attempting to start up a local cardboard box industry and thus will be offering preferential tax rates to companies that wish to deal in cardboard boxes.

    2. Pellinor
      FAIL

      Re: Ninja Accountants

      Rubbish. Income and profit are not the same thing. US parent gets income of £1, so the overall expense booked in the group of 50p. Which is, not entirely coincidentally, the actual cost of the box.

      Shock, horror, Amazon gets to deduct the cost of something it bought when working out its tax bill! Stop the press!!!

      1. frank ly

        @Pellinor Re: Ninja Accountants

        I never said that income and profit are the same thing. Try reading my post - see the mention of expenses? The article (and the post) are not about how to calculate operating profit, they are about something else. Try reading the article to see if you can figure out what it is.

        1. Pellinor

          Re: @Pellinor Ninja Accountants

          @ frank ly: I read the article, and your comment, carefully.

          You say that in the total company books (by which I assume you mean the consolidated accounts) the expense would be £1, because there'd be expenses of £1.50 (presumably 50p in the US and £1 in the UK) and income of 50p. That is of course bollocks, to use the technical term, as the £1 cost in the UK would be £1 of income in the US. You've confused yourself with the 50p profit you mentioned earlier.

          The article is doing this to illustrate transfer pricing, suggesting that a 100% markup might be applied even though it's a bit steep, and thus save UK tax because the UK's £1 expense is too high: if UK tax rates are higher, then saving tax on £1 in the UK is worth paying tax on £1 in the US. That's basic transfer pricing.

          What you've done is suggest that transfer pricing can somehow generate expenses out of thin air: the 50p actual cost has magically turned into £1 of tax deduction. That doesn't happen: all you can do with transfer pricing is shift profits around a group. You mention other "buying expenses", but again, you can't magic them out of nothing without having some profits arise elsewhere.

          Except of course HMRC is very hot on such things and would come down like a ton of bricks on anyone who tries a 100% mark-up on low-value high-volume goods, and extra fees for no good reason. It's one of their big earners: they don't bother checking every year, they just come along every five years or so, and if they're not happy with the intra-group prices they reopen earlier years and charge penalties and interest on the extra tax.

          Or at least, that's what's happened in my 15 years as a Chartered Tax Advisor advising international groups on corporation tax, transfer pricing, IP, and financing. Every group I've come across has been very nervous of HMRC or the IRS coming along, and taken pains to use reasonable prices. Top end of the "reasonable" range, maybe, but with a tax provision held back in case HMRC challenge them.

          Perhaps my experience is untypical - what's yours been like?

      2. Yet Another Anonymous coward Silver badge

        Re: Ninja Accountants

        >Shock, horror, Amazon gets to deduct the cost of something it bought when working out its tax bill!

        Or in this case, Amazon-Caymens owns the one-click patent and amazon UK and USA get to pay it $1 everytime somebody orders something.

    3. Arctic fox
      Headmaster

      @frank ly Re: "Ninja Accountants" It is interesting that the shear scale of this kind......

      ........of behaviour is (relatively) new. However, companies using those kinds of shenanigans are not anything new qualitatively (so to speak). We all remember what a huge success the first Alien movie was (total world wide takings by 2004 had hit $185,000,000 almost 17 times what the film cost to make) and certainly such luminaries as Sigourney Weaver and John Hurt were at the outset feeling pretty pleased with themselves because they were on a percentage. To their utter astonishment and considerable fury Twentieth Century Fox claimed that the film had (when all extraneous expenses had been taken into account) almost made a loss. They had unfortunately not negotiated a percentage of the gross turnover but of the profits. Hence today there is not an actor in the profession who has the clout to be on a percentage who does not insist on a percentage of the gross. Fox' fairly shameless attempt to do an end run round the IRS had ended up robbing the very actors who had contributed to much to the film's success in the first place. The sheer scale of these practices today however are a wholly different level of challenge to society.

      1. Fatman

        Re: @Artic fox

        I believe that Hollywood has a term for those shenanigans - creative accounting.

      2. Arctic fox
        Happy

        "It is interesting that the shear scale of this kind......" I hope I may be forgiven for.....

        .........contributing another story from film history of the same period. When a certain Mr Lucas had persuaded Alec Guinness to take on the role of Obi-Wan Kenobi in the original Star Wars film he discovered at a vital point in the project that he was running out of "cash up front" and was forced to beg Sir Alec to accept a percentage of the gross instead - to which Sir AG most unwillingly agreed (a story that he told against himself many times afterwards) . The rest is history as was Sir Alec's very comfortable retirement.

      3. John 62
        Headmaster

        Re: @frank ly "Ninja Accountants" It is interesting that the shear scale of this kind......

        "Fox's", because it is a proper noun.

