UKC

Nothing about VAT on Edam.

On the excellent BBC show "The town who took on the Taxman". The details of how many big organisations or the ultra rich are avoiding tax by offshoring profits were shown often to involve this stucture which buffers the loop-hole closures in most EU states. The figure quoted in this show as going through the Netherlands was $7 trillion. Mind blowing!

http://www.bbc.co.uk/programmes/b06ygl19
https://en.m.wikipedia.org/wiki/Double_Irish_arrangement#Dutch_sandwich

In reply to Offwidth:

How dare you come along with this fascinating illustration of one type of cross border tax arrangement which shows just how international, convoluted and difficult to legislate against these structures have become.

We just want to shout "it's not fair" and blame the government.

In reply to BnB:

Its not fair and I blame all western govenments. Better ?

This little programme based on a good comedic Mark Thomas style idea has woken me up to the true scale of the problem and I thought I was reasonably well informed.

In reply to Offwidth:

I particularly liked the extra conveluted 'Double Irish Dutch Sandwich'

In reply to Valaisan:

Especially as on the show it was implied it was a structure used by U2?

In reply to Offwidth:
While the "lost" corporation taxes seem like large numbers, the real benefit for the operation of multinationals within any economy accrues in a number of different ways, each far more significant than corporation tax.

The big one, of course, is employment. And we're not just talking McJobs here. Google and its like employ a great range of skills. The economic benefit of removing an individual from their dependence on the state is out of proportion to the minuscule CT generation of one employee in a vast corporation. And when we look at employment taxes, the picture is rosier still. Locating their business in the UK means that Google's UK arm, irrespective of company performance, pays about 40% of its entire wage bill directly to HMRC. More can be done, as Facebook's share scheme illustrates, but no company can retain a workforce on share schemes alone.

But let's talk indirect tax. Nigel Lawson is calling this morning for a shift away from taxing profits to a tax on sales. I'm surprised he hasn't already noticed that we have a tax on sales here in the UK. It's called VAT and results in 20% of the value of all Amazon UK's sales being paid directly to HMRC, whether they make a profit or not. I expect Lawson would like tax on sales to go further and the abolition of corporation tax on profits would provide the leeway to do so.

But the game for the UK government isn't as simple as squeezing the corporate pips until they squeak. They have to find the sweet spot that produces all the above benefits in the form of increased employment, employment taxes, and indirect taxation without killing the golden goose. The infrastructure of corporate taxation is part of their toolkit and, this being an international problem, perhaps we should be complaining as much about the excessively competitive rate of CT in Eire which is being so assiduosly exploited, as we are grumbling at our own government's efforts. Better still, maybe look at the wood, not the trees, and understand that, in an imperfect world, the possibility exists that we could be getting a better deal than many nations, and certainly better (and more complex) than most are willing to admit.

In reply to BnB:

UK losing millions in VAT from non-EU sellers on Amazon.

http://www.theguardian.com/business/2015/nov/01/uk-losing-millions-vat-non-...

I'm all for sensible tax rates it just seems to me globalised organisations are currently running rings around western states, partly with our politicians looking to be culpable in the scams. Mass tax avoidance, funds sucking value from shares on streams of mainly cancelled nanosecond bets (where they can't lose), TTIP allowing evil corporates to sue governments over evidenced based public health initiatives....

In reply to Offwidth:


But you can spin that another way:

UK consumers saving 20% on electronics leading to an increase in disposable income and consumer confidence!!

In reply to BnB:

A dumb argument which taken to its extreme would mean no tax. If tax is set at the wrong level in terms of overall effect on a balanced economy its better to close the loophole and charge a lower rate for everyone. Why should Amazon get a better deal than small business in the UK?

In reply to Offwidth:


CT rates haven't historically been the same for small and large companies. There's nothing new in a disparity.

I am playing devil's advocate here simply because most people have very little appreciation of the nuances (not including you amongst that number of course). If anyone should be pissed off about the contrast in the treatment of multinationals vs SMEs it's me.

I'm majority shareholder of a sizeable SME and of all the contributors to these Google CT threads I'd be surprised if there are many who feel the disparity more keenly than me. If I put a value on my disproportionate burden (relative to Google for example) you would choke on your coffee and I'd start weeping at the keyboard. Of course, everyone of us misses out when taxes are avoided, not just those who bear an unfair burden. But I understand the complexities of the problem for the government and I can see the benefits of using CT as a tool in the UK's international competitiveness. Few in low-CT Eire are complaining about all the jobs that have appeared there in the past 20 years.

In reply to BnB:



Surely just a ME then

In reply to Alasdair Fulton:


Indeed. By either Companies House or EU definitions we are a medium sized business. In fact our turnover is "only" a few million short of lifting us into the large category so I'm eagerly anticipating the day HMRC calls me "sweetheart"

In my dreams.

