You thought only Google dodges UK taxes? So do all the Brit firms Big British-based tech firms like Autonomy and BSkyB have subsidiaries in onshore and offshore tax havens, and avoid paying taxes in much the same way as has been highlighted in the case of US firms Google and Amazon. Research shows that most of Blighty's top companies have offshoots in tax havens, according to charity …
"Shock! Horror! UK companies who do international business aim to minimise their costs"
Big bloody deal. Tax avoidance is a feature of any tax system. It has been going on for centuries and it will continue to go on. The capitalist system is not perfect. It never has been. It never will be. But it's a damn site better than the alternatives. If you don't like it, go and live in France or Sweden or any other Western European country that 'enjoys' taxing the crap out of their citizens.
"go and live in France or Sweden or any other Western European country". Perhaps not such a bad idea if you look at this list of "the best countries in the world" by Newsweek and a few universities in the US.
Finland, Switzerland and Sweden as the top three.
http://www.thedailybeast.com/newsweek/2010/08/16/best-countries-in-the-world.html
"Shock! Horror! UK companies who do international business aim to minimise their costs"
There's a difference between "minimising their costs" and "tax fraud".
Like the man said, if you want to do business here, you pay taxes here. Don't just siphon billions off of the populace and send it to another country. At least the government keeps what they steal here. Big business just steal and you see little to no benefit.
There's a difference between "minimising their costs" and "tax fraud".
That's right there is a big difference "tax fraud" indicates that you have broken a law to avoid taxes. "minimising their costs" indicates they are using existing loop holes in the legalisation to minimise the tax they need to pay.
Typically, the government sits a whines over this "gross" injustice rather than acting on closing the loop hole which they created in the first place.
The UK Govt keeps most of what it steals.....mmmmmmm not sure about that.
Apart of course from the Billions it pays to be part of that corrupt club called the EU and the Millions it contributes in Aid to countries that are growing bigger and faster than the UK, or that have such endemic corruption that the Aid doesn't actually benefit anyone other than the Tyrants and WarLords......
Vodafone operates a phone service in Ireland and Cable & Wireless operates phone services in many of the offshore Islands. That is a legitimate reason for having companies in theses countries. Of course they have a subsidiary in Switzerland where they don't operate a phone service so they are clearly involved in tax planning as well.
We need to look at why they have those companies, many of may have legitimate reasons for doing so, and if the local government chooses not to charge tax on their genuine activities there, that is their prerogative.
Some of HMRC's offices are run from a tax haven. I shit you not.
Only in the UK would the tax inspector sell their own buildings to a company operating out of a tax haven.
Want to avoid paying taxes? Just buy the head of HRMC a nice dinner. Job done!
Want to change tax law? Just second a few accountants to the right MP. Job done!
Want to de-regulate banking? Just stuff the banking regulator with bankers who don't want regulation. Job done!
Is it any wonder the country the fecked?
Labour and Tories both to blame in equal measure as the are both cut from the same cloth.
Too quick to cosy up to their rich chums and gouge the tax-payer to enrich them further.
Try this as a start (it references the UK Public Accounts Committee) - http://www.accountancyage.com/aa/news/1808456/mps-slam-hmrc-business-acumen-offshore-company-deal
However from what I understand those dozy gits who sit in the House of Commons either kew nowt or were not prepared to do anything until Private Eye (http://www.private-eye.co.uk/) started raking up some of the dirt, as well as subsequent disgraceful behaviour by HMRC. Described as scurrilous by many (typically MPs, Councils and others who get caught out - for example http://www.private-eye.co.uk/sections.php?section_link=in_the_back&issue=1338, it does the most consistent job of reporting the real murk in Britain of all the news publications. Worth a subscription).
If UKIP would drop the nonsense about coming out of the EU (I know - they'd need to change their name first), then their other policies look quite attractive and socialist. However, I'm rapidly becoming a Scottish Nationalist - socialist and wants to be part of the EU. I'll let the loons in the rest of Britain vote their paranoid way whilst I vote to make my adopted home a country that will be as good as the best in Europe in a few short years.
...or did the person who came up with the name 'Foreign Account Tax Compliance Act' get told to cut it off two words shorter, just in case the plebs noticed they were having the piss taken out of them. Foreign Account Tax Compliance Act Territorial Services maybe...or something.
Y'know, is it just me or could the issue be something to do with the complexity of the UK tax code (running at 11500+ pages, most complicated in the world *various sources, citation needed etc)?
I mean, businesses will be businesses however it is in the power of the government to reduce complexity (albeit at the risk of offending friends at accountancy firms & subsequent employment prospects).
