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Source: (consider it)
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Thread: What constitutes fair tax?
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Sipech
Shipmate
# 16870
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Posted
The UK news has given a fair amount of attention recently to the £130m that is to be paid by Google to HMRC for previously underpaid tax. [source:Guardian]
One of the phrases that gets used a lot in the discussion is about Google (and other large corporations) "paying their fair share". But how much is fair?
Those behind the Fair Tax Mark are decidedly woolly when it comes to trying to quantify what is otherwise an inherently subjective notion.
Plus, how much of the prominence of this is solely due to the fact that Google is a household name. Many of the large corporations in the UK aren't. How many of the FTSE 100 can you honestly say you know much about or have had dealings with?
It's quite easy being on the political right, as the ideology of a low tax society is at least quantifiable, even though it comes at the expense of underfunded public services. But the left's idea of fair tax seems harder to pin down. It's all the harder given the amount of obfuscation allowed in the financial reporting regulations (trust me, I'm a charted accountant!) that results in half-baked reporting in the media and unanswered questions when it comes to tax related matters.
So what do shipmates think constitutes fair tax (or is the idea not as good as low tax)?
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Posts: 3791 | From: On the corporate ladder | Registered: Jan 2012
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Alan Cresswell
Mad Scientist 先生
# 31
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Posted
To me, there are two versions of "fair tax". One relates not specifically to the level of tax but to the comparative effects of that taxation on those who pay (or, not if they can 'legally' get away with it). The other is the question of what rate taxation is set at, and whether the government is justified in collecting and spending that amount of tax income. The second question really is one of political theory - how big a government should be, to what extent public services should be paid for from taxation or by those who directly benefit etc. So, I'm not going to go there.
So, on whether the comparative effects of tax are fair ...
Imagine a scenario where there is a small family owned retailer and a large multinational retailer. Both make a profit on their operations in the UK. Obviously the small retailer only has business in the UK, and pays the tax set by the UK government on their profits. The multinational retailer has business in other countries and is able to move money around such that some (or even most) of the profits made on sales in the UK get registered in another country where the tax rates are lower, and hence pays a smaller proportion of tax on their UK operations than the small retailer. That is what I would consider unfair - the multinational organisation using access to overseas divisions to pay proportionately less tax than the small retailer who does not have access to those sort of financial mechanisms.
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Posts: 32413 | From: East Kilbride (Scotland) or 福島 | Registered: May 2001
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Gee D
Shipmate
# 13815
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Posted
The newspapers here are going through one of their periods of attacking those with high incomes for the amount of tax they pay. For Google and some others, the answer is as Alan Cresswell says, the ability they have for transfer pricing. Others are more complicated, but in no instance has there been a suggestion of any evasion of tax payable; at the most, the line taken is that a taxpayer has taken steps lawfully to minimise the tax paid. As far as I know, there's no obligation on anyone to arrange their affairs to pay more tax. I certainly don't and I'd be very surprised if anyone on these boards does either. If a government considers that a particular method should not be allowed, the answer is to pass amending legislation.
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Not every Anglican in Sydney is Sydney Anglican
Posts: 7028 | From: Warrawee NSW Australia | Registered: Jun 2008
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Doc Tor
Deepest Red
# 9748
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Posted
In essence, a fair tax would be a sum of money, when levied across the population, which would pay for the things those people want to see paid for.
It then just comes down to how that tax is distributed, and what is taxed.
To my mind, given that everyone needs a minimum of x to live on, that amount x is not taxed. Everything above x is. You can then put in an incremental tax so that x<2x is taxed at a lower rate than 2x<3x.
Businesses can be taxed on profit or turnover. I'd argue that if the company banks its profits in the country, those get taxed. If it offshores them, tax the turnover.
There's also inherited wealth, which tends, over time, to concentrate money in the hands of the few. So there'd be a wealth tax on property and land.
People need to believe that they are taxed fairly, and that everyone pays a fair share. My marginal rate after my tax-free allowance amounted to just over 27%. Google's was 3%. I don't think that's fair, and I'll be writing to my MP to indicate that.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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hatless
Shipmate
# 3365
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Posted
I think there are deeper questions underneath the matter of fair tax.
One is about levels of pay. These are not completely arbitrary, but the logic that determines them is opaque. Governments sometimes raise the minimum wage by passing a law, and market forces do not rebel or send the world into a spin, nor does unemployment rocket. So what was keeping the going rate lower? Top wages seem to owe a lot to fashion, and certainly not to solid evidence of worth.
What we all get is our pay less our taxes, so questions of fairness belong to the more general question of how we are rewarded in society. Tax is a part of that.
The other big underlying question I can see is about how we understand 'mine' and 'ours'. Income tax is unpopular because the government takes a slice of the money I earned and was enjoying regarding as mine. I got paid 1000 last month, but now 300 has gone, it's not fair.
This ignores the fact that my 1000 pay only has any meaning within the society that we create by our taxation and spending. I have no real money that can buy real things apart from the whole society that we make up (in both senses). Nor does the government exist as some other entity that can be seen as opposed to me. The government is us.
What is mine is the school across the road, the police who guard the street, and the pharmacy with drugs for free or cheapish, as much as the stuff on my house insurance or the numbers in my bank account.
Tax is one of the ways we shift wealth around. Paying tax shouldn't be thought of as a loss.
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My crazy theology in novel form
Posts: 4531 | From: Stinkers | Registered: Sep 2002
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quetzalcoatl
Shipmate
# 16740
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Posted
Obama: you didn't build that.
