They're a global business Stig. That's the point. The stuff can come from all over because they buy and store it all over. And that means they can plan what they do and where they do it for the best result.
I'm not saying that's good or bad, just that its not as easy to work out what "should" be paid where when there are so many different rules in different countries. We might think that more "should" be taxed here, but if the rules don't provide for it or another country says they want that income taxed in their country under their rules then who takes priority, country A or country B?
Also, in Amazons case I don't really see how they are masquerading as a UK business either. So they've got a UK web address, big deal. Doesn't mean they have to have any physical presence here at all (although in their case they have).
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales. Europe as a whole consumes a lot! And effective government / legislation should ensure that a fair share of sales tax and profits on that consumption should be collected in Europe and used to deliver decent services. I love There are various comments on here about technical issues and I could go into detail about coffee, books etc. and how some companies do not pay much tax in this country/ Europe. But there is a bigger point for me... where is the clarity from any political party on what must be a fairly big opportunity to lift the UK out of deficit AND lift Europe as a whole out of austerity/recession? For it is the politicians who should express clarity to the legislators and level this playing field. And delivery on this one area alone would nail the lie that is UKIP! The UK cannot operate in isolation and our issues are not down to the imminent arrival of 26M Romanians and Bulgarians! There are some fairly simple macro economic issues at stake including government revenues / spending which need sorting. None of this is about attacking global entities or driving them out of the country... just that if you buy a book or coffee for £3 which is distributed and consumed in this country then you expect a fair portion of the sales tax and profits on that item to go to UK plc.
Off-it is contradicting himself but this has only helped me to construct the argument above which I hope will appear at the next election... for like News of the World when you boil it down it is fairly simple
Good luck to anyone avoiding paying tax! If I could get away with paying no tax, then I, like most people wouldn't pay it. Just because its two massive companies everyone pisses and moans about it.
Yes, because if nobody paid any tax then that would work out great.....
If nobody paid any tax then we'd be called Greece, or Italy.....
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales. Europe as a whole consumes a lot! And effective government / legislation should ensure that a fair share of sales tax and profits on that consumption should be collected in Europe and used to deliver decent services. I love There are various comments on here about technical issues and I could go into detail about coffee, books etc. and how some companies do not pay much tax in this country/ Europe. But there is a bigger point for me... where is the clarity from any political party on what must be a fairly big opportunity to lift the UK out of deficit AND lift Europe as a whole out of austerity/recession? For it is the politicians who should express clarity to the legislators and level this playing field. And delivery on this one area alone would nail the lie that is UKIP! The UK cannot operate in isolation and our issues are not down to the imminent arrival of 26M Romanians and Bulgarians! There are some fairly simple macro economic issues at stake including government revenues / spending which need sorting. None of this is about attacking global entities or driving them out of the country... just that if you buy a book or coffee for £3 which is distributed and consumed in this country then you expect a fair portion of the sales tax and profits on that item to go to UK plc.
Off-it is contradicting himself but this has only helped me to construct the argument above which I hope will appear at the next election... for like News of the World when you boil it down it is fairly simple
So how am I contradicting myself then?
Actually, don't bother. I'm tired of trying to help people understand the problem. You think what you want old son.
If you go into a shop down your local high street and buy something then both you and the retailer will generally be taxed in the UK. Simple.
Now then, carry on.
It's not that simple though, what if that "widget" bought in the US for 1$ sold to the shop through an intermediary company for £9 and sold on to the customer for £10, the retailer books £1 worth of business expenses against tax and therefore pays no tax on no profit. The intermediary company makes all the profit and being based in a tax haven pays very little of the profit in tax.
The ability to trade across European borders is an integral part of the European free market. I had the pleasure of building one of the first multicurrency cross border systems in support of global points of sale applications in the early 90's.
The Irish Development Association virtually rebuilt the entire Eire economy on the back of bringing American companies to Dublin as their foothold in selling across Europe.
This method of trading, sales, product fulfilment and accounting has been around for 20 years. There are a number of issues surrounding the practice in terms of prevailing financial rules, consumer protection and product standards and of course corporation tax. The consolidation of administrative functions in one country saved these corporations a fortune. Advantageous tax regimes were core to deciding the preferred country of "trading" domicile.
May I suggest to those who express solidarity with such tax avoidance as if it is some blow against government who the hell do they think has to pay more tax because these corporations do not pay.
I find the concept of tax avoidance as if it were a game ridiculous and the idea a corporation feels able to place itself above the individual societies in which it trades and from which it profits beyond arrogant. Without doubt it is an abuse of those individual societies and effectively sticking two fingers up to every other business and individual tax payer who pay their dues.
The solution is comparatively straight forward. The country of trading and therefore prevailing consumer protection, prevailing legal product protections, and therefore consequent applicable tax regime simply needs to be defined by the country of origin of the order, be that order placed in writing, over the telephone or via the internet. Each transaction is easily tracked by way of network access. Any attempt to mask such network access identity would then be tantamount to tax fraud. It is perfectly possible for each transaction to carry an applicable country code. International credit card transactions have done so for decades. It is fundamental to the credit card bank interchange fees.
The message to any global corporation should be simple you want to sell in and make money in my national market you pay a fair price for the privilege.
Grapevine49
So companies should open their carefully constructed network security & protection to HMRC? Now you are having a larf! IT security is so lacking in this country it's unreal that would just make a bad situation worse.
Interesting debate. I am a bit confused with what appears to be well thought out analysis from some people who sound like they know what they are talking about, contradicting other well thought out analysis from other people who appear to know what they are talking about though.
I think what it boils down to is the morals and attitude of big companies, which in my opinion is a bit different from someone earning 30k a year saying they would pay less tax if they could.
Also, in Amazons case I don't really see how they are masquerading as a UK business either. So they've got a UK web address, big deal. Doesn't mean they have to have any physical presence here at all (although in their case they have).
Maybe not correct to say you are contradicting yourself - more like there is an obvious contradiction: I've forgotten the exact quote context but it goes something like this: if it looks like a fish and smells like a fish then the likelihood is that it is a fish
Last time I looked at transfer pricing, tax treaties allowed global entities to shift 95% of profits abroad via licence agreements. Yes they go to Dublin but then 95% of all European profits disappear out of the EU. I think the plumbing analogy is perfectly valid and that the tax laws in UK and EU should be changed to make the whole thing fairer while still encouraging global entities to trade here.
How do you do that? Don't know but to me that is why we have politicians and think tanks! Last time I looked only Italy and Spain have any kind of formal audit of transfer pricing arrangements so perhaps we start there?
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales.
No, I know perfectly well what VAT is, and it is NOT a tax paid by the seller but by the final domestic consumer. The companies in the supply chain are merely collection and payment agents for the government, and VAT is not a cost to them at all (with exceptions, but the general principle holds good).
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Interesting debate. I am a bit confused with what appears to be well thought out analysis from some people who sound like they know what they are talking about, contradicting other well thought out analysis from other people who appear to know what they are talking about though.
I think what it boils down to is the morals and attitude of big companies, which in my opinion is a bit different from someone earning 30k a year saying they would pay less tax if they could.
People are contradicting each other over both the theory and definitions - but it is excellent that we are having this debate here... and ideally it should be happening across the country and all over the internet because it matters... I don't know the exact numbers but suspect that the revenue lost to UK plc far exceeds the 1% of GDP we pay to the EU - the only way to capture it would be with G8, G20 and EU agreements on a new system.
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales.
No, I know perfectly well what VAT is, and it is NOT a tax paid by the seller but by the final domestic consumer. The companies