Argh, so tired of it all.
Agreed. You need financial adviser to stay on the right side of the tax law, but since his wages are not small chunk of money, why not put it to good use. You should not need adviser in the first place to pay the right amount of tax, but that would take the job away from ex-government advisers .... guess what they are doing now.
The US code is legendarily complex - sure there are plenty of complexities in the UK code, but you can usually knock up a reasonably approximation of expected corporation (for small biz) & income tax in a spreadsheet. In the US, you need specialized software and/or a firm.
To put that £1 bllion figure from Sky in perspective in 2010/11 the UK government raised £43 billion in Corporation tax, which was 8% of the gov't's income.
By contrast income tax raised £153 billion, National Insurance £93 billion and VAT £84 billion.
So the true figure should be substantially less than that punted to the media.
Sources - http://www.ifs.org.uk/publications/5885 and http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.pdf
As a listed company, they freely provide all of this information.
It should be here:
http://corporate.sky.com/the_bigger_picture/reporting/ourperformance/financial
A cached version is here:
http://webcache.googleusercontent.com/search?q=cache:RSf8rtRWOBwJ:corporate.sky.com/the_bigger_picture/reporting/ourperformance/financial+&cd=4&hl=en&ct=clnk&gl=uk&client=firefox-a
Approx £330m of taxes borne. Profits before tax at £1148m.
Approx. £1086m of taxes collected by Sky. No figures provided for the cost of collecting the tax.
We all know big companies take the piss out of us, the front desk of one big hotel chain has a screen listing all their companies, we are talking hundreds of little companies all with names like X000001 X00002 X00003, all operating at below level required to register for VAT . No doubt they send all their sales through the Caymens and rent the use of the company name from an office in Delaware.
The moment you can afford to have 2 or 3 accountants working full time for you, you can recoup their wages in tax avoidance.
The trouble is that these companies can only make money out of the UK by taking advantage of the infrastructure and protective framework of the UK. (roads, police and general safe environment in which to do business)
As someone mentioned before, remove politicians personal links to big business and refuse entry to company's who wont pay their upkeep towards this safe business environment and all the corruption goes away (or at least finds less lucrative loop holes)
In the mean time, as someone who gets to make a decision on purchasing kit, it looks like HP are the winners here
If the hotel was trying to avoid a VAT registration then that would be unlikely to work, you can't artificially separate a business out to avoid it.
See - http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#7
I'm not saying there isn't something weird going on there, it's just unlikely to be VAT related.
Most of the tax schemes here require an overseas element, usually a low tax regime, which will have an entity billing the UK bit. That bill reduces the UK profit, which as taxes are based on profit, reduces the tax bill. Tax is then paid in the overseas place, and dependent on the tax treaty is then considered taxed, so no further tax will be payable. It's a bit more complicated than that, but it gives the gist.
"In the mean time, as someone who gets to make a decision on purchasing kit, it looks like HP are the winners here"
As somebody sitting in a company enduring HP's 5hite service and products, I wish you good luck choosing your vendor on the basis of their unproven claims to be paying their fair share of tax.
Out of interest, why would you want to do business with a company who not only have messed up every major acquisition they've made, but also seem to be claiming that they ignore their fiduciary responsibilities to shareholders? And as a major offshorer of UK and US jobs, why is it that (allegedly) paying their fare share of taxes is a good thing, but you're happily prepared to endorse and reward their export of jobs in the pursuit of profits?
The vast majority of US corporates are registered in Delaware. It's not necessarily for tax reasons: http://en.wikipedia.org/wiki/Delaware_corporation
I work for a UK SME (about 50 employees). We do a lot of remote work for a US customer (based in southern California) from our UK office, but we employ two guys in the US to liaise with the customer and "bring the work home". Those two guys are employed by a small US subsidiary, which just happens to be incorportated in Delaware, mainly I think because it's about the easiest state in which to set up an Inc.
With the possible exception of the two US staff, all our income comes into the UK company and we pay tax in the UK. Without the US Inc. company and it's two employees we probably wouldn't have work for maybe 10 or 20 UK-based staff.
So, a UK company having a Delaware subsidiary isn't necessecarily bad for the UK.
Except of course, isn't this exactly the same reason Google are being hauled in front of the PAC committee again? If the two guys in the US are setting up the sale, shouldn't the sale be attributed to the US authorities? Or have you set up some elaborate licensing agreement between the UK parent and the US subsidiary?
No elaborate agreement. The work is on a time-and-materials basis. The work of the UK company is sold by the UK company, carried out in the UK, and the customer has a direct contract with the UK company for that work. The guys in the US are just a visible presence at the customer's site which helps the UK company be considered for future contracts with the customer. The only sale they conduct is of their own labour under a separate contract between the customer and the Inc. company.