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*Leon*
Shipmate
# 3377
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Posted
The debate about corporation tax payment in the UK annoys me a lot. As far as can see, most people seem to be complaining that Corporation Tax isn't VAT.
It's fairly obvious that a lot of the value Google generates form the UK is as a result of real work being done outside the UK. therefore it seems quite obvious that a lot of the profit can legitimately be booked outside the UK. Specifically, Google's ability to make loads of money from advertising is dependent on a search engine and advert platform that are largely developed in California. Now, I know that in Google's case those profits end up in Bermuda, not California, but that's a matter for American taxmen to worry about, not UK ones. The change is they're now booking the work involved in selling advertising to the UK, not to Ireland. Most people who are arguing for Google paying more tax seem to ignore the possibility that any of the value should be booked outside the UK.
Another target, Amazon, has a very obscure tax structure. However all the strange products that are exchanged between different parts of the company to make this work are actually successful products that are sold to the general public.
In general, I feel there needs to be a sensible debate about what kinds of taxes multinationals are expected to pay. Working out what, simplistically, is the correct level of corporation tax for a multinational to pay is not obvious even assuming they aren't doing anything that could be described as tax avoidance. We should either come up with taxes where the amount to be paid makes sense, or put up with the fact that the amount paid doesn't make sense.
[ 28. January 2016, 14:09: Message edited by: *Leon* ]
Posts: 831 | From: london | Registered: Oct 2002
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Adeodatus
Shipmate
# 4992
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Posted
"From each according to their ability, to each according to their need." - Louis Blanc, 1839
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Leorning Cniht
Shipmate
# 17564
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Posted
quote:
Originally posted by Sipech:
So what do shipmates think constitutes fair tax (or is the idea not as good as low tax)?
One obvious feature of a "fair" tax is a level playing field - if you are taxed at a similar level to your competitors, the government isn't providing any of you with an unfair advantage.
Alan mentions this in his point about multinationals: arrangements that permit Multinational (UK) Ltd. to license its branding from Multinational Holdings (Tax Haven) Ltd. and so migrate profits to a low-tax country aren't fair.
The multinational case is complicated in that the unfairness is generated by a combination of governments rather than by one government by itself.
My opinion of taxation is quite straightforward - the tax system is a way of dividing up the costs of all the necessary functions of government amongst those who can afford to pay for it; it follows that attempts to misrepresent your wealth (by finding tax loopholes etc.) aren't fair.
Another aspect of tax fairness is really spending fairness. If I like apples and you like oranges, and you can get enough of your citrus buddies together to provide tax-funded oranges to everyone, that's not fair either.
Posts: 5026 | From: USA | Registered: Feb 2013
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mr cheesy
Shipmate
# 3330
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Posted
quote:
Originally posted by *Leon*:
The debate about corporation tax payment in the UK annoys me a lot. As far as can see, most people seem to be complaining that Corporation Tax isn't VAT.
No, most seem to be complaining that Google seems to be able to determine its own tax rate.
quote:
It's fairly obvious that a lot of the value Google generates form the UK is as a result of real work being done outside the UK. therefore it seems quite obvious that a lot of the profit can legitimately be booked outside the UK. Specifically, Google's ability to make loads of money from advertising is dependent on a search engine and advert platform that are largely developed in California. Now, I know that in Google's case those profits end up in Bermuda, not California, but that's a matter for American taxmen to worry about, not UK ones. The change is they're now booking the work involved in selling advertising to the UK, not to Ireland. Most people who are arguing for Google paying more tax seem to ignore the possibility that any of the value should be booked outside the UK.
Not sure I follow this: Google as a corporation is not based in the UK, therefore the question is how much business is done in the UK and therefore how much tax should be paid on that business. It seems pretty obvious that Google is getting paid for advertising British companies to British customers, so I'd think that the proportion of business advertising to British customers from companies outside of the UK would be quite small.
quote:
Another target, Amazon, has a very obscure tax structure. However all the strange products that are exchanged between different parts of the company to make this work are actually successful products that are sold to the general public.
As I understand it, the problem with Amazon/Ebay is that Chinese companies send packets of products to be sent to customers via British warehouses. These are often significantly cheaper even than online retailers who have bought the products from Chinese factories because they're not paying VAT or corporation tax in the UK - they certainly should be paying VAT and probably should be paying corporation tax if they're supplying customers with products which are already in the UK rather than sending them from China to order.
quote:
In general, I feel there needs to be a sensible debate about what kinds of taxes multinationals are expected to pay. Working out what, simplistically, is the correct level of corporation tax for a multinational to pay is not obvious even assuming they aren't doing anything that could be described as tax avoidance. We should either come up with taxes where the amount to be paid makes sense, or put up with the fact that the amount paid doesn't make sense.
This seems to discount the fact that the corporations want to pay as little tax as possible whilst benefiting from the supply of services by the state. At some point they have to realise that supplying products to British customers (for example) is a drain on British public finances (for example paying for the roads they use to distribute products) so having a sneaky nominal "head office" in Luxembourg to avoid paying tax isn't going to wash any longer.
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arse
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lilBuddha
Shipmate
# 14333
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Posted
*Leon*,
There is no difference between selling a camera on Amazon and selling advertising on Google. Neither product was made in the UK, but both generate revenue from the sale in the UK. Google has its expenses in the US and that is where it can deduct those, but it generates profit elsewhere as well and it is not unfair to pay tax on that.
