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The government is set to announce a renewed crackdown on large international tax avoiders, after evidence the big firms gave to the recent Public Accounts Committee hearing was described as “evasive” and “difficult to believe.”
MPs on the Public Accounts Committee were particularly scathing of the evidence given to the committee by Starbucks, which claims to have made a loss in 14 of the 15 years it’s been operating in the UK. Amazon was also criticised for being “evasive and unprepared to answer legitimate questions,” while Google was said to be rather hypocritical about its demands to pay tax in the country it’s earned, thanks to the way it shuffles money through Bermuda.
Margaret Hodge, chair of the Public Accounts Committee, said: “Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax here. This is outrageous and an insult to British businesses and individuals who pay their fair share.”
Chancellor George Osborne is said to be announcing some new tax-dodging, loophole-closing rules today, designed to claw back around £150m from the more obvious tax dodges.
Starbucks, meanwhile, announced plans to start reviewing its tax affairs and potentially start paying more UK corporation tax over the weekend, which is surely an admission that it’s been bending the rules to breaking point all along. [Metro]
Image credit: Hiding money from Shutterstock
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“The government is set to announce a renewed crackdown on large international tax avoiders”
I think I’ll see Michael Jacksoon moonwalk right in front of me before the government doing anything about tax avoiders.
EDIT BUTTON WHERE FOR ART THOU
Been there, screwed up my comment, wondered why I can’t do that…
Closed to the edit it seems!
I’m undecided on this. These companies are not breaking the law as I understand it but are instead breaking “moral” obligations for want of a better term. In terms of doing the right thing by Britain, yeah, get them to pay the same tax as everyone else who doesn’t use these loopholes. However, by doing that what will be the repercussions? Rising prices to offset the loss meaning we have to spend more money on things? Will companies just stop trading in the UK because it stops being cost effective?
On the flip side, of those scenarios do occur, how would it help Britain? Would UK companies start to do more home trade? Would the high street see a comeback?
Nope. All of these countries are way too heavily invested. There’s no way starbucks will just up sticks and disappear if forced to actually pay some tax. Even if they were charged a reasonable rate, they’d still be making hilariously huge profits.
This is repeating the same logic that has let them get away with it for years. The reason you see so many Starbucks and so few independent coffee outlets is because they can undercut the independents based on their multinational structure and the redirection of profits to international subsidiaries. What you will see is more competition as the playing field is equalized. Jobs will not be lost as the elasticity of demand for the commodity (coffee) is sufficient to maintain the derived demand for labour to supply it.
Yes, they may not be breaking the law, but they are flouting it. I am guessing you are undecided on MP expenses abuse because they (in the most part) were not breaking rules and were just taking advantage of them? Call me an overt socialist, but if people did their fair share and not focused only on shareholder appeasement, this country would be a much better place
These companies exist to make profit, whilst they are not (in the eyes of most, myself included) doing the morally right thing, they are fulfilling their raison d’être, the making of profit. It’s like criticising a crocodile for eating an animal.
I don’t agree with what they’re doing, but I also can’t fault them for doing it. The loopholes and ‘little tricks’ that allow them to get away with this is what should be more highly scrutinised. If the loopholes didn’t exist, then neither would this problem.
This. Multinational companies will always practice whatever methods allow them to make the most profit and avoid a high tax exposure. That’s just the nature of a commercial entity. If they didn’t do it, they’d be handing an advantage to their competitors that do practice it.
The only way to stop it is to close the loopholes where possible, thereby putting every multinational on a level playing field while also pulling in more tax revenue.
The government created the very loopholes that they are now upset with, and the reason it was done in the first place was to encourage multinational business. By closing these loop holes just think of the business that could be harmed outside of the public eye; Sony, Qinetic, GKN, Ford….. the entire Pharmacutical Industry.
I think that it has put a number of businesses into a position where it makes them look like the bad people when its a poor performance from previous political parties that should be bearing the brunt.