  4. This post has been deleted by a moderator

    1. kbb
      Joke

      Re: Corporate tax dodgers

      None, but MPs would be able to award themselves that little bit higher pay rise.

      1. Fatman

        RE: Re: Corporate tax dodgers

        Not quite correct, as I think you left out something, I corrected your comment below:

        None, but MPs would be able to award themselves that little bit higher pay rise and a larger expense account.

        FTFY

    2. A n o n y m o u s

      Re: Corporate tax dodgers

      It's the same for us - our UK companies make profits abroad (probably paying little or no tax) and bring them back to the UK - you can expect to have it both ways.

      1. RivieraKid
        FAIL

        Re: Corporate tax dodgers

        You must be new here. The "profit" never comes back to the UK, even with large UK companies. It's all funnelled offshore to holding companies in friendlier jurisdictions like the Cayman Islands, Bermuda, and Switzerland.

        1. Anonymous Coward
          Anonymous Coward

          Re: Corporate tax dodgers

          Actually the profit does come to the UK, in the form of management charges. This is because the lax regulation of the CIty makes the UK a top destination for financial fraud.

    3. ScottishYorkshireMan
      Unhappy

      Re: Corporate tax dodgers

      It would be exactly what it is now. If every company in the land paid all the tax that was due, the country would be no different, with the exception that politicians would have awarded themselves their 50% pay increase.

      Do not underestimate the capabiltiy of politicians for pi$$ing money out of the UK's coffers.

    4. Crisp

      Re: how much our personal tax could be cut

      If we taxed them properly, then you could probably cut the tax rate of the poorest amongst us to 0%

      1. Anonymous Coward
        Anonymous Coward

        Re: how much our personal tax could be cut

        You could, but the tax allowance is already pretty high and the Lib Dems have pushed the government to increase it.

        But what use is a tax cut if you can't get a job?

      2. Anonymous Coward
        Anonymous Coward

        Re: how much our personal tax could be cut

        @Crisp

        I'm fairly certain that a good proportion of the 'poorest' people, with incomes at or below the Lower Earnings Limit for PAYE, and qualifying for housing benefit, child tax credits et. al, probable have a negative tax rate. This may even be the case if you take VAT into consideration.

        Whilst I, in my white collar skilled job, single income above the recent Child Benefit threshold household, get shafted with every change to the tax system.

        OK, I still earn a lot, and I know I am more fortunate than people who have lost their jobs, but my pre-tax income has gone down in the years since 1998, and I've probably lost £1K a month of my post-tax income through reduction and tax changes. Try removing >20% from your household budget without moving house, and you may understand why the squeezed middle are squeeling.

    5. Anonymous Coward
      Anonymous Coward

      Re: Corporate tax dodgers

      Your personal tax bill will be exactly the same, you'll just pay more for stuff you buy off of Amazon. Remember companies don't pay tax, people pay tax, either the customers or the workforce.

  5. A n o n y m o u s

    Perhaps it would just be better to charge a higher rate of VAT - companies cannot (so easily) avoid it and it's based on what people actually spend - not so much on what they earn or any profits they make. For instance would you be happy to pay a higher rate of VAT on everything you bought if income tax were reduced.

    The problem is countries want to attract companies to set up there - why would a company set up in the UK and pay 20-odd percent corporation tax when it could setup in Ireland, Netherlands, Switzerland etc. and pay much less - with the friendly EU it's made all this possible.

    1. dogged
      Facepalm

      1. Companies don't pay VAT. At least, VAT-registered ones don't (which is everyone with a turnover - not profit! - of more than about £10K/year). VAT is a tax that Government outsources to companies to collect from us, citizens.

      2.No, I would not be fucking happy. VAT is a regressive tax which hurts low incomes much harder than it hits high incomes.

      What a stupid, stupid idea.

      1. RivieraKid

        A tiny nitpick - companies may not have to pay VAT on goods they purchase to then sell on, but they do however have to pay HMRC VAT on services that they provide.

        For service based VAT registered companies (like my own limited company), HMRC operates a VAT flat rate scheme whereby you invoice the full prevailing rate of VAT, but you pay to HMRC a lower rate of VAT to offset the fact that you are still expected to pay VAT on any supplies you purchase.

      2. Anonymous Coward
        Anonymous Coward

        1. Yes they do - they effectively pay VAT on their profits. They charge VAT on their sales - reclaim VAT they pay on purchased and pay the difference to the government.

        2. Higher income households spend more.

        But you are happier with a tax that corporates can easily dodge instead of one that would be much harder.

        1. dogged
          FAIL

          @AC -

          1. That's nonsense. Charging VAT on sales and reclaiming purchased VAT would be zero sum if the two were levied at the same time but since they're not, the cashflow actually makes a VAT registered money in the long term.

