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Is being a tax avoider socially unacceptable?
Comments
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Let's be clear on this. Putting money in an ISA, and manipulating your profits through transfer pricing are not the same thing. Tax avoidance usually involves minimising the tax liability by applying the law in a way which was not originally intended when it was drafted.
Yes, it is immoral, but one cannot expect a company to have morals. As people have already pointed out, the directors of a company have a duty to their shareholders, not the public.
The people who are letting us down are the Government. It's not difficult to close loopholes with legislation. Or HMRC to challenge companies in the courts. Using the Starbucks example, money is paid overseas for the rights to use the brand. There is already transfer pricing legislation that says this has to occur at an arm's length. As Starbucks account's show they not made a profit in the UK, the HMRC should argue that the brand value is therefore nil. Alternatively, the government could write a law saying IP rights must be taxed in the UK - e.g., Starbucks must have a UK Holdco that holds the rights to sell Starbucks in the UK.
If we rely on morality to collect tax, we're doomed. Most people would pay to tax if they could find a way of doing so legally."Real knowledge is to know the extent of one's ignorance" - Confucius0 -
Yes, it's up to the government(s) to close this off.Let's be clear on this. Putting money in an ISA, and manipulating your profits through transfer pricing are not the same thing. Tax avoidance usually involves minimising the tax liability by applying the law in a way which was not originally intended when it was drafted.
Yes, it is immoral, but one cannot expect a company to have morals. As people have already pointed out, the directors of a company have a duty to their shareholders, not the public.
The people who are letting us down are the Government. It's not difficult to close loopholes with legislation. Or HMRC to challenge companies in the courts. Using the Starbucks example, money is paid overseas for the rights to use the brand. There is already transfer pricing legislation that says this has to occur at an arm's length. As Starbucks account's show they not made a profit in the UK, the HMRC should argue that the brand value is therefore nil. Alternatively, the government could write a law saying IP rights must be taxed in the UK - e.g., Starbucks must have a UK Holdco that holds the rights to sell Starbucks in the UK.
If we rely on morality to collect tax, we're doomed. Most people would pay to tax if they could find a way of doing so legally.
As an extreme at the other end, Boris was born in New York, and he received a tax bill from the US when he sold a house in London!0 -
....It's not difficult to close loopholes with legislation. ...
Perhaps not. But what is often regarded as 'tax avoidance' has little to do with gaps in legislation...Or HMRC to challenge companies in the courts. ..
Hardly a day goes by without HMRC fighting some court case or other.....Using the Starbucks example, money is paid overseas for the rights to use the brand. There is already transfer pricing legislation that says this has to occur at an arm's length. ..
There you go. There is no 'loophole'.....As Starbucks account's show they not made a profit in the UK, the HMRC should argue that the brand value is therefore nil. .
It could. But not much point spending a few million on fighting a court case if you get told by leading counsel that you're certain to lose...Alternatively, the government could write a law saying IP rights must be taxed in the UK - e.g., Starbucks must have a UK Holdco that holds the rights to sell Starbucks in the UK. ..
No it could not. The Starbucks subsidiary concerned is located in the Netherlands. The principle of 'freedom of establishment' applies across the EU single market.
Edit: P.S. Of course, Starbucks does have a UK Holdco that holds the rights to sell Starbucks in the UK. It just has to pay for that right.0 -
Perhaps not. But what is often regarded as 'tax avoidance' has little to do with gaps in legislation.
If it can be closed with legislation, it's a loophole
Hardly a day goes by without HMRC fighting some court case or other.
So what. Do we say the police can go home early if they make an arrest at 10 am.
There you go. There is no 'loophole'.
Just because I've given a example where there is no loophole, doesn't mean they do not exist.
It could. But not much point spending a few million on fighting a court case if you get told by leading counsel that you're certain to lose.
Maybe it's not nil. But the transfer price is certainly not an amount that causes a company to lose money. It's what an unrelated party would be willing to pay. Nobody sells brands which lose money. The HMRC need to look at this more closely.
No it could not. The Starbucks subsidiary concerned is located in the Netherlands. The principle of 'freedom of establishment' applies across the EU single market.
Leave the EU if they don't reform. It wasn't set up to allow international tax avoidance.
Edit: P.S. Of course, Starbucks does have a UK Holdco that holds the rights to sell Starbucks in the UK. It just has to pay for that right.
............................................"Real knowledge is to know the extent of one's ignorance" - Confucius0 -
Ed Miliband is married to Justine Thornton.
Ed Balls is married to Yvette Cooper.