Google's case is the opposite, trying to persuade the taxman that work/services which "appear to be" carried out in the UK are nevertheless supplied by a company in Ireland.
In our case it couldn't be clearer that the work done in the US is supplied by the US firm and the work in the UK by the UK firm.
> Why can they not do what they do with the rest of the populace and just take the money?
Simple. The companies would bugger off to somewhere more "sympathetic". Governments can tax their citizens into oblivion, safe in the knowledge that few (not even the rich ones - for they have better means of avoiding taxes) , very few, of those people will up-sticks and leave.
Companies however, are not so sticky. That's why they can negotiate beneficial tax terms (what: you thought they just paid up and didn't do deals with HMRC?) and grants in order to do countries the favour of setting up on their patch of land - as opposed to some higher-taxed country.
"Simple. The companies would bugger off to somewhere more "sympathetic"."
Good. Let them go.
There are more than enough people/companies who can replace them and pay tax in the appropriate places. All this needs is the balls to actually start laying down the law. 'The law' as-in what 'the man in the street' would understand, not 'the law' as thousands of scumbag accountants/lawyers/politicians can figure out.
> Good. Let them go.
Maybe I wasn't explicit enough:
The companies would bugger off to somewhere more "sympathetic" making thousands of people redundant, and terminating the contracts they had with ALL the local service companies and suppliers they use, causing even greater knock-on redundancies.
As for the companies who would replace them, if those companies wanted to be in the UK, they would already be here. It's not a case of the UK can have (say) Google, or Exxon and somehow choose who they'd like to come here. All multinationals make their own, independent, decisions of where they choose to have offices. By making the UK financially unattractive to some, it's not very likely that others would see an opportunity and pile in, instead.
Sorry but that's bullshit.
If a company can make money somewhere they won't leave just because they may make less money if the tax system changes. If it falls below the level of profit - or *enough* profit then maybe yes. But to state that if things thange they will all leave is patently rubbish.
If a large company is using/abusing the tax system then they have an inherent advantage over smaller companies coming into the market, who may not be able to 'save' their money in the same way.
@Jason H,
I agree with you..............
We had all the Bankers threatening to leave the UK financial services sector for more sympathetic countries when they got bashed and taxed for "significantly contributing" to the causing the banking crisis.
I ask you how many actually left? Few.........
Has it damaged the performance of the Financial Services sector in the UK? No!!
Are we feeling the pain? No!!
Should we have already prosecuted and jailed some of those Feckers? Absolutely
Such as action would once again re-establish the "moral hazard" or fine tune their "Moral Compass"
Finally corporations did leave the UK when we had through necessity apply higher corporation taxes to allow us to recover from the "banking led economic crisis". This was only right and proper as clearly based on other posts on this forum; Corporations have clearly profited massively in the good times. Now its payback.
That said now that Corporation and other taxes are coming down how many of those corporations are coming back to the UK.
In short the UK Government has to "grow a pair" and get tough rather than lube up and flash the sheriffs badge each time Corporates make threats.
@Jason_H
Sorry chap, I see where you are coming from but the politicians don't work for us. None of the western politicians work for the 'normal citizens'.
They all work for the big global corporations. Have done for decades. That's why no matter who you vote for Tory/Labour/Socialist/Right wing etc. the basic corporate agenda carries on unaffected.
It's all been manipulated that way. You don't think those big political donors only donate to one party do you?
All this Europe/immigration stuff only keeps getting dredged up because it works as a good smokescreen to keep covering up that none of the corporates/banks have yet to be taken to task for the crisis they helped make.
I mean the governemtn >.>
Part of the problem is we've gone the classic briish route of pricing ourselves out of the market. We want more money so we jack up taxes, company a and b can't afford it and either go out of business, or avoid the taxes. Suddenly less money coming in, or not as much of a gain as they'd hoped, taxes go up again, rinse and repeat.
The same thing is happening everywhere.
Heck half the town centre is dead where I live because of a very similar problem with business rates being jacked up. Because of this local businesses are all doing one of the following 3
Going out of business.
Moving elsewhere
Dodging tax as best they can.
Going out of business and moving elsewhere are most common however. Because of that town is now a barren wasteland of mobile phone stores and charity shops. A lot of stores are actually moving to the next town over, whose business rates are around 5% lower. That town is thriving while ours is dying.
Surely this is pretty much a small scale version of what's happening with international taxation.
