Corporate Tax Avoidance - A poll

[Herr Tubthumper]

And this is the point where the debate gets interesting. Business's are attracted to places with an educated workforce, to what extent do they have an obligation to contribute toward the upkeep of that (as they benefit from it) or is that solely the preserve of the British public?

Very much this.

 

[Herr Tubthumper]

They have the same obligation as any other tax payer. To pay the tax that the Government determines they should pay by way of legislation. All groups of society seek to minimise their tax liability. Providing it's within the law, personally I don't have a problem with it. If it is illegal then for any member of society, including companies and individuals, they should be prosecuted.

But sadly it is not as simple as legal/illegal. A lot of business law comes down to subjective interpretation. If I opened a coffee shop and sold a coffee (in my humble opinion) it is a sale; it is not the passing of intellectual property between two parties under license. Starbucks have argued the latter. The reason I do not pull the same stunt in my fictitious coffee shop is that the HMRC will most likely bang on my door and I will have to pay up. I could challenge it of course, but I am only a little coffee shop without the funds to fight the government.

The only reason a lot of companies get away with not paying taxes is because they have not been properly challenged over their intepretation of law. In some respects it is similar to the old trick (or urban myth) of DIY stores getting round the Sunday trading law by selling an orange for £50 which comes with a free ladder. This was eventually declared illegal after the government got around to challenging it and a judge decided that the DIY store was indeed selling a ladder for £50 on a Sunday.

 

[beorhthelm]

...My point, using Starbucks, is that I and others feel they have tenuously and falsely classified a service as intellectual property, they have costed it themselves and sold it back to themselves.

it seems you have mis-understood a significant detail. there is no one pretending that they are selling a service as intellectual property. they are licencing the Starbucks name, logos etc as IP, which it is. should they be allowed to do so within their own company is seperate matter. but eitherway, there's no legal question, its openly done by many companies. i think usally the parent compnay runs the satelite operations as franchises, which make it look better.

 

[BadFish]

Don't blame the companies,just change the law and as others have said.............cash in hand deals?Who hasn't partaken in this

Thing is we can't change the law can we? We can't even vote in a government that will change the law because none of the main parties will do this

The one thing we can do is choose to buy the products of the company with the least dodgy tax avoidance techniques.

 

[BadFish]

We can choose to support or challenge the way a company does business, treats it's workers, treats the planet, makes it's products or interacts with the local or global community. This is one of the few powers that we have and it surprises me that so few choose to exercise it. Instead we seem to make our consumer choices based on advertising, fashion and fad.

 

[Bedsex]

it seems you have mis-understood a significant detail. there is no one pretending that they are selling a service as intellectual property. they are licencing the Starbucks name, logos etc as IP, which it is. should they be allowed to do so within their own company is seperate matter. but eitherway, there's no legal question, its openly done by many companies. i think usally the parent compnay runs the satelite operations as franchises, which make it look better.

Yes, companies can choose where to locate their intellectual property and thus charge royalties to other group companies for the use of these IP rights. This is what Starbucks did, as their IP was located in the Netherlands.

However, the point that I don't think has been made yet, is that current UK tax policy is attracting big multinational companies to locate their IP in the UK. For example, a US multinational could locate their IP in the UK, the US company will pay royalties to the UK group company for use of that IP and get a tax deduction at 39%. The royalty income earned by the UK company, if eligible for the patent box regime, will be taxed at 10%. Therefore, the multinational company may well be avoiding 30% tax (all in the US, but still morally wrong by some commentators' opinions), but it will be bringing income into the UK, that is taxed here and may also bring additional employment and the tax income attributable.

For example £100m of royalties paid from the US to the UK, mean a tax saving of £29m for the organisation (how do they sleep at night with such dubious morals), but £10m of tax revenue for the UK exchequer that would not have otherwise arisen had it not been for the UK's more competitive corporate tax regime.

 

[BadFish]

Yes, companies can choose where to locate their intellectual property and thus charge royalties to other group companies for the use of these IP rights. This is what Starbucks did, as their IP was located in the Netherlands.