I don't think any of the tax avoidance involved the use of someone else's spouse..
You are as bad as antrobus letting the facts get in the way of a good rumour. I had not realised just how much we had a 'political class' in this country.I think....0 -
I want to tell you a story:
A builder leaves his employer who collected tax under PAYE and sets up as self employed. He buys a van and a load of tools for which he reclaims the VAT. He gets his first customer which happens to be an extension on a Victorian terrace.
His customer gives him the cash to buy the first batch of materials for which he reclaims the VAT and starts work. As the work progresses the customer advances more cash and he buys more materials for which he reclaims the VAT. After the build is finished he presents his invoice to the customer who is quite happy to settle in full because our man's done a good job.
More and more customers follow but in his first tax year the amount of VAT he's collected is less than the VAT he's paid in equipment and materials so the tax man owes him money. This margin is applied to his second year trading (remembering that the HMRC owes him money) in addition, he also applies the money he's spent on sundry expenses and depreciation on his tools and van (net of VAT of course) against his tax bill and this comes out at a figure which places him below the threshold for tax, in fact "on paper" he's actually made a loss.
The following year, he is quite a bit busier and makes a lot more money. He can still reclaim depreciation on his equipment, claim his expenses and reclaim VAT etc. but because he traded at a loss the previous year, his accountant tells him that he can credit this loss against his second year profits. (The tax you pay is on income from the tax year two years previously anyway).
The third year his business has really grown and so he makes quite a lot of money. Now, he is starting to make a profit and pays tax on it.
Now, here's the thing: He's reclaimed VAT on everything he's bought for the business, all the expenses associated with the business are set against income tax including depreciation of equipment and plant.
Now, has he evaded tax? No. Has he avoided tax? Yes he has.
Personally I don't actually believe that there's any such thing as tax avoidance but there is tax efficiency. Moreover, there is no such thing as "applying the law in ways not intended", you either apply the law or you don't. There are "loopholes" though and whether you "exploit" them or not is up to your own conscience and even the HMRC themselves would advise you of ways to reduce your tax bill if you ask them.
It's a bit like driving at 25MPH through a 30MPH speed limit in the dark when there's ice about. You might be "applying the law in ways it is not intended" but you are still driving legally. If you had an accident though you could be accused of dangerous driving.0 -
As an extreme at the other end, Boris was born in New York, and he received a tax bill from the US when he sold a house in London!
That's is because the US is unique in the Western world in taxing US citizens and Green Card holders on their worldwide income and gains irrespective of their tax residence. That is why if you do US tax you can get a job virtually anywhere in the world.
(NB: Johnson has dual British/US nationality and so should be filing a US tax return every year).'I want to die peacefully in my sleep, like my father. Not screaming and terrified like his passengers.' (Bob Monkhouse).
Sky? Believe in better.
Note: win, draw or lose (not 'loose' - opposite of tight!)0 -
...If it can be closed with legislation, it's a loophole
I'd say that was begging the question....So what.......
The 'so what' is that HMRC do challenge things in the courts. And, as it happens, what HMRC do is often challenged in the courts as well.... Do we say the police can go home early if they make an arrest at 10 am....
What makes you think that HMRC are going home early?..Just because I've given a example where there is no loophole, doesn't mean they do not exist....
I didn't say that loopholes didn't exist. I said "that what is often regarded as 'tax avoidance' has little to do with gaps in legislation". You now apparently seem to agree with me...Maybe more closely.it's not nil. But the transfer price is certainly not an amount that causes a company to lose money. It's what an unrelated party would be willing to pay. Nobody sells brands which lose money. The HMRC need to look at this...
What makes you think HMRC haven't already looked at it?
As it happens HMRC have already looked at it, challenged it, and got the 6% royalty fee reduced to 4.7%. Given that there apparently are a number of independent licensees of the Starbucks brand who do indeed pay 6%, that's not bad going really.
P.S. Lots of people "sell brands" which lose money. As a general rule, if they carry on losing money they stop doing it after a while....Leave the EU if they don't reform. It wasn't set up to allow international tax avoidance.
You can advocate withdrawal from the EU if you like. But whilst you're in it you have to play by their rules. So it's useful to know that things like the 'freedom of establishment' exist.0 -
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Vote with your feet where you can....
Choose small businesses, local companies.... avoid as much as possible the huge multi nationals.
We need a targeted campaign on 1 or 2 high profile companies to bring about change.
Do we all think that anything will change after the election? Where is all the money coming from for the election campaigns?.... and less transparently, look historically at how many MP's end up in board rooms and positions of high pay after their 'public' service.Peace.0
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