          2. Companies don't pay income tax. And if you increase the VAT on say, petrol, that leaves somebody on £5K paying exactly the same tax as somebody on £500K - it's hard to drive one hundred times as far or eat one hundred times as much or watch one times more films or whatever.

          Stop kidding yourself.

          1. Tom 38 Silver badge

            dogged: VAT is only zero sum if you receive the same or less in VAT on sales than you expend on VAT in purchasers. Companies that spend more than they sell don't tend to last that long. Therefore, successful companies do pay VAT.

            VAT is a tax on consumption. Someone on £5k only pays the 'same tax' as someone on £500k if they consume the same amount. People on £500k do tend to consume more - the Jag uses more petrol than the Mini, but it is still a regressive tax, because even though the wealthy consume more, their proportion of the overall consumption is dwarfed by the (meagre) consumption of everyone else.

            The main issue is the tax code, which has grown massively since the mid 90s. There are far too many loopholes and special conditions that the top few percent no longer pay their fair way, and companies (legally) avoid the majority of their taxes. Raising VAT would not help, simplifying and rewriting the tax code would.

            1. dogged

              Tom 38: VAT is exactly zero-sum for businesses because you reclaim what you spend and pay out what you charge, minus interest you can shuffle on funds held for repayment.

              1. dogged
                Windows

                The downvoter has never run a business, I see.

                1. Roland6 Silver badge

                  I down voted because I do run a VAT registered business...

                  VAT isn't zero sum for business.

                  Some export oriented businesses get to reclaim more VAT than they make from sales...

                  Services business'es ie. the typical contractor, will invoice for more VAT than they paid out for supplies, hence will pay VAT.

                  The only business for which VAT is zero sum is a business that buys and sells at the same price ie. no mark up; and that is a business that won't be in business for very long...

      3. tony
        Happy

        What a stupid, stupid idea.

        Companies don't pay vat they also don't pay corporation tax (even when they don't jump through hoops to avoid it)

        The only person who pays corporation tax (for the entire chain) is the end customer (or the staff at the company in the chain which then effects how much they buy).

        Whether it'll be possible to scrap corporation tax and for all companies in the chain to adjust their prices 'fairly' probably wouldn't happen. But then if a company in the supply chain starts gouging it's customers then a competitor could jump in.

        1. Sam Liddicott

          Re: What a stupid, stupid idea.

          Thank-you.

          So few people understand this.

          Shareholders also pay by means of reduced dividends - or in other words pensioners pay in reduced pension (compounded)

      4. Pellinor

        Nope, the UK threshold is £77k a year, not £10k. And it's only taxable supplies (which admittedly is most turnover).

        And companies do suffer from VAT. You have one customer with sales of £75k, no VAT to charge, you keep £75k. I have two identical customers, sales total £150k, I have to pay £25k of that out in VAT (I can only bill £125k + VAT maximum, or they'll go to someone unregistered for the cheaper price). If the cost per customer is the same, I've lost £25k off the bottom line.

        1. dogged
          Stop

          But you can register at any turnover over £1500, I believe. And most do.

          And your example is reasonable IF you're not selling to another VAT registered company (in which case, they don't care about the VAT surcharge) AND if your raw materials/labour/contractors/bills are not subject to VAT. Which would make you pretty much unique.

          1. Pellinor

            Which would make you pretty much any small service business with a few employees selling to the general public.

            Gardeners, window-cleaners, IT consultancies, accountants, builders, decorators, plumbers, personal trainers.... not all that unique, really.

    2. Mage Silver badge

      More VAT?

      No, that doesn't work, only the consumer pays VAT. Schools etc count as Consumers.

      Purchase Tax as per 1940s to when VAT came in was calculated on the Wholesale price. Retailers often displayed the price ex Tax. Consumers largely paid it.

  6. Kevin Johnston Silver badge

    Financial merry-go-rounds

    It's good to see that the investigations into the antics of Enron et al have produced a system where finances are much better regulated and all dealings are transparent and above reproach.

    NOT

  7. Ivan Headache

    What about Starbucks Swiss coffee beans?

    Are thery going to look at that aspect too?

  8. jai

    boycott!!!

    Right, that's it!!

    From now on I'm going to buy all my electricals from Comet... ah....

    Well i'm going to get my music from HMV then.... oh....

    Well damnit, at least i can get my DVDs from Blockbusters.....

  9. Magister

    Hypocitical

    The MPs can bitch and posture all they like; but they are the ones that passed the various Acts that define the tax rules; the companies are simply using the rules to their advantage.

    Worse, the MPs are among the very first ones to make use of any loopholes in the tax laws.

    When they finally do something about the mess that they (or their predecessors) have created, then I might have some interest in their views; until then, they can winge all they like and I still won't care.