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Hallellou, hallellou
Posts: 17627 | From: the round earth's imagined corners | Registered: Dec 2008
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Schroedinger's cat
Ship's cool cat
# 64
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Posted
Fair tax is a complicated system in a world where the internet is as prevalent as it is. Trans-national organisations are bound to use whatever tricks they can to have their tax burden settled in a low-tax place, and identifying what of their money comes from what other country is complex.
But to take the question a little more theoretically, a company should pay corporation tax on money it takes in a country (the UK). What they are actually doing is hiding that profit in another country, and that is wrong. Because Corporation Tax is based on profits, they can adjust the profits to ensure they are low, while still making sack-loads of money.
Starbucks is probably an easier company to consider. It pays no tax in the UK, but it must be making a profit, otherwise it would leave - they are not known for their charity. They are clearly taking a lot of money in the UK, given their presence every 6 shops, and that money should be appropriately taxed.
The real problem is that we have tax laws based on geographical boundaries, while business is no longer bound by these. The only answer would be a degree of harmonisation of tax legislation, some restrictions on business activity, and/or new taxation systems that depend on money taken, not profit. Given that 10% of the GDP of the world goes through the Netherlands because of a particular tax loophole, how likely is it that they will want to harmonise tax systems and close that loophole?
The core issue is that it should be a fair tax system for everyone. The problem currently is that a small business taking a million pounds a year can be paying more tax than a huge multinational taking several millions a day in the same business. That is not fair tax.
It should also be fair for the receivers of tax benefits, which should mean the welfare beneficiaries (of all sorts, including pensions), rather than the multimillionaire business leaders. I am a supporter of a high level of taxes (I am a lefty after all), because that is what is needed to support the less well off. People and businesses should pay into this proportional to how much money they actually make in the country - not how much their accountants can pretend they have actually made.
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Posts: 18859 | From: At the bottom of a deep dark well. | Registered: May 2001
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no prophet's flag is set so...
Proceed to see sea
# 15560
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Posted
It gets complicated. We have an area of the province where an oil company is driving lots of heavy equipment on local roads, damaging them. Should they pay for usage? The taxation system inordinately benefits this company who does not pay their share of costs for road maintenance, repair and construction. I'm actually of the mind that everyone should pay a per km or mile fee on all vehicle trips, with vehicles rated to cost more or less based on fuel use/enviro damage and wear and tear on roads.
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Doc Tor
Deepest Red
# 9748
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Posted
Which is why the quickest way to get transnational companies to pay tax is to levy something against a percentage of their turnover. "But we make no profit" then becomes irrelevant.
The only way to avoid the turnover tax is to incorporate within the tax jurisdiction. Then it's profits that get taxed, and to encourage companies to do that, you could make the overall tax-take lower.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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Leorning Cniht
Shipmate
# 17564
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Posted
quote:
Originally posted by Doc Tor:
The only way to avoid the turnover tax is to incorporate within the tax jurisdiction. Then it's profits that get taxed, and to encourage companies to do that, you could make the overall tax-take lower.
In a lot of these cases, the company is incorporated within the tax jurisdiction, but offshores its profits by purchasing image and branding rights, supplies etc. from an offshore parent at what are essentially arbitrary prices.
To achieve the "correct" level of tax, you need to make Amazon (UK) behave as though it were completely independent of Amazon (Netherlands) or Amazon (US), and then tax its profits.
Nobody can do that. It's possible to prevent the most obvious abuses, but no more than that.
Posts: 5026 | From: USA | Registered: Feb 2013
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Doc Tor
Deepest Red
# 9748
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Posted
Then they're not really incorporated in the country. A General Anti-Avoidance Rule would rule the off-shoring of profits illegal, and levy a tax bill based on turnover.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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Leorning Cniht
Shipmate
# 17564
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Posted
quote:
Originally posted by Doc Tor:
Then they're not really incorporated in the country. A General Anti-Avoidance Rule would rule the off-shoring of profits illegal, and levy a tax bill based on turnover.
But to rule the offshoring of "profits" illegal, you have to determine a reasonable purchase price for the thing that the domestic company is importing from its foreign sibling. Which isn't always easy.
Posts: 5026 | From: USA | Registered: Feb 2013
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Sioni Sais
Shipmate
# 5713
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Posted
quote:
Originally posted by Doc Tor:
Then they're not really incorporated in the country. A General Anti-Avoidance Rule would rule the off-shoring of profits illegal, and levy a tax bill based on turnover.
Would that mean that off-shoring turnover would also be illegal? Once that is in place could the amount on which tax is due be calculated fairly?
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"He isn't Doctor Who, he's The Doctor"
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Posts: 24276 | From: Newport, Wales | Registered: Apr 2004
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Leorning Cniht
Shipmate
# 17564
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Posted
Here's another challenge for "fair" taxation.
We often see examples of a big multinational company intending to build a new factory to build cars, or semiconductors, or whatever other widget they have. Said company could build the factory in one of several localities, and so the local governments fall over themselves offering tax breaks and subsidies to attract the new factory.
Attracting a big employer is clearly a good thing for the locality. It's rational for the locality to offer bribes to attract the big employer, and the locality shows significant net benefit even so.
But it's not "fair". The big employer is using all the same local resources as anyone else, but not paying its fair share of the costs.