In reply to BnB:

Fair enough. Big corporates get enough advantages as it is with better access to loans, lawyers etc and more dishonest stuff like tax doges and anti-competitive practice (like the scummy behavior demonstrated in the Tesco's story last week). Its about time punishments (when criminal or rule breach practice is found) started to fit the crimes... as it is most are not even fined or prosecuted.

In reply to Offwidth:

Don't get me started on Tesco. Slow payment is a deadly form of corporate arrogance. I hope the bad press costs them dear.

In reply to Offwidth:

Brilliant programme. I can't believe I just watched an hour long documentary about corporation tax and found it engaging, and even quite poignant. As shown in the film, it's not the easiest way to protest - to "sink to the level of Starbucks" as Irena put it - so the message is slightly confusing unless you pay attention.

In reply to BnB:


Trouble is, CT is hard cash, whereas we can't know which of the other benefits we'd lose if the rules were changed so that multinationals had to pay.


You're arguing that changing the rules so that Google pay tax will mean that we see all these employees on the dole. I just don't believe it - there is much, much more to operating in the UK than being able to avoid tax. If that's all we've got to offer multinationals, despite being a huge, English speaking, liberal economy, then we need to take a long hard look at ourselves (i.e. our education, our infrastructure, our people).


Exactly. And no one is arguing "until the pips squeak". The argument is simply that SMEs shouldn't get screwed by having to pay vastly higher tax rates than large corporations. I simply don't believe that the only reason these companies do business in the UK is because it allows them to avoid taxes, and that if we make them pay we will lose out as they close every office, every coffee shop, every warehouse. It's not a credible argument, we're far too big a market, and we have far too much to offer.

In reply to Jon Stewart:


This government has changed the rules. The general anti-avoidance legislation was introduced in 2015 to capture precisely the sort of arrangement we're discussing here. It covers all arrangements from 2013, so too late for Google's historic transactions but surely a step in the right direction? Were you aware of it?

https://www.gov.uk/government/publications/tax-avoidance-general-anti-abuse...


No, I'm arguing that fast growing US technology firms have a choice of locations for their new European headquarters which will be decided by a range of factors from labour cost and availability through to tax infrastructure. Apple's is in Éire, so is LinkedIn's. Why is that? Éire had nothing like the information technology skills infrastructure of the UK's population when those decisions were made.


Of course Starbucks won't close their coffee shops unless unprofitable. And if they did, someone else (preferably independent and local) would fill the gap so frankly I wish they would. Those are pips I'd like to see squeezed to death. But Nissan's car-making operation in NE England exploited the ready availability of skilled labour but was brought to the UK by a "sweetheart" deal that included free land and legally questionable union-busting arrangements. I'd speculate that their tax arrangements include certain incentives too. Ask the people of Washington whether they care and I doubt that's a worry..

Thank you for your concern that I'm "getting screwed by having to pay vastly higher tax rates". But, it doesn't feel that way to me. It just looks like the old game of governments lagging behind the avoidance while having to balance a range of conflicting priorities. The plunging rate of CT for all companies from 28% to its current level of 20% while raising the level of tax on shareholder dividends by 7.5% tells me that they've done their sums and figured that they can skin this cat another way AND encourage investment in the UK simultaneously.

In reply to BnB:


That's jolly good, and obviously better than no changes, but it clearly doesn't address the issues raised by the film. So "must do better" is my response. The changes we need are ones which work internationally, everyone knows it, but there's no political will. I don't buy the line that it's impossible to negotiate, the countries we're talking about do not have the world's biggest economies over a barrel.


That sounds like an argument that we should become a tax haven in order to attract US technology companies to base themselves here. I don't think that's a good plan for our economy. A tax regime that requires everyone making money here to pay their way so that investment in services, education and infrastructure make for a well-functioning society sounds like a better way to encourage growth of diverse home-grown businesses to me.


I think that's fair. In certain circumstances there might be good reasons for flexibility, exceptions to the rule that corporations pay 20% or whatever rate. But making exceptions where a good public interest case can be made is not the same as having sloppy policy without international coordination that allows for "Dutch sandwich" and "double Irish" structures which are simply loopholes that let big business rip off the taxpayer. Presenting the current situation as one in which the rules are carefully balanced in favour of the public interest is disingenuous, precisely as the film points out.


I don't doubt that there is *some* intelligence and public spirit within UK tax policy - and the last budget went further than I expected in raising tax from business - but I don't agree with your stance that everything's fine and nothing needs to change. You haven't responded to the point made by the film: one rule for the big boys while SMEs have to pay up or else. The point is very well made that if SMEs were to use the same structures as the multinationals (which seems to be possible, if probably not very good value for them) then the rules would simply have to change.