    1. johnnymotel

      I'm not so sure it is that easy to create tax laws that are totally watertight and anyways who knows what people were involved in the law making, vested interests perhaps.

      The other problem is the not so level playing field, the large corps with international connections can get away with far more than simple local based companies. It could be argued that the recent bankruptcies on our high streets was in some part created by the power of online stores being able to out price the high street by reason of their lower tax payments.

      I'm certain that Mr Bezos has not entertained the thought that once he has eliminated the biggest high street names, he can begin to ramp up the prices on Amazon. Then the profits will become truly enormous and without any hindrance via the tax laws.

      I'd like to ask everyone here, where would you rather see this money? In the Caymans serving a very small % of the worlds population or in your country being used for your benefit. Even if there are losses on the way it's money we never had in the first place.

  10. cheeryAllyjspurs

    Its so easy nowadays to vote with your hard earned. There are plenty of UK based online retailers that can compete with Amazon on price and pay all their taxes here, just do some searching about instead and hurt these big companies where they take real notice on their balance sheet.

  11. H in The Hague Silver badge

    Re Anon 9:53 Tax rates

    > why would a company set up in the UK and pay 20-odd percent corporation tax when it could setup in Ireland,

    > Netherlands, Switzerland etc. and pay much less -

    Corporation tax rates:

    Ireland: 12.5% (http://www.revenue.ie/en/tax/ct/index.html)

    Netherlands: 25% (http://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/winst/vennootschapsbelasting/veranderingen_vpb_2012/tarieven_vpb_2012)

    Zwitserland: 21.17% (http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx)

    To get a really good deal you have to go closer to home (and outside the EU):

    Isle of Man: 0%

    Jersey: 0%

    Guernsey: 0%

    > with the friendly EU it's made all this possible.

    Not a lot to do with the EU as international trading (esp. with non-EU countries such as Bermuda) is also governed by specific tax treaties. Furthermore, Switzerland is not in the EU. And the EU means you and I can trade, in both directions, between NL and the UK with essentially zero hassle. (Pity my trading partners' UK banks charge them a lot more for receiving GBP than my local bank charges me for sending them.)

    Apols for undermining your argument with boring facts.

    Cheers,

    H currently in The Hague

    (who doesn't pay corporation tax but income tax which bites rather more in NL than in the UK)

    1. Anonymous Coward
      Anonymous Coward

      Re: Re Anon 9:53 Tax rates

      Probably should have been more specific - seems certain regions in Switzerland offer much better deals than that - we have had quite a few calls from their Department of Trade suggesting we consider moving for the skilled workforce, access to local markets and of course big tax incentives. Some countries also have tax rules that make things like Google's tax shuffle possible / easier - i.e. must be some reason they chose NL.

      1. Silverburn
        Coat

        Re: Re Anon 9:53 Tax rates

        seems certain regions in Switzerland offer much better deals than that

        Kanton Zug, to be specific. Lowest corp and personal tax in CH.

        ...Mine's the Mink Sable.

    2. Anonymous Coward
      Anonymous Coward

      Re: Re Anon 9:53 Tax rates

      Think the point was when you get one country that charges a lower rate it will encourage companies to have their HQ there.

  12. Edward Clarke

    clarke@cilia.org

    Chump change by amateurs. For truly wonderful and amazing accounting, you need only go to Hollywood, home of the MPAA. It seems that the actor who played Darth Vader in "Return of the Jedi" - the fifteenth highest grossing picture of all time - still isn't getting paid residuals because the picture still isn't profitable.

    http://www.techdirt.com/articles/20110912/13500315912/hollywood-accounting-darth-vader-not-getting-paid-because-return-jedi-still-isnt-profitable.shtml

  13. Triggerfish

    @cheeryAllyjspurs 10:48

    I am actually surprised that some companies aren't advertising this.

    If I had been running Costa coffee or a small local coffee shop, the first thing I would have done is plaster a large sign in my window saying "We pay more tax than Starbucks".

    1. Anonymous Coward
      Anonymous Coward

      Re: @cheeryAllyjspurs 10:48

      You better be sure it's true then and if Costa has branches in the US perhaps they would seek to minimise their tax obligations 'there'.

    2. Anonymous Coward
      Anonymous Coward

      Re: @cheeryAllyjspurs 10:48

      Perhaps all companies should have to clearly state how much tax they have paid as a flat figure or perhaps as a percentage of their UK turnover. Probably is it's a bit like HMV vs Amazon - HMV were making losses so would have been paying no / little corporation taxes - so no different to Amazon.

  14. Anonymous Coward
    Anonymous Coward

    I don't give a sh*t about the technicalities.

    If I have to pay tax, then every entity should be paying their share.

    Someone who purposefully avoids paying their share is a scum sucking leech and doesn’t deserve to breathe god’s clean air!