It should be possible to close some loopholes, requiring multinationals to pay a reasonable level of tax relative to their profits, without penalising them or unduly restricting their operations. It’s certainly true that if the operating environment becomes too hostile, many companies will simply reduce their footprint in the UK (particularly internet companies who are uniquely flexible), and many employees will lose their jobs. That’s something that legislators must try to avoid, and they know it.
But yes, the multinationals are being made out to look like the crooks, while the politicians who created that environment get away relatively scott free.
Well, its hardly honest when commercial entities report losses to HMRC based on payments to their own subsidiaries (thus avoiding tax liabilities) and then going on to brag to shareholders back home how brilliantly profitable their operations here are, is it?
As such, I have no issue with them being painted as crooks.
No, it isn’t honest or ethical (and neither is it illegal), but that’s precisely the kind of loophole I’m referring to. It needs closing.
So, you agree by (Dictonary.com’s) definition they are crooks then
Bloody ‘ell, we’ve lowered ourselves to this now?
Well OK. I wouldn’t go with any definition that describes them as criminals, sooo….
Under Webster’s definition, NO:
- “a person who engages in fraudulent or criminal practices”
Under Dictionary.com’s definition, YES:
- “a dishonest person, especially a sharper, swindler, or thief”
So, Companies get agro whilst complying with tax laws set (or at least not changed) by the Government, the Government changes those laws and looks like it is doing something about the “tax dodging” their laws allowed.
20 quid says if this had MS in the title and not google he would be giving them hell haha!
Sorry, are you talking about me? If so, then No, that isn’t the case. Google, along with everyone else should pay a fair amount of tax on the profits it makes in this country.
So, that’s twenty quid you owe me.
Will you be paying tax on that £20?
Considering I am likely to have to write this off as a bad debt, I doubt it.
No, Darrell does his banking in Lumembourg
SOAB! LuXembourg.
Sigh.
No, you were right the first time, I do all my banking in Lumembourg, a country that only exists as a typo, this means it has very good rates of taxation.
Shhh…don’t tell Starbucks.
Is it true that some people where giving abuse to baristas at Starbucks? That’s a bit shit. By all means, boycott the company, but the staff didn’t have any hand in it. If anyone had done that to me when I worked for Starbucks I’d have been pissed.
I was at a Starbucks about a month ago, near where I work, and it came to when the staff asked what name shall I put down on the cup – I reciprocated with suggesting they put “tax-payer”, and then promptly walked out with a smile.
You know that ALL UK employees of Starbucks pay tax via PAYE, right? I’m sure your point made them think very hard about the sins of the corporation that pays their rent.
Or they thought you were a bit of a pillock and served the next customer.
“Or they thought you were a bit of a pillock and served the next customer.”
I’m guessing this and then I walked out.
I disagree with what you say, but I LIKE the way you say it.
wonder if the tories will come down hard on the non doms too? oh, of course not, they are party donators
Just fix the tax laws and make it clear what companies should be paying. There’s no room for all this “morality” BS in tax law.
remember, the people making the decisions are mainly piggies with their snouts in the trough, just look at he expenses scandal for instance.
So you’re saying that the MPs are being paid by the multinationals and lobbyists? That does happen, but any such contributions would have to be declared on the Register of Members’ interests. Failure to do so may be considered a criminal offence.
I would avoid characterising all MPs as criminals due to the expenses furore. The scandal resulted in 30-odd resignations and suspensions (including 7 criminal charges) from a combined membership of 1425 (650 commons, 775 lords).
but thats only because most got off scott free. take the recent one. the guy is suspended for a year for stealing £40k and falsifying receipts. anyone else –> straight to jail.
what i really meant is that its not in their best interests to stop tax avoidance as they will be doing it later in life. or their vested interest companies do that.
I think you’re referring to Lord Paul. He was investigated by the Police, but they didn’t press criminal charges as he technically didn’t breach the House of Lords rules (and therefore couldn’t be characterised as fraud). However, the House of Lords did decide that he had acted dishonestly and he will be forced to pay back the £41k that he owes. He’s one of the 30-odd politicians that I mentioned above.
excellent. i can now create fraudulent false companies and move money between them then can i? can i fraudulently claim i have another 10 kids and claim benefits for them?