Posts: 5026 | From: USA | Registered: Feb 2013
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Doc Tor
Deepest Red
# 9748
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Posted
quote:
Originally posted by Leorning Cniht:
We often see examples of a big multinational company intending to build a new factory to build cars, or semiconductors, or whatever other widget they have. Said company could build the factory in one of several localities, and so the local governments fall over themselves offering tax breaks and subsidies to attract the new factory.
The EU has rules regarding the level of state aid a country can give as 'sweeteners'.
It's not perfect, and IANAL, but you seem to be offering naught but a counsel of despair. Where there's a will, there's a way: all too often, the will is absent - I'd like to know why that is.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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Ricardus
Shipmate
# 8757
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Posted
quote:
Originally posted by lilBuddha:
*Leon*,
There is no difference between selling a camera on Amazon and selling advertising on Google. Neither product was made in the UK, but both generate revenue from the sale in the UK. Google has its expenses in the US and that is where it can deduct those, but it generates profit elsewhere as well and it is not unfair to pay tax on that.
I'm pretty sure that if Ricardus UK Ltd exports nasal hair tweezers to Poland, then although I am technically making money out of Polish people, I am not liable to pay Polish corporation tax. While I can quite believe that Google doesn't pay enough UK tax, I don't think the amount of products sold to British people can be counted as evidence for what it should pay.
The problem AIUI is when Ricardus UK Ltd 'buys' intangibles off Ricardus Luxembourg sàrl at an artificial price as a means of transferring profit into a tax haven.
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Posts: 7247 | From: Liverpool, UK | Registered: Nov 2004
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lilBuddha
Shipmate
# 14333
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Posted
Exporting an item is different than setting up shop to sell that item, which is essentially what Google does.
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Hallellou, hallellou
Posts: 17627 | From: the round earth's imagined corners | Registered: Dec 2008
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Arethosemyfeet
Shipmate
# 17047
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Posted
quote:
Originally posted by Gee D:
As far as I know, there's no obligation on anyone to arrange their affairs to pay more tax.
Well, I choose not to take full advantage of the tax system and so pay more than I could probably get away with - I'm in the position of being a reluctant landlord of a house where the rental income is less than the mortgage interest so could technically offset the extra loss against my tax liability from my employment but I choose not to because it feels like cheating. I wouldn't be able to do it if the house was empty and I was eating the whole loss but can if I'm recouping some of it by renting the house out? It's nonsense. Plus the government is already paying the rent as the tenants are getting LHA.
Posts: 2933 | From: Hebrides | Registered: Apr 2012
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ExclamationMark
Shipmate
# 14715
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Posted
With Google and other such large corporations, it's not so much the tax they pay as it is the feeling that the Government are much too cosy with them.
In my dealings with HMRC (personally, on behalf of others and in the corporate world), I've found them to be unbending, unhelpful and liable to interpret "guidelines" in a manner only likely to suit themselves. The argument over whether they could round up or round down was a classic of its genre.
It makes interesting reading to get a copy of the info that HMRC hold on you - they are legally bound to produce it in under 28 days (Data Protection rules). It includes not just your tax figures and records of income but a lot of other information, soem of which is their written and recorded comments about you. In both my (and other records), I've found significant inaccuracies which have resulted in cases being upheld for breaches of Data Protection.
It doesn't appear from wehat we see and/or read that Google et al, have the same kind of experiences.
I don't trust HMRC as a result of experience - I question everything and claim everything. y delay in responding to my enquiries egts an invoice from me with a notional charge of £60 per day until resolution - applying HMRC practice to itself. It may not result in any cash but it sure gets them moving!
Posts: 3845 | From: A new Jerusalem | Registered: Apr 2009
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Sioni Sais
Shipmate
# 5713
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Posted
quote:
Originally posted by Gee D:
As far as I know, there's no obligation on anyone to arrange their affairs to pay more tax. I certainly don't and I'd be very surprised if anyone on these boards does either. If a government considers that a particular method should not be allowed, the answer is to pass amending legislation.
I'm sure that I couldn't arrange to have my salary paid other than through PAYE (ie, deduction by employer). Most in the UK are in this situation. Successive governments have closed loopholes for individuals and done nothing about those used by corporations.
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"He isn't Doctor Who, he's The Doctor"
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Posts: 24276 | From: Newport, Wales | Registered: Apr 2004
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Adeodatus
Shipmate
# 4992
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Posted
Some questions for companies "arranging" their tax affairs:
Who paid for the roads and rail that get your employees to work?
Who paid for the drains and sewers that run under your buildings?
Who paid for the basic education of your employees?
Who pays for the police and armed forces that give you a secure environment to work in?
Answer those questions, please - and then pay your sodding taxes!
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"What is broken, repair with gold."
Posts: 9779 | From: Manchester | Registered: Sep 2003
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hatless
Shipmate
# 3365
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Posted
I agree that Google should pay more tax, and we should, together with other countries, find accurate ways to measure what they earn and owe. But, there are many ways of paying tax.
Google's biggest bill must be its wages, and every employee pays income tax. Much of their wages will be spent, incurring sales tax and various excise duties as well as profits at the supermarket, pub and taxi rank, on which further taxes are paid. The government gets to tax money nearly every time it changes hands.
Arguably tax rates matter less than the velocity of money.
But tax also has a symbolic function. We tax bad things like fags, and give relief for good things like being a friend of the schools orchestra. We like the new rich kids at Google to be made to pay. I think that's what this is really about.