    Avoiding tax doesn't make you clever, it makes you lower than a snakes belly and demonstrates that you are not part of society; you are no better than the 10 year dole claimants the Tories hate so much.

    Those found to be avoiding tax should be made an example of! Instantly fine them half of their personal wealth, no matter where it is.

    1. Sam Liddicott

      all fancy talk

      It is the "technicalities" that you don't care for that define what "their share is" - tax is about technicalities; which is why we need accountants to make sure are paying the right tax.

      George Osbourne was paying the right tax, we know that for sure because someone who could understand the rules verified it for him.

      Are YOU paying the right tax? no doubt you think you are paying YOUR SHARE which is the point; so do these guys...

  15. The BigYin

    Buy local

    Maybe we need a campaign like "Patriots pay taxes", "Proud to pay my tax" or something.

    Local traders could display it in their windows (or their websites) and the likes of Amazon, Google, Starbuck, Vodafone, Tesco etc wouldn't.

    Of course, it would be better if MPs tightened up the tax laws to negate such chicanery in the first place.

    1. bitwise

      Re: Buy local

      A traffic light system would work - people could affix the stickers to ads by the companies.

      The data would need to come from an independent site somehow..

    2. Tom 38 Silver badge

      Re: Buy local

      This way to protectionism...

      1. Richard 120
        Happy

        Re: This way to protectionism...

        Now Tom, I've said this before, protectionism is okay, so long as none of the other countries are doing it.

      2. The BigYin

        Re: Buy local

        Protectionism? Who ever mentioned that?

    3. Silverburn

      Re: Buy local

      "Proud to pay my tax"

      oh come on...*nobody* is proud to pay tax. Everyone resents it. There is never too little tax. If they offered a 1% reduction in NI or PAYE, you'd be all over it quicker than a zombie in a mensa convention.

      1. The BigYin

        Re: Buy local

        "oh come on...*nobody* is proud to pay tax. Everyone resents it."

        Newsflash - some people don't mind paying. I enjoy having roads, the NHS etc. Makes life that much easier. I am quite happy to pay my fair share (we can argue about "fair" if you like).

        The thing I resent is our MPs spunking my cash into their pals' wallets through tax-avoiding PFI deals. All PFI deals need to stop. Now.

  16. Anonymous Coward
    Anonymous Coward

    Idea?

    Stop taxing income (for people and companies). So that's no taxes on profit etc.

    Only tax consumption. So something like VAT on *everything*.

    Subsidiary buys a service/item from parent? Tough shit, pay tax on that.

    You consume someone's service (e.g. an employee's work). Tough shit, pay tax on that.

    Give them a bonus? Tough shit, pay tax on that.

    Buy a house? Tough shit, pay tax on that.

    I might be over-simplifying things; but surely a tax on consumption makes some of these dodges much harder?Hmm....I guess they'd just sell things to subsidiaries at a loss and thus evade tax that way. :(

    1. Kevin Johnston Silver badge

      Re: Idea?

      or...

      Sales within a corporate structure are at cost. If it is a purely internal product (IP or suchlike) then the taxman sets the cost and hence value for licencing.

      1. Anonymous Coward
        Anonymous Coward

        Re: Idea?

        That could also work. But you can be sure the companies would simply fiddle the books to make the cost seem higher. Much easier just to tax their consumption.

        Want to pay less tax? Consume less. Dear god - it sounds like a green policy!

        1. bobbles31

          Re: Idea?

          Why not simply make licensing subject to vat/import duty?

  17. Silverburn
    Flame

    Groan...

    ...once more, this time with feeling:

    Avoidance != Evasion

    Frankly, the sour grapes about the whole thing boil down to two things:

    - You didn't think about using the same scheme yourself

    - You didn't think about taxing the same scheme yourself

    Think it's unfair? Campaign for the rules to be changed. Also campaign for bigger harbours, since all the international Corps will be exiting these shores the moment it comes it effect.

    1. Anonymous Coward
      Anonymous Coward

      Re: Groan...

      Avoidance = Evasion x better PR

      "Also campaign for bigger harbours, since all the international Corps will be exiting these shores the moment it comes it effect."

      So what - with all the evasion they engage in, they provide little to the local economy. The people are will still be here, they still need goods and services; so having UK based companies supply those (and pay their taxes) would be to the betterment of the UK.

      1. BioPeek
        Devil

        Re: Groan...

        In NZ they have a flat rate tax -- NO ALLOWANCES.

        From memory, people got around this by having trust funds. It was amusing to be asked if I wanted to pay my rent in cash, via an envelope into the landlord's hand or via cheque to the trust fund... no prizes for guessing whic was cheaper.

        Simplfy the taxation system and you will increase tax yield because it removes the (deliberate) inherent complexities and thus remove the wriggle room to find the loopholes.