However, the point that I don't think has been made yet, is that current UK tax policy is attracting big multinational companies to locate their IP in the UK. For example, a US multinational could locate their IP in the UK, the US company will pay royalties to the UK group company for use of that IP and get a tax deduction at 39%. The royalty income earned by the UK company, if eligible for the patent box regime, will be taxed at 10%. Therefore, the multinational company may well be avoiding 30% tax (all in the US, but still morally wrong by some commentators' opinions), but it will be bringing income into the UK, that is taxed here and may also bring additional employment and the tax income attributable.

For example £100m of royalties paid from the US to the UK, mean a tax saving of £29m for the organisation (how do they sleep at night with such dubious morals), but £10m of tax revenue for the UK exchequer that would not have otherwise arisen had it not been for the UK's more competitive corporate tax regime.

Are you suggesting that tax avoidance is okay as long as it benefits the UK?

 

[spring hall convert]

We can choose to support or challenge the way a company does business, treats it's workers, treats the planet, makes it's products or interacts with the local or global community. This is one of the few powers that we have and it surprises me that so few choose to exercise it. Instead we seem to make our consumer choices based on advertising, fashion and fad.

Exactly, though you forget price, that's the key driver here. We have to take responsibility for the impacts of our purchasing decisions.

How many of you would knowingly buy clothes from a business that you knew manufactured using child labour?

 

[Bedsex]

Are you suggesting that tax avoidance is okay as long as it benefits the UK?

No, not at all. But what I am saying is that if companies operate on a global basis, in many territories that have different tax regimes and different tax rates, then tax avoidance is inevitable, whether intended or otherwise. Therefore I don't think that all tax avoidance can be labelled as immoral. I was also pointing out that the UK has taken measures to encourage investment in the UK.

What I also didn't point out is that of the total UK take, corporation tax is pretty insignificant and that the UK is wiling to sacrifice a small proportion of a small piece of the pie in order to gain a larger piece of the larger pie (income tax and NI).

 

[BadFish]

Exactly, though you forget price, that's the key driver here. We have to take responsibility for the impacts of our purchasing decisions.

How many of you would knowingly buy clothes from a business that you knew manufactured using child labour?

Yep I did forget price. Sadly, price plays a huge part in my consumer choices. Although ironically as i get paid by the government if more tax were paid i may get5 more money to make better consumer choices. Although I am a teacher so if more tax were paid I would be very unlikely to get any of it

 

[Goldstone1976]

Exactly, though you forget price, that's the key driver here. We have to take responsibility for the impacts of our purchasing decisions.

How many of you would knowingly buy clothes from a business that you knew manufactured using child labour?

I just don't think we're going to agree about this; but that's ok!

For me, CT really is as simple as whether it's legal or not. For you, it isn't.

Child labour? Immoral, for sure. But, also illegal. Double whammy.

 

[BadFish]

No, not at all. But what I am saying is that if companies operate on a global basis, in many territories that have different tax regimes and different tax rates, then tax avoidance is inevitable, whether intended or otherwise. Therefore I don't think that all tax avoidance can be labelled as immoral. I was also pointing out that the UK has taken measures to encourage investment in the UK.

What I also didn't point out is that of the total UK take, corporation tax is pretty insignificant and that the UK is wiling to sacrifice a small proportion of a small piece of the pie in order to gain a larger piece of the larger pie (income tax and NI).

Fair enough and I agree that not all tax avoidance is immoral. It is only really companies that take the piss that are highlighted for immoral practice. I suppose the question is: Where do you draw the line? and if a company crosses that line, what do you do about it?

 

[BadFish]

I just don't think we're going to agree about this; but that's ok!

For me, CT really is as simple as whether it's legal or not. For you, it isn't.

Child labour? Immoral, for sure. But, also illegal. Double whammy.

I for one find it hard to believe that anyone would use legality (especially in respect to corporate law) as a measure of morality.

But you have drawn your line and I respect that.

 

[Goldstone1976]

I for one find it hard to believe that anyone would use legality (especially in respect to corporate law) as a measure of morality.

But you have drawn your line and I respect that.

I'm specifically not equating morality and corporate law. I'm saying that the Gov't have decided what Corporation Tax laws the country will have and that all we can expect companies (and all other tax payers, whatever tax they are required to pay) to do, is to pay that tax. If the tax laws are morally bankrupt, then change them.