Do you think that this threat (which I doubt is that realistic but makes a great point) is irresponsible, because we as a society benefit so much from companies using "the double irish with a dutch sandwich" even though at face value it appears just to be a scam?

In reply to Jon Stewart:
No one is saying everything is fine and nothing has to change. I thought it was obvious from the data I quoted that things are changing quite significantly. In shifting the burden of tax away from the corporations and onto their shareholders by reducing the headline level of CT and increasing the tax on profit distribution, the incentives for corporate tax avoidance are greatly reduced, without necessarily harming the overall tax take (with the obvious rider that the treasury needs to have got its sums right).

And the GAAP provisions introduced last year make future efforts to abuse tax treaties illegal. Why you don't think the legislation addresses the issues raised in the film you'll have to explain, especially since it specifically includes corporation tax and the abuse by multinationals of international tax treaties for the purpose of tax avoidance. Most tax accountants disagree with you.

If you suggest that the devil is in the detail and implementation, particularly requiring the cooperation of other nation states, is harder than design I'll agree with you. But these measures seem to be wide reaching and ambitious.

So what is the government doing about this problem? More than you expected.

In reply to BnB:
I own 80% of an SME. I am getting hacked off by the tech company's blatant use of clever tax arrange to pile up cash in places like Bermuda. It looks like that my business pays more ct than shell, BP,BAT,astra Zeneca and others combined. Something is not right. As the entrepreneur Luke Johnson says "it stinks".

In reply to neilh:

No argument with you on that.

In reply to BnB:

You can't be sympathetic to Neil and support the governments changes as they stand. Talking up changes which don't deal with most of the money is dishonest... they are not a success they are only a small step in the right direction. The problem is huge and seems to me to be getting bigger more quickly than changes are made:

http://www.telegraph.co.uk/finance/personalfinance/tax/9905450/Dozen-FTSE-1...

In reply to BnB:

You can't be sympathetic to Neil and support the governments changes as they stand. Talking up changes which don't deal with most of the money is dishonest... they are not a success they are only a small step in the right direction. The problem is huge and seems to me to be getting bigger more quickly than changes are made:

http://www.telegraph.co.uk/finance/personalfinance/tax/9905450/Dozen-FTSE-1...

In reply to Offwidth:

So what can I/we do? I have been following this thread and others and agree things are wrong. I just don't know what to do about changing things. Is it as simple as voting for change at the next election? I have no intention of joining a political party.

In reply to BnB:

That's one hell of a B&B BnB

In reply to Eeyore:


Personally I don't think we get any change regardless of who we vote for, just a different mouthpiece.

We need to change the economic model. The growth model is doomed to fail, as it has many times already, because it relies on ever increasing returns and as a result ever increasing growth and ever increasing ravaging of the World's resources (hence boom bust, environmental disasters, increased rate of global warming, humanitarian disasters and war). Greed & self-interest is insidious and it is in everything so the chance of changing the model is essentially zero.

Hypothetically though, changing the global economic model can only work if people learn to say enough is enough, stop wanting more and self regulate that ethos effectively, which fundamentally means that change can only come by changing human nature and for that we need a new period of enlightenment when everyone participates.

Chances of the Google board one day saying; "Hey Guys! Here's a great idea, how about we say $1 Billion profit per annum is enough and for every new client beyond that and every extra $1 we make, we just keep reducing our prices?"

In reply to Valaisan:


So do I do nothing (other than look after my own interests) because the chance of achieving change is near zero or can I do something? If I do something, what is something?

In reply to Offwidth:
How can you judge whether changes introduced a mere 10 months ago have been a success? Have you studied the General Anti-Abuse legislation? No one, private or corporate, has yet had a tax return processed under the new regulations. Time will tell as to the effectiveness of the measures but suggestions that the government has done nothing are ill-informed. Apologies for the nerdiness but you might find this interesting:

GAA captures (from the Act itself):

a) arrangements resulting in an amount of income, profits or gains for tax purposes that is significantly less than the amount for economic purposes
b) arrangements resulting in deductions or losses of an amount for tax purposes significantly greater than the amount for economic purposes
c) arrangements resulting in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid

These encapsulate the key tools of corporate tax avoidance. Whether tax avoidance is deemed abusive or legitimate depends on whether "it were reasonable to assume that this was not in fact the anticipated result of the relevant tax provisions when they were enacted"

Now it's down to HMRC to make it stick, as follows (from the guidance notes):

In broad terms, counteraction by the GAAR comes into operation when each of the following questions is answered £yes£ in sequence:
a) Is there an arrangement which gives rise to a tax advantage?
b) Does the tax advantage relate to one of the taxes to which the GAAR applies?
c) Is it reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangement?
d) Is the arrangement abusive?