        The poor pay more tax as a proprotion of income -- direct and indirect taxes -- than the rich. Remove VAT "trading" options from companies, caused by the perverse fiddling of who did what, when and with whom in regard to perceived value added to goods and services. Change this to a fixed small rate applicable and payable to all the stages of the circulation and collection cycles. The rich use their VAT registration (their companies and businesses) to acquire goods and services and offset and transfer their liabilities to the end-payer (the real tax payer, those who are PAYE tax payers). Companies negotiate with HMRC about their taxes, particulalry VAT! Something Mr/Mrs/Miss/Ms Bloggs cannot.

        Dump the "dividend paid" and "commercial loan" tax exemptions and loopholes for shareholders and companies -- its become a way of fiddling income and should be treated the same as salaries and wages. A single flat rate system is the fairest and most easily administered.

        In short, the only people/entities who suffer will be accountants and management consultancy companies (Goldman Sack's, et al anyone?).

        1. Pellinor

          Re: Groan...

          Your recommendations are pretty much how the system works already.

          I'm not sure what you mean about VAT "trading" options - very little about VAT is optional. The VAT paid by a company is a slice of the value added, which is determined by what you receive from a third party for your supplies less what you paid third parties to do it. No "perceived" about it. It happens at all stages of the cycle, too. And most of the time you have things like staff costs with no VAT to recover, so your effective rate of VAT on the value you add is much higher than 20%.

          Mr Bloggs can negotiate with HMRC about taxes just as much as any company can. Nearly every negotiation with HMRC that I've been involved in is an examination of what actually happened: the ones about how the tax rules should apply to the transactions are relatively rare. The reason companies negotiate more than individuals is that they do more stuff, so there's more subject matter to discuss. Tax deduction at source makes most individuals' tax affairs very clear and simple compared to those of companies.

          By dividend exemption, I presume you're referring to lower rates of tax on dividends when received by individuals. Those just compensate for the fact that tax is levied twice on the same profits: once in the company, and again on the dividend. Until a few years ago the end result was pretty balanced either way; now with lower corporation tax rates dividends are usually better, but not always.

          Loans are very hard to exploit, especially for individuals - ever heard of s455 tax? It's practically a penalty system.

          Rule 1 of fixing a system: find out how it works now. You might be surprised.

          You're right that simplification does make things fairer, but you can't take it too far or you end up making them unfair again - like your NZ trust funds. It's like a chaotic system: even where the rules are simple, they can have enormously complex consequences. The UK system is too complex now, but flat taxes bring a host of anomalies.

      2. Silverburn

        Re: Groan...

        @ AC

        So what - with all the evasion they engage in, they provide little to the local economy

        Corp tax doesn't go to the local economy either.

        Neither does the PAYE and NI the employee pay, nor does the Corp NI on those employees. Those go to HMRC. The government makes plenty from indirect taxation of these orgs, and corporate tax is a mere topup.

        Only the rates/council tax (and possibly rent for council owned buildings) and the retail outlet of said org contribute locally.

        people are will still be here, they still need goods and services; so having UK based companies supply those (and pay their taxes) would be to the betterment of the UK.

        Whether a company is international or UK based, the majority of revenue comes from indirect taxation, and the creation of jobs and thus a local economy. Ask Sunderland how much it would like Nissan to go home, which it would consider if you bumped up corporation tax.

        Also, read this:

        http://www.theregister.co.uk/2012/11/25/tax_and_tech_biz/

        1. NumptyScrub

          Re: Groan...

          quote: "Ask Sunderland how much it would like Nissan to go home, which it would consider if you bumped up corporation tax."

          As opposed to Longbridge, which might well like the idea of restarting the Rover factory once we have a demand for automotive production with the withdrawal of Nissan? Are jobs in Sunderland inherently more or less important than jobs in Longbridge?

          Every single multinational that provides goods or sevices to the UK, can be replaced with a national company that supplies those goods or services. It may take a little time to get up to speed, but the demand is already there. Comet goes tits up so Dixons rakes in the sales, it's the same thing.

          If companies don't want to trade in the UK that is their choice; the demand for products and services won't magically disappear, and the free trade options inside the EU mean that we can always choose to purchase across borders if we wish, or if local supply is not up to the demand. Demand is related to price, of course, but it is also related to supply; the loss of several companies in one segment just means that there will be a lucrative market for any replacements, or the alternative option where we find out we never really needed the product in the first place, and that the original demand was being artificially inflated.

          It's like climate, there are several negative feedbacks as well as the positive ones, and people seem happy to skew perceptions one way or the other for their own agenda. I am by no means immune to that myself, hence the post above :)

          1. HandleOfGod

            Re: Groan...