Well, their 2012/13 FY results show them making £1.96bn taxable profit. They paid out £574m in corporation tax to assorted government, so that's about 30% tax rate.
But that ignores their employers NI and business rates which will more than double that. If you ignore what Tesco are taxed on, and just look at gross governemnt confiscation as a proportion of profits, then you'll find that the thieves and wasters of governments take more of Tesco's profits than Tesco's shareholders.
Used to work for a SME UK company who had an Irish office for tax purposes. They also had a datacentre located in mainland Europe being a fully owned Irish entity. So all customer payment transactions therefore flow though Ireland and are subject to the lower Corp tax.... They also took 95% of their profit from certain software licensing and paid a 'completely separate' company in an offshore location (called the same name funnily enough) this royalty fee. So they only paid 12.5% Corp Tax on 5% of their profits. In fact it was even less than that due to them then moving the money out of this offshore haven to others.
All totally legal but morally suspect....
This post has been deleted by its author
"Broadcaster BSkyB has ten per cent of its 110 offshoots in tax havens, according to ActionAid's data, including a branch in Ireland and two in Delaware..."
Sky has a large customer base in Ireland as it sells its TV, Phone and Broadband products there. It also has customer support infrastructure there that supports both the UK and Ireland.
So its not just an "offshoot in (a) tax haven" as suggested in the article, but a legitimate company.
Well not so sure about that.....I think it may be used for some tax haven purposes as ironically we pay the 20% VAT rate to the UK for Sky products (not the 23% VAT to the Irish Gov), except for installs and service call outs (where it does get paid to the Irish Gov @ 23% VAT). You'd wonder....
As things are, publicly traded companies are *required* to deliver the maximum possible profit for their shareholders. Which is why they are *obliged* to minimise their tax bill.
If we start meddling, we will end up where companies are NOT required to deliver maximum profit for their shareholders, but to deliver maximum tax take for the government of the day.
Which would *you* prefer ?
"If I owned 1% of Vodafone shares, would I get 1% of profits?"
In simplistic terms yes. Few companies distribute their entire profit (otherwise they won't be replacing their assets as they depreciate), but even if Vodafone didn't pay out the full amount, you'd still own 1% of their balance sheet where the retained profit shows up, and 1% of their future income streams.
Taking Vodafone, if they paid out 100% of their profit, then over time they'd have no surplus cash to renew the network infrastructure, to buy 4G licences and the like, and over time that would drag on their business and reduce its scale, so your investment declines in value. Or they'd need to borrow more to renew assets, which would reduce the future profits through interest payments (a self compounding problem in this hypothetical example because as debt ratios climb, so would the interest rate).
Ultimately the 100% payout company would see equity (shareholders) decline in importance until they disappear. When a company's gearing (ratio of debt to equity) starts to go wrong, it reaches a financial event horizon, beyond which the interets payments become unafforable, or the creditors can trigger breach of covenant clauses, and seize control of the company. Certain big banks have a track record of engineering these situations deliberately.
another person who doesn't understand accounting.
Taking Vodafone, if they paid out 100% of their profit, then over time they'd have no surplus cash to renew the network infrastructure, to buy 4G licences and the like, and over time that would drag on their business and reduce its scale, so your investment declines in value.
Profit is what is left AFTER you have spent money on investing in the business.
I wish the brain dead "reporters" in the main stream media got the point and tackled the energy companies on this when they try to say "ah but if we didn't make a profit we couldn't invest".
When I started working for a US publicly traded company (multinational, about 30,000 employees, but about 35% of the stock was still held by the family of the original founders of the company), we were told about the "5 Voices" - The Community, the Customer, the Employees, the Management and the Shareholders.
By the end of the 1990s, the only "voice" that mattered was the Shareholder, and the main goal of managing the company was to increase the share price.
A company doesn't benefit from a higher share price (unless it creates new shares, and dilutes the value of existing shares). A higher share price makes it harder for a company to be bought out, which is often bad for middle management, and upper management's remuneration also tended to be closely tied to the share price, so I guess the Management Voice was pretty closely aligned with the Shareholder voice, but the other 3 voices were pretty much sidelined by a focus of people who were only rewarded by selling their stake in the company! Speculators, in other words. The Voices that were best served by permanence and long term thinking (Community, Employees, Customers and those Shareholders who were interested in Dividends, rather than share price) were all sidelined.
Note that the Share Price of a company tends to take account of all those overseas profits, even if they can't be repatriated, and used to pay dividends. So this focus on off-shore tax "management" is also part of the fallout from shareholders switching from investment to generate income/dividends to speculating in share prices.
commissioned by whom?