In reply to Offwidth:

I enjoyed a Dutch sandwich once, it wasn't tax but it did end in x....

In reply to Orgsm:

Gravlax?

In reply to Orgsm:

Calmex?

In reply to Eeyore:
I'd say its always best to complain as effectively as you can. Governments have to be held to account. If you haven't seen it I would look up 38 degrees: an example of people power that has changed policy based on evidence in the face of spin.

The certainty expressed by doommongers about the inevitable failure of capitalism demonstrates a complete misunderstanding of how technological change can drive growth. The current problems are really a failure of regulation: of dishonest avoidance schemes, governments not acting then being forced to bail out failed banks with huge amounts of taxpayers money (and in the UK's case spinning that it was Labours fault, for political gain), and sometimes clear criminality (usually unpunished). The super rich are scamming the middle and working classes of the western world with the culpability of the political elite.

The Observer today has a front page story about the government strongly lobbying to keep the Bermuda tax haven off an EU blacklist. It also has an article on how the Uber (backed by its super rich investers) runs anti-competitive practices by running at a loss until after the destuction of any local competition. Not long back it was Amazon bypassing VAT liability using loopholes. Facebook pay less corporation tax than most individuals (£4k last year). And several top FTSE companies pay nothing.

In reply to BnB:
Any government that is serious about raising corporate tax revenue wouldn't behave the way this government has. Saying one thing and doing almost the opposite behind the scenes. Even more stupidly cutting back HMRC when experts say increasing staff and resource would easily repay any investment many times over.

The new law is already bypassed by these loopholes like the dutch sandwich, when is the next law due?

In reply to Offwidth:



Incorrect. The GAA captures the Dutch sandwich because the purpose of the structure is the avoidance of tax. That's the innovative nature of the legislation, it doesn't attempt to outlaw any structures, but rather the intention behind them by what is known as the "double reasonableness test". I'm sorry you're unable to see that.

In reply to BnB:

As I said, follow the money not the political spin. If it was working there would be more and better deals (and HMRC investment to handle the work). I'd love to see jam tomorrow from this act but am currently a bit cynical and expecting some more of my bread to be stolen (my take home pay is less than 2009 and set to drop again next year with NI changes, I pay more for a worse pension, the services provided by tax have declined in quality...and I'm one of the lucky ones).

In reply to BnB:
I'm listening to the news, and Sajid Javid is saying how he sympathises with SMEs who think the Google deal stinks. He's not saying that the provisions in place from 2015 prevent the arrangements being used from now on...and nor is anyone else. You seem to have a lot more faith in the GAAP that the government!

In reply to Offwidth:

I suspect the new law will capture some of its intended targets but fail in other ways as the game is moved on by new countermeasures. What isn't deniable is that it represents a sea change in legislative strategy for which you might eventually end up giving the government some credit.

Just providing a litany of corporate evil doesn't advance the debate or strengthen your case. We all agree it's a problem. And I agree with you that holding the government to account by protest or other means is vital. But try to understand their conflicting priorities as well as the steps they have already taken, the better to persuade and influence.

In reply to BnB:

Just maybe!


I haven't done that here, just responded to the film. About a month ago I posted about the banks that paid no CT because of the unprecedented losses incurred in the crash (and shuffling money around between jurisdictions so that losses were reported in London and profits somewhere else); and George Osborne agreed with me, rather than the Tories on here, that it was totally unacceptable.

If you support the government (or like others, you work in the world of f*cking the taxpayer in the ass and need to defend your self esteem), then you have reason to paint me as ranting without considering the broader picture. But if you look at the content of the arguments, you'll find that I'm quite prepared to consider conflicting priorities in the the context of the public interest. When it comes to the stuff that gets me angry, it's because in those cases the idea of the government working in the public interest has become a total joke!

Edit: Sorry, just realised your post was in reply to Offwidth, I needn't have been quite so defensive.

In reply to Jon Stewart:

No worries Jon. It's an important topic about which you're right to be enraged. How do you think I feel as owner of an SME?. But for there to be a discussion someone has to offer the unpopular viewpoint. It's been an interesting conversation and I'm fascinated to see whether the new legislation bites.

Thank goodness I wasn't born with the "right" socio-economic capital or I'd have ended up as a tax partner in some international law firm. My brother in law was just that and he quit because he hated his clients so much.

In reply to BnB:

I said its a step in the right direction: that is some credit. We can come back over the next few years to see how it goes. I just think the seeming continued weakness of regulation and tax control is dangerous to the markets and will soon lead to a repeat of the level instability we saw in 2008. In the meantime I'm looking forwards to The Big Short which hopefully might open a few more eyes to what can go wrong when market regulation and control is too weak.