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My crazy theology in novel form
Posts: 4531 | From: Stinkers | Registered: Sep 2002
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mr cheesy
Shipmate
# 3330
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Posted
quote:
Originally posted by hatless:
I agree that Google should pay more tax, and we should, together with other countries, find accurate ways to measure what they earn and owe. But, there are many ways of paying tax.
Google's biggest bill must be its wages, and every employee pays income tax. Much of their wages will be spent, incurring sales tax and various excise duties as well as profits at the supermarket, pub and taxi rank, on which further taxes are paid. The government gets to tax money nearly every time it changes hands.
Even if labour is their biggest cost (I have no idea) this is irrelevant. Employees pay income tax on their income, whether a company makes a profit or not. Whilst there might be a tangential link between employee costs and profitability (possibly a higher proportion of labour costs when a company is more profitable, but not necessarily), corporation tax is paid on profits. Therefore if Evil Corp is not paying corporation tax on the profits they are earning in the UK, then there is a loss to the public exchequer over-and-above what Evil Corp employees are paying in income tax.
Therefore this excuse that "ah but we're employing x million British workers" doesn't wash.
quote:
Arguably tax rates matter less than the velocity of money.
Not really. What matters is that some large corporations want the benefits of trading in particular jurisdictions without the full costs of doing so. They're playing a game, and you're seeking to let them off the hook whilst our NHS hospitals struggle to pay their bills.
quote:
But tax also has a symbolic function. We tax bad things like fags, and give relief for good things like being a friend of the schools orchestra. We like the new rich kids at Google to be made to pay. I think that's what this is really about.
Bullshit. This is about an attitude by some a the very top of our society that asserts they're too rich/important/prestigious to dirty themselves with paying tax.
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arse
Posts: 10697 | Registered: Sep 2002
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by Adeodatus:
"From each according to their ability, to each according to their need." - Louis Blanc, 1839
...is probably the stupidest philosophy I've ever heard, because it incentivises people to maximise their needs while minimising their ability.
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by Adeodatus:
Some questions for companies "arranging" their tax affairs:
Who paid for the roads and rail that get your employees to work?
Who paid for the drains and sewers that run under your buildings?
Who paid for the basic education of your employees?
Who pays for the police and armed forces that give you a secure environment to work in?
Around here, many such things are paid for by local councils. Now, I live in one council area where the council tax rate is quite low, but work in another where the council tax rate is comparatively high (for an otherwise identical house). So I'm not contributing any tax money towards the council-funded facilities that enable me to earn my money.
Do you think the council where I work should have the right to tax me as well as the one where I live? I am, after all, earning my money there. Am I freeloading off their provision while taking all of my earnings to a different council area where the tax take is lower?
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Sipech
Shipmate
# 16870
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Posted
quote:
Originally posted by mr cheesy:
This is about an attitude by some a the very top of our society that asserts they're too rich/important/prestigious to dirty themselves with paying tax.
I think you're imputing an attitude that doesn't really exist in the head offices of large corporations.
The key concern for management is the return to shareholders. That is enshrined in law (Companies Act 2006, s172t). Whether or not one likes to engage in sophistry about the nature of tax, it remains an expense. It is on the face of the income statement and higher tax reduces the return to shareholders.
So along with trying to increase revenue and gross profit margins, it is standard to try to look to reduce overhead costs, of which tax is just one.
That's the law as it stands. I don't agree that that's the way it should be, but when we discuss tax reform and ways to make it better, it helps to be able to diagnose the problems precisely.
This is why I don't find Adeodatus' comment of "pay your sodding taxes" to be constructive. It would only be appropriate if there was a single, clear number that a company would have paid had they not taken any measures to reduce their liability which could then be compared to the amount actually paid.
But the start of the problem is not even with the amounts paid, it is the lack of clarity that prevents such a calculation even being done.
Plus, as hatless rightly points out, tax can be used as an incentive (either to pay less tax) or a disincentive (to pay more). For example, I've advocated encouraging companies, when employing people, to favour those who are currently unemployed rather than those moving from job to job.
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I try to be self-deprecating; I'm just not very good at it.
Twitter: http://twitter.com/TheAlethiophile
Posts: 3791 | From: On the corporate ladder | Registered: Jan 2012
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Doc Tor
Deepest Red
# 9748
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Posted
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Adeodatus:
"From each according to their ability, to each according to their need." - Louis Blanc, 1839
...is probably the stupidest philosophy I've ever heard, because it incentivises people to maximise their needs while minimising their ability.
...is probably the stupidest interpretation of an eminently reasonable maxim I've ever heard, because it assumes people are simply suckling pigs looking for a teat to drain.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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mr cheesy
Shipmate
# 3330
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Posted
quote:
Originally posted by Sipech:
I think you're imputing an attitude that doesn't really exist in the head offices of large corporations.
The key concern for management is the return to shareholders. That is enshrined in law (Companies Act 2006, s172t). Whether or not one likes to engage in sophistry about the nature of tax, it remains an expense. It is on the face of the income statement and higher tax reduces the return to shareholders.
Corporations are not above the (tax) law. An individual who attempted to do this may well find that they're charged under tax evasion laws, there is no reason why a corporation should not also have the law properly applied to them.
quote:
So along with trying to increase revenue and gross profit margins, it is standard to try to look to reduce overhead costs, of which tax is just one.