It would be rather funny if it were to be found out that it was commissioned by one of those tax-dodging googles, starbuckses and other Irish&Dutch loving mega-contributors to the UK economy and the well-being of us all.
which is NOT to suggest, that the research results are incorrect, nosir. Just a little bit of a diversion perhaps ;)
If you want businesses to have freedom to work without the restrictions of borders, and as a consumer to live and buy without borders, then so be it. Nothing illegal or immoral to move your affairs to where it's cheapest or most profitable.
Is it much different to moving up north and buying a house much cheaper? Surely these people are avoiding taxes? And not even taxes, but the price of things, surely it's "imorral" to be paying £100k less for a house than the average. That's not fair on the rest of us. They're taking the piss aren't they? ;)
I could move to a country in the EU where taxes are cheaper. Am I a tax avoider? Flip it round, people who move to the UK to get more money than where they live, is that "fair" too?
What's the answer? Oh yes, communism. Everyone earns the same, everyone pays the same, everyone's poor (except those in charge).
ActionAid have been beating this drum for some time, and not just in the UK. They did a particularly good piece a few years ago on how uk.gov were actively enabling tax avoidance for large UK firms operating in developing countries.
Wife works in the sector and as a consequence I have a fairly low opinion of some of the larger Charities, but not ActionAid.
It's not really that difficult to eliminate tax avoidance: make accountants personally responsible.
So if an accountant dreams up a scheme that avoids £10M tax then when it's discovered not only does the company have to pay the £10M plus interest in back tax plus a fine of some kind, possibly equal to the sum avoided but the accountant personally has to pay the same sum as a penalty.
Just make tax avoidance too expensive as well as putting a lot of effort into detection. As long as companies, individuals and mostly accountants think they can get away with it and if the penalties if discovered are low then avoidance will continue.
The net benefit is that if everybody paid the tax they should pay then everybody else could pay tax at a lower rate in order for the government to raise the same sum.
A part of the problem is that the people who make the legislation are largely the same people who would stand to lose most from such a system so boys and girls, don’t expect any significant changes in the near future and especially not from a Tory government.
"Have an isa, or child trust fund, or make private pension contributions etc"
All of those "financial instruments" are capped at a maximum level of tax-free investment on an annual basis. In other words, they are designed to encourage saving by waving a carrot in front of the investor. All that saved money goes into the pots of big business where they can use it to make more money while creaming off the "management fees".
On a totally unrelated note, Starbucks for example, pay almost their entire income to low tax based "associated" companies in eg Switzerland for the use of the name and to source their coffee. Surely if they were doing their "fiduciary duty" to their shareholders, then Starbucks UK ought to change their name to something they own and source their coffee more cheaply on the open market.
It’s amazing how little people care about this, or excuse it as just what companies do, we are talking Billions of pounds not being collecting in tax for the UK, yet it’s a none story, however, as soon as its not a huge company dealing with Billions, and becomes of the vastly over reported despite the minuscule amount of people that do it out of the 3% that claim ‘benefit cheats’ dealing in hundreds of pounds, it’s all day everyday disgusted news and people foaming at the mouth, MP’s getting angry and Daily Mail headlines.
I guess the moral of the story is, if you want to ‘cheat’ the system do it big, and already have a ton of money.
Absolutely. Tax planning to avoid tax is not illegal (evansion is). Tax avoidance is a perfectly normal thing to do, not just for large multi-nationals, but for individuals too. I'm an IT contractor and I see it my duty to myself to minimize my tax hit. I pay as much tax as the rules require me to pay. If you want more tax, vote into power a party that will raise tax rates. Otherwise people should just live with it.
If one refer's to the Smith Ìnstitute Survey on who governs Britan its summary was
"Parlement today better reflects the gender balance and is more ethnically diverse, but in the terms of educational & vocational background the new political elite look remarkably like the old establishment. It is suprising how many of our MP's were privately educated, went to Oxbridge and worked in the professions, particularly the Conservatives and Lib Dems. It seams that our Parliament is becoming less representative in terms of education and occupation, and continues to attract similar types of people from a narrow professional base".
http://www.smith-institute.org.uk/file/Who-Governs-Britan.pdf
With this in mind, what is the likelyhood of persuading your MP & using the established democratic process to change laws & enact tax reform?
I did find it dissappointing to hear this morning that both BP & Shell's Uk headquarters were raided by the EU looking for evidence of price fixing, why was'nt our UK authorities dealing with it, why the big suprise from the MP's questioned, I wonder?
I suspect that with this inbreed cronisim, nepotism, lack of real world experience & vested interests the Global Corps will continue to evade there moral dues.
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