            "As opposed to Longbridge, which might well like the idea of restarting the Rover factory once we have a demand for automotive production with the withdrawal of Nissan? Are jobs in Sunderland inherently more or less important than jobs in Longbridge?"

            But what makes you think that the loss of Nissan production in Sunderland will mean that there is suddenly a demand for Rover cars? What's to stop the shortfall in supply simply being made up by increased imports from elsewhere? And that would be far worse - buying a Nissan or Toyota made in the UK ensures the vast majority of cash stays here and goes to supporting jobs here. Those workers then support other aspect of the local economy with their own spending and consumption.

            "Every single multinational that provides goods or sevices to the UK, can be replaced with a national company that supplies those goods or services. It may take a little time to get up to speed, but the demand is already there."

            Speaks someone with apparently little idea of logistics. Companies don't magically come out of thin air and even those that already exist can't just scale their operation to meet a massive increase in demand. Supply chains that don't exist don't just magic into being.

            Don't get me wrong, I am a big fan of buying British and always choose Costa over Starbucks etc (and even bigger fan of buying local, so I buy from my local butchers, farm shops etc) but anyone suggesting that these big MNC's make no contribution to our economy is just plain wrong. Corporation tax is but a drop in the ocean compared to the money they are sinking into the economy with the rents they pay, the employees they hire and the supply chains which service them.

          2. nsld
            FAIL

            Re: Groan...@Numpty

            Egypt has outrageous import duties and forces people to purchase what is known to the ex pat workers as "local equivelant"

            A misnomer if ever there was one as its never even close to the original.

            I worked on a hotel project in Cairo where the massive hydropool needed a specific plant setup, too expensive to import so they got the plans and bonded some plastic pipe together for the "local equivelant" and then stood back and looked shocked as several hundred thousand gallons of water left the system and flooded the floor of the health club below.

            If Nissan leaves and Rover re opens what do you think the quality of the product will be? The proof will be in the driving and it wont be pretty. The reasons we no longer have a domestic car industry on any scale is due to the massive costs and the appaling quality so unless your idea of a car is a Trabant be careful what you wish for!

            Plus with European free trade Nissan will just setup in another EU country and have employees there whilst simply shipping the cars to the UK to sell so your utopian dream to force these companies out leads to unemployment, higher benefits bill and a dying economy.

            1. NumptyScrub

              Re: Groan...@Numpty

              quote: "If Nissan leaves and Rover re opens what do you think the quality of the product will be?"

              Rover won't reopen, it got bought by India. But the skillset of the guys in Sunderland will still exist, and my point was we have already had one massive car factory closed yet apparently we still make cars here, and we still have the facility and ability to make cars here.

              quote: "The reasons we no longer have a domestic car industry on any scale is due to the massive costs and the appaling quality so unless your idea of a car is a Trabant be careful what you wish for!"

              Rover were shit, granted (MG only slightly better, in a few cases). But Nissan, built right here in the UK, aren't? So you are confirming that we can build quality vehicles in UK plant (Nissan in Sunderland), then claiming we can't build quality vehicles in the UK. Bit disingenuous? Rover's designs were the problem, not our local manufacturing or engineering skills. McLaren is a UK company too, you know, and if they saw a possible market they could be interested in the acreage at Longbridge (or even Sunderland tbh) :)

              quote: "What's to stop the shortfall in supply simply being made up by increased imports from elsewhere?"

              Nothing. If we can build it cheaper here than importing it, there is margin for a "local" company to compete. If we can't, then we have to import. Since (in the Nissan example) we already build those product here, then it's obvious to me that we can build it cheaper here already. I'm not asking us to force internationals out, just to plug the idiotic tax loopholes that they are honour-bound to exploit to their fullest (alternatively, give all citizens equal access to the same loopholes), and then let the market sort itself out. Which it will, since as I pointed out the demand for product doesn't magically disappear just because an international company got all butthurt about paying more tax and decided to up sticks.

              quote: "Speaks someone with apparently little idea of logistics. Companies don't magically come out of thin air and even those that already exist can't just scale their operation to meet a massive increase in demand. Supply chains that don't exist don't just magic into being."

              Do Nissan, or Starbucks, not have a supply chain for their current UK business? I wonder if they would be able to handle the output from "BNP Right-Wing Anti-Foreigner Cars Plc" (or whichever existing or new manufacturer, insert your own favourite comedy name here) that decides to take over the Sunderland plant when Nissan bugger off? Also, and to more fully address your point, they certainly can't do it instantly, I completely and wholeheartedly agree. But if the demand is there waiting to be fulfilled, you can bet your ass that companies in the same market segment will want in on that slice of pie, and they'll be able to find VCs to fund the expansion.