Corporations may indeed attempt to bend, break, rewrite or ignore laws in particular jurisdictions. This doesn't mean that we should let them.
quote:
That's the law as it stands. I don't agree that that's the way it should be, but when we discuss tax reform and ways to make it better, it helps to be able to diagnose the problems precisely.
That's one law. Other laws apply. In this case, the law relating to paying of tax.
quote:
This is why I don't find Adeodatus' comment of "pay your sodding taxes" to be constructive. It would only be appropriate if there was a single, clear number that a company would have paid had they not taken any measures to reduce their liability which could then be compared to the amount actually paid.
No, sorry, this is very clear. The corporations do not want to pay the taxes on profits earned in the UK by trying on clever corporate structures designed only to avoid it. They're not the victims here, they're the ones trying to get the benefits from trading in the UK without having to pay their way.
quote:
But the start of the problem is not even with the amounts paid, it is the lack of clarity that prevents such a calculation even being done.
Even if things were absolutely clear, they'd be looking for ways to pay less than they should - because as you say they're only accountable to their shareholders and are looking for ways to reduce externalities. Which in this case includes finding ways to avoid paying for the things they use - like roads.
quote:
Plus, as hatless rightly points out, tax can be used as an incentive (either to pay less tax) or a disincentive (to pay more). For example, I've advocated encouraging companies, when employing people, to favour those who are currently unemployed rather than those moving from job to job.
Ridiculous nonsense.
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arse
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Sipech
Shipmate
# 16870
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Posted
quote:
Originally posted by mr cheesy:
Corporations are not above the (tax) law. An individual who attempted to do this may well find that they're charged under tax evasion laws, there is no reason why a corporation should not also have the law properly applied to them.
You are at risk here of conflating avoidance with evasion. I engage in tax avoidance personally by paying into a pension, having an ISA and giving by gift aid. I doubt I'm the only one here. Where there is evasion, of course an individual or a company is liable to prosecution. The issue at hand is how far does avoidance (which is absolutely legal, nomatter how much one may find it immoral or distasteful) go, before it becomes evasion. It's a grey area. quote:
That's one law. Other laws apply. In this case, the law relating to paying of tax.
I never advocated not paying the taxes that are due. It simply remains the case at the moment that there a number of legal ways in which you can reduce the amount that is due. In fact, quite a significant part of tax legislation exists to close previous loopholes. For example, when an individual is subject to capital gains tax on shares, the shares they are deemed to have sold first are those that they buy in the next few days. It sounds bonkers at first, but it's designed to curb short-selling. quote:
No, sorry, this is very clear.
Then please show your workings which tells you exactly how much Google would have paid had they not avoided any tax. If it is as clear as you say, this should not be a problem for a tax genius such as yourself. quote:
Ridiculous nonsense.
Would you care to elaborate on why you think this is so?
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I try to be self-deprecating; I'm just not very good at it.
Twitter: http://twitter.com/TheAlethiophile
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Adeodatus
Shipmate
# 4992
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Posted
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Adeodatus:
Some questions for companies "arranging" their tax affairs:
Who paid for the roads and rail that get your employees to work?
Who paid for the drains and sewers that run under your buildings?
Who paid for the basic education of your employees?
Who pays for the police and armed forces that give you a secure environment to work in?
Around here, many such things are paid for by local councils. Now, I live in one council area where the council tax rate is quite low, but work in another where the council tax rate is comparatively high (for an otherwise identical house). So I'm not contributing any tax money towards the council-funded facilities that enable me to earn my money.
Do you think the council where I work should have the right to tax me as well as the one where I live? I am, after all, earning my money there. Am I freeloading off their provision while taking all of my earnings to a different council area where the tax take is lower?
Until the Coalition started slashing council grants in 2010, more than 50% of what councils spent was paid for by grants from central government (and therefore from national-level taxation), and only 25% was raised by council tax, so I'm afraid your argument doesn't hold water.
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"What is broken, repair with gold."
Posts: 9779 | From: Manchester | Registered: Sep 2003
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Adeodatus
Shipmate
# 4992
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Posted
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Adeodatus:
"From each according to their ability, to each according to their need." - Louis Blanc, 1839
...is probably the stupidest philosophy I've ever heard, because it incentivises people to maximise their needs while minimising their ability.
Ability does not equal whether one can be bothered to work; need does not equal want.
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"What is broken, repair with gold."
Posts: 9779 | From: Manchester | Registered: Sep 2003
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lilBuddha
Shipmate
# 14333
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Posted
quote:
Originally posted by Doc Tor:
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Adeodatus:
"From each according to their ability, to each according to their need." - Louis Blanc, 1839
...is probably the stupidest philosophy I've ever heard, because it incentivises people to maximise their needs while minimising their ability.
...is probably the stupidest interpretation of an eminently reasonable maxim I've ever heard, because it assumes people are simply suckling pigs looking for a teat to drain.
It also ignores the basic reality of our society and the nature of humanity. We live in a cooperative society which depends on multiple levels and types of work and interaction. It is reasonable to expect that those whose situation* and/or abilities allow them greater reward share with those whose situation* and/or abilities do not.
*Situation is a greater factor of who has and who has not than many of those who have will admit.
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I put on my rockin' shoes in the morning
Hallellou, hallellou
Posts: 17627 | From: the round earth's imagined corners | Registered: Dec 2008
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lilBuddha
Shipmate
# 14333
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Posted
Originally posted by Sipech,
quote:
Then please show your workings which tells you exactly how much Google would have paid had they not avoided any tax. If it is as clear as you say, this should not be a problem for a tax genius such as yourself.