(etc etc)
basically you are saying they are allowed to defraud and its only illegal if a pleb does it?
How did you get that? Any organisation (including the house of Lords) can set as broad or as narrow an expenses scheme as they like. It’s only fraud if you criminally abuse that system.
Lord Paul claimed expenses for a second home that he barely visited, although he did technically meet the House’s requirements to claim expenses for it. The House concluded that they “did not feel justified in finding, on the balance of probabilities, that Lord Paul acted dishonestly or in bad faith. However, his actions were utterly unreasonable, and demonstrated gross irresponsibility and negligence. They therefore render him liable to sanction by the House.”
Again, it’s the difference between something that is illegal and something that is immoral. It’s a fine line, sure, but it applies to both the private and public sectors.
Two tennants of taxtion.
1 – Pay as little as possible WITHIN the rules of the tax laws.
2 – That the tax collected must be higher that the cost if it’s collection.
These companies arguements are that they haven’t broken any laws. And they haven’t. The difference between tax avasion and avoidance is one is illegal and one isn’t. Hell, there’s even a tick box on the Tax Return asking if you used one!!! It’s not like the Revenue don’t know you’ve used it!!! The problem and issue here is that the previous and current Government have screwed up the whole system.
When I first started in Accountancy most clients got a vist from the VAT man EVERY 3 or so years. And we had the Revenue (tax) man investigate regulary.
About 10 years ago they merged the two and cut a lot of jobs. They also put the owness on the tax payer. They also started to employ more ‘tick boxers’. Labour created more stupid tax laws and burecracy and the Tories have just continued this policy.
In my job I have found the Revenue are just interest in penalising people for filing late returns/forms. Everything is ‘online’ and hardly anyone is investigated unless you are ‘very’ unlucky. So it’s easier with a service with under-pressure staff to go after a ‘non-moving target’ (ie us) than to go for the big boys and waste valuable resources.
£2billion is nothing in the greater scheme of things. Especially with the amount of cutts already in play.
And I bet all this is just a smoke screen anyway…
Wait until the dreaded Real Time system for PAYE kicks in the next couple years, this is a worry system that no-one wants… Big Brother will certainly be watching you then!!!
The concept of charging large corporations a fair amount of tax is one of the fairest concepts in the world.
Taxes help provide better services and quality of life to the people of the UK. They free up certain cost worries such as healthcare, legal aid etc as the state provides these for them. Simple economics states that this will result in more disposable income. Higher disposable income will mean more customers for Starbucks as more people will feel it fair to pay £3.50 for one coffee than for however many you can get my making one at home.
Put simply:
Taxes = State Benefits = Disposable Income = Customers
Paying tax is a form of increasing sales.
not to mention that tax pays for amazon/starbucks etc staff to be educated. for roads to be built to the depots and for the police to stop us all just walking in and taking what we want
Exactly!
Quite right, but it works the other way as well. Multinational organisations have options as to where they set up their business. If they don’t like the tax situation in one country, they may choose to invest in another nearby country instead. That means fewer jobs and, ironically, less tax.
This is precisely what happened throughout the 2000′s when the Republic of Ireland lowered their taxes to large corporations. Many large organisations like Dell and Microsoft moved their UK operations to the ROI, resulting in lost jobs and tax revenue while the Irish economy boomed.
but then workers can move to other places like costa who will have seen a massive boost in customers without the competition.
i know what you mean. maybe the EU should set a standard rate of corporation tax to stop this?
in the end it didnt help the irish. we still had to bail them out for 10billion.
Well yes, they’re in tough times now (largely because of high public spending, a collapse in the property market and reduction in consumer spending) and some of those businesses are moving back to the UK. I’m just pointing out that the UK is part of a global marketplace here, not an isolated microcosm, and should act as such.