              You're making it sound like international companies have us, as a country, by the balls and that if we refuse to let them pay fuck all tax here we're going to go down the shitter. I don't disagree per se but, by contrast, believe that the reason we look like we might be heading down the shitter is that companies like that pay fuck all tax here, yet have a large slice of our GDP funnelling out of the UK into various tax havens.

              Our UK consumers already have that money they would have spent on <insert company name here>, and if they no longer have that choice, the money doesn't evaporate, and their wish to spend it on certain market segments stands a good chance of remaining too (e.g. new car, overpriced coffe with free wifi). Give them alternative options and they'll take them, whether it's an import from France or the new UK coffee shop down the road. You have however got rid of a bunch of cheap vultures sucking the economic lifeblood from the country to feed somewhere else; draconian internal tax regulations mean that the money stays with the draconian internal government, rather than scooting through a double Irish with a Dutch sandwich and off to foreign climes.

      3. HandleOfGod

        Re: Groan...

        "So what - with all the evasion they engage in, they provide little to the local economy. The people are will still be here, they still need goods and services; so having UK based companies supply those (and pay their taxes) would be to the betterment of the UK."

        That assumes there are UK companies already providing the same goods and services. There might not be. And even if there are, it assumes that the UK companies can suddenly re-scale their operation to fill the vacuum created by the recently departed corps. In most cases that won't be possible. I work for a UK food producer - if our competitors were removed from the market could we suddenly increase our output by say 1000% to service all the new business? I'll give you one guess.

        Do not mistake "paying no corporation tax" for "making no contribution to the economy". These are very, very different things. I fail to see how dumping the entire workforce of Amazon, Starbucks and McDonalds (to name but a tiny few) on the dole queues benefits the economy.

  18. aurizon

    Big Pharma has done this for decades

    In their production formula for many items there were ingredients used in the USA or UK that were very costly, that on analysis turned out to be simple cheap compounds. These purchases allowed them to export those $$ to their offshore subsidiary as they imported that ingredient to make their pills. Some of these ingredients turned out to be simple salt, with a few dollars per ton that were invoiced as a precious ingredient at thousands of dollars per gram, which inflated the cost of the pills it went in to.

    All companies with offshore subsidiaries need to be watched for this behavior or the profits in the USA/UK will completely vanish and the offshore subs do very well indeed.

    Audit methods with teeth and assay and inspection rights are needed so that this profit exporting is discovered and denied.

    1. Anonymous Coward
      Anonymous Coward

      Re: Big Pharma has done this for decades

      Pharmaceutical grade materials require a lot more paperwork and testing than food or industrial grade materials. And different packing and supply agreements.

      Hence although one might buy 5 tonnes of compound X in paper bags on a pallet at £25/ton to clean sheet metal before painting it,

      you might buy 1 tonne at £50/ton in plastic sacks to keep your bakery products mould free

      but pay £100/kilo for a 25 kg drum to put into medicine.

      (all numbers are inspired by reality and make no claim to be accurate)

      Apart from the packing and checks, the products might be identical. eg Pharma grade sucrose is the same quality as the stuff that goes in your mug of tea.

    2. Horned-Devil

      Re: Big Pharma has done this for decades

      "Audit methods with teeth and assay and inspection rights are needed so that this profit exporting is discovered and denied."

      So we end up with an enormous HMRC to be able to manage all of this audit and investigation which swallows up all the effective tax that it brings in? Could well be a zero sum game (or even cost more to manage/administer than would be gained in additional tax revenues)

  19. Anonymous Coward
    Anonymous Coward

    An IT company.....

    .......Forces you to purchase equipment internally, laptops, paper, printers etc, what I could get from Saples (5 reams of paper) @ £16 I was forced to buy internally at £288, for exactly the same Staples paper, that is how that particular company makes little or no profit on its government contracts

    1. Fatman

      Re: An IT company.....

      OH! You figured out where manglement bonuses come from (£288 - £16) .

  20. Anonymous Coward
    Anonymous Coward

    hmm

    business as usual for the current Administration's biggest left-coast financial backers.

    Support higher taxes for "the rich" while opposing spending cuts, then do everything to dodge them so the working man gets stiffed, while the government crows about "saving the 99%" but it's the 99% who are actually paying the bills.

    time to push the big red RESET button yet?

  21. Winkypop Silver badge
    Unhappy

    Politicians make stupid (tax) laws

    Corporations take full advantage of said stupid (tax) laws.

    Politicians complain about stupid (tax) laws.

    You and I, we just get screwed over.

  22. Anonymous Coward
    Anonymous Coward

    What have Currys, HMV, Jessops all got in common - apart from all going bust recently - they all sold goods whcih Amazon could sell cheaper, in part because of their judicious choice of where to pay VAT (and other mechanisms to cut their tax bill).

    Proposal: any company with over, say £100m sales in UK whose not declaring, say 5% profit, becomes fair game for nationalisation without compensation.

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