It doesn't take a genius to deduce that 3% is less a rate than what the vast majority of people pay and less than we could possibly arrange to pay without being completely destitute.
[ 29. January 2016, 16:38: Message edited by: lilBuddha ]
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I put on my rockin' shoes in the morning
Hallellou, hallellou
Posts: 17627 | From: the round earth's imagined corners | Registered: Dec 2008
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mr cheesy
Shipmate
# 3330
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Posted
quote:
Originally posted by Sipech:
You are at risk here of conflating avoidance with evasion. I engage in tax avoidance personally by paying into a pension, having an ISA and giving by gift aid. I doubt I'm the only one here. Where there is evasion, of course an individual or a company is liable to prosecution. The issue at hand is how far does avoidance (which is absolutely legal, nomatter how much one may find it immoral or distasteful) go, before it becomes evasion. It's a grey area.
No I'm not and no it isn't.
quote:
]I never advocated not paying the taxes that are due. It simply remains the case at the moment that there a number of legal ways in which you can reduce the amount that is due. In fact, quite a significant part of tax legislation exists to close previous loopholes. For example, when an individual is subject to capital gains tax on shares, the shares they are deemed to have sold first are those that they buy in the next few days. It sounds bonkers at first, but it's designed to curb short-selling.
Google is trying to use clever lawyers to negotiate the tax that is due. In other words, they think they can pay less than the tax rate everyone else pays.
quote:
Then please show your workings which tells you exactly how much Google would have paid had they not avoided any tax. If it is as clear as you say, this should not be a problem for a tax genius such as yourself.
It isn't about being a "tax genius", it is purely about the facts as as they're reported - which suggest that Google should have paid multiple times what they've negotiated. Given that they pay a lot more in other countries it seems reasonable to think that these estimates are somewhere near the truth.
quote:
quote:
Ridiculous nonsense.
Would you care to elaborate on why you think this is so?
What, you want me to comment on why I think your idiosyncratic suggestion to penalise corporations for employing people who are already in work in preference to those who are unemployed is nonsense?
For a start, the only power any employee has with his employers to negotiate wages lies in the fact that he/she can tell them where to stick his job and walk out. If one artificially reduces the value of an employee that is in work, this reduces his negotiating power and will likely lead to reduced pay.
Second, employees who are unemployed may for a large number of reasons be better than those who are unemployed (for example one may be continuing to learn new skills whilst in work but be getting left behind whilst unemployed - clearly that's not everyone, but an example). So suggest that employers are not only incentivised to employ the unemployed but disincentivised to employ people who are already employed is to force companies to take on people who may not be suitable.
It's a stupid idea. Why would anyone agree to this?
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arse
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Gee D
Shipmate
# 13815
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Posted
quote:
Originally posted by Sioni Sais:
quote:
Originally posted by Gee D:
As far as I know, there's no obligation on anyone to arrange their affairs to pay more tax. I certainly don't and I'd be very surprised if anyone on these boards does either. If a government considers that a particular method should not be allowed, the answer is to pass amending legislation.
I'm sure that I couldn't arrange to have my salary paid other than through PAYE (ie, deduction by employer). Most in the UK are in this situation. Successive governments have closed loopholes for individuals and done nothing about those used by corporations.
It used be called PAYE here, but is now PAYG (for Pay As You Go). Now doubt, someone was paid to think of the new name and acronym. But of course that only applies to employees, not to those of us who are self employed. Even for employees, those who have investments need to pay tax on the income from investments and are of course under no obligation to pay any more tax than the law requires.
Mr Cheesy, you say:
Corporations are not above the (tax) law. An individual who attempted to do this may well find that they're charged under tax evasion laws, there is no reason why a corporation should not also have the law properly applied to them.
and at face value that must be correct. I am not aware that the UK tax authorities are any less diligent than those here and if no proceedings have been taken against Evil Corp, I'd assume that tax is not being evaded, but legitimately avoided. Big difference, and not all that subtle. What Sipech is saying is 100% correct.
Arethosemyfeet, that is your choice. Do you depreciate the consumable fittings (eg carpet, blinds, paint, fences, dishwasher, hot water system) you supply with the rental property, or deduct the agent's commission? If so, why not depreciate the cost of the money you have borrowed to finance your investment? It's called negative gearing, and while it's the subject of much debate here from time to time, there seems little likelihood that any government will move against it.
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Not every Anglican in Sydney is Sydney Anglican
Posts: 7028 | From: Warrawee NSW Australia | Registered: Jun 2008
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chris stiles
Shipmate
# 12641
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Posted
quote:
Originally posted by Gee D:
I am not aware that the UK tax authorities are any less diligent than those here and if no proceedings have been taken against Evil Corp, I'd assume that tax is not being evaded, but legitimately avoided. Big difference, and not all that subtle.
Or the difference is a matter of opinion, and the company concerned can hire more lawyers than the budget HMRC have to expend on the case.
In which case the company may well make an offer, and HMRC may chose to take it.
Posts: 4035 | From: Berkshire | Registered: May 2007
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Gee D
Shipmate
# 13815
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Posted
quote:
Originally posted by chris stiles:
quote:
Originally posted by Gee D:
I am not aware that the UK tax authorities are any less diligent than those here and if no proceedings have been taken against Evil Corp, I'd assume that tax is not being evaded, but legitimately avoided. Big difference, and not all that subtle.