I respect any individual's right to boycott a company's product/services if they don't like the way they do business, and indeed I have done so personally (for example, I refuse to deal with Barclay's due to their actions during apartheid), but I hold no grunge if a company seeks to minimise their tax liabilities. Just about everyone does so. I don't see the difference between a company doing so and a private individual; s'all.

 

[Creaky]

And this is the point where the debate gets interesting. Business's are attracted to places with an educated workforce, to what extent do they have an obligation to contribute toward the upkeep of that (as they benefit from it) or is that solely the preserve of the British public?

Companies don't benefit from such resources - companies don't benefit from making a profit nor do they suffer from making a loss - ultimately it is people that either benefit or suffer and they have contributed towards the educational standards and other facilities. Suggesting companies can benefit or suffer is akin to saying they can be happy or sad.

You can't compare the profit a company makes with the income an individual receives, (well you can but it's not a valid comparison) - companies, (be they large or small), are the vessel by which most people achieve employment - take liquidity out of those companies via taxation and all that achieves is less employment opportunities.

 

[Dandyman]

everyone i know uses or would use any available tax reduction/avoidance option made available to them. got a pension? got a ISA? been on a booze cruise? paid a tradesman cash for a reduced price? so why get in a froth because a company does the same?

In what way is having a pension the same as corporations refusing to pay for schools, hospitals, roads, emergency services, and the rest of a civilised society ?

 

[beorhthelm]

In what way is having a pension the same as corporations [using the tax framework to avoid tax]

pensions have tax relief, you pay no income tax on the money earned that goes into the pension, therefore avoiding tax. you could take you earnings taxed them place them in an alternative investment vehicle to save for your retirement. or spend.

 

[Dandyman]

pensions have tax relief, you pay no income tax on the money earned that goes into the pension, therefore avoiding tax. you could take you earnings taxed them place them in an alternative investment vehicle to save for your retirement. or spend.

Pensions are deferred wages. To compare them to the deliberate moral fraud of mega corps and wealthy individuals is utter nonsense.

 

[beorhthelm]

Pensions are deferred wages. To compare them to the deliberate moral fraud of mega corps and wealthy individuals is utter nonsense.

nobody compared to "deliberate moral fraud", only to tax avoidance. there must be billions lost from the exchequer every year through this avoidance that could go to schools, health, roads. or the state pension? shirley as a socialist you would advocate that we should contribute all we can to the state provision, to improve pensions for all, rather than using favorable tax laws to privately aquire an improved pension of our own?

the pension funds are after all one cornerstone of the whole capitialist enterprise, being as they are principle shareholders of the corporations.

 

[gordonchas]

In what way is having a pension the same as corporations refusing to pay for schools, hospitals, roads, emergency services, and the rest of a civilised society ?

Companies and corporations are artificial constructs, they exist only on paper. Ultimately, they are just collections of individuals. As it is, they already pay plenty of tax, even those companies you don't like. VAT, Income Tax, National Insurance and Business Rates are all taxes that rely, in the main, on companies and corporations, as without trade you'd have none of those things.

Corporation Tax, which is just a tax on profits, is an irrelevance in the general scheme of things The total revenue to HMRC from CT is about £40bn a year. Income Tax, NI and VAT contributes around £350 bn. Business rates collects £20 bn.

A company can't attend a school or a hospital, it can't drive on a road or need to be transported in an ambulance. So it's individuals who should be taxed. As far as Income Tax, NI and VAT is concerned, they are already, though that's hidden from most people's view. Corporation Tax, though, should be scrapped completely and dividends should then be taxed as income.

This would level the business playing field a little in favour of the wealth-generating, innovate part of the economy, the SME's, instead of the continual favouring (by all major political parties) of mulitnationals who are able to take advantage of loosely written tax laws by those very same politicians.

As it stands, the £40 billion currently taken in CT has to be provided by someone. It's not the "company" because a company no more pays its own tax then your car pays for its own road fund licence - you have to do it. So the burden of paying the tax can only fall three ways. Either the shareholders pay it through reduced dividends, customers (ie you) pay it through increased prices, or the employees pay it through lower wages or lost jobs. Academic research suggests that the burden falls most greatly on the employees. But you'd like more Corporation Tax?