Or the difference is a matter of opinion, and the company concerned can hire more lawyers than the budget HMRC have to expend on the case.
In which case the company may well make an offer, and HMRC may chose to take it.
You may be right in your first paragraph about the UK tax authorities, but that is certainly not the case here. The difference between the concepts of avoidance and evasion is very straightforward; agreed that in particular instances it can become difficult to determine just which side of the line a particular course falls. Settling is not common here, seeking a court ruling is the preferred course for both sides.
[ 29. January 2016, 23:59: Message edited by: Gee D ]
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Not every Anglican in Sydney is Sydney Anglican
Posts: 7028 | From: Warrawee NSW Australia | Registered: Jun 2008
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Ricardus
Shipmate
# 8757
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Posted
quote:
Originally posted by lilBuddha:
Exporting an item is different than setting up shop to sell that item, which is essentially what Google does.
Well, Google's argument is that the shop is based in America, because that's where the coders are.
FWIW I do think this argument is qualitatively different from the Vodafone and Starbucks cases, in that coders are real people who draw real quantifiable salaries, whereas Starbucks' case was based on buying 'branding' from other bits of the group at arbitrary prices, and Vodafone's case was IIRC based on intra-group lending at arbitrary interest rates which were then offset against tax.
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Then the dog ran before, and coming as if he had brought the news, shewed his joy by his fawning and wagging his tail. -- Tobit 11:9 (Douai-Rheims)
Posts: 7247 | From: Liverpool, UK | Registered: Nov 2004
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lilBuddha
Shipmate
# 14333
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Posted
It isn't about the coders, but the product. They effectively have shops and products in many countries.
BTW, their coders might be in the US, but that which they create is assigned to Bermuda. They do not pay a reasonable share anywhere.
Google isn't interested in logic, they are interested in paying as little tax as legally possible.
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I put on my rockin' shoes in the morning
Hallellou, hallellou
Posts: 17627 | From: the round earth's imagined corners | Registered: Dec 2008
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mr cheesy
Shipmate
# 3330
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Posted
quote:
Originally posted by Ricardus:
ell, Google's argument is that the shop is based in America, because that's where the coders are.
Factually incorrect - there are Google programmers working in many different places around the world. And, AFAIU, none in Bermuda where the corp is apparently registered for tax purposes.
quote:
FWIW I do think this argument is qualitatively different from the Vodafone and Starbucks cases, in that coders are real people who draw real quantifiable salaries, whereas Starbucks' case was based on buying 'branding' from other bits of the group at arbitrary prices, and Vodafone's case was IIRC based on intra-group lending at arbitrary interest rates which were then offset against tax.
I think there is a difference, but not a massive one. Google does not provide tangible products, but it doesn't really matter: if they were producing widgets from factories in the USA (or as with their model from components assembled in various factories around the world), they are still seeking to provide those widgets to British customers for use in the British market. If they were selling tangible widgets, it wouldn't be much different to Starbucks.
The only difference here, it seems to me, is that those selling tangible products have to come up with more imaginative tax dodges than those selling intangible internet services - in that those selling tangible products have to come up with complicated licensing systems to transfer the profits to low-tax jurisdictions.
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arse
Posts: 10697 | Registered: Sep 2002
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Marvin the Martian
Interplanetary
# 4360
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Posted
quote:
Originally posted by Adeodatus:
quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Adeodatus:
"From each according to their ability, to each according to their need." - Louis Blanc, 1839
...is probably the stupidest philosophy I've ever heard, because it incentivises people to maximise their needs while minimising their ability.
Ability does not equal whether one can be bothered to work; need does not equal want.
So if the individual cannot decide what his abilities and needs are, who can? Should the State decide what work we do and how much we will get paid for it? And in what world is that a better solution than the one we have now?
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Hail Gallaxhar
Posts: 30100 | From: Adrift on a sea of surreality | Registered: Apr 2003
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Doc Tor
Deepest Red
# 9748
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Posted
quote:
Originally posted by Marvin the Martian:
And in what world is that a better solution than the one we have now?
The one where people starve for the want of a job.
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Forward the New Republic
Posts: 9131 | From: Ultima Thule | Registered: Jul 2005
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Arethosemyfeet
Shipmate
# 17047
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Posted
quote:
Originally posted by Gee D:
Arethosemyfeet, that is your choice. Do you depreciate the consumable fittings (eg carpet, blinds, paint, fences, dishwasher, hot water system) you supply with the rental property, or deduct the agent's commission? If so, why not depreciate the cost of the money you have borrowed to finance your investment?
At the moment HMRC say that because it operates at a net loss (just on the basis of rental income minus mortgage interest) I don't need to fill in a self-assessment form. I don't pay any tax on it, but I don't offset any of the losses against my tax liability for other things. Basic fairness seems to me that if I run any sort of attempted profit making venture then I should pay tax if it makes a profit but I don't see why the tax man should help me out if it loses money
Posts: 2933 | From: Hebrides | Registered: Apr 2012
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chris stiles
Shipmate
# 12641
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Posted
quote:
Originally posted by Gee D:
You may be right in your first paragraph about the UK tax authorities, but that is certainly not the case here.
I'm not sure where 'here' is so couldn't possibly comment. Suffice to say that a lot of these sorts of cases tend to circle around which jurisdictions profits are booked in - and I know of no major economy in which this hasn't been an issue.
Posts: 4035 | From: Berkshire | Registered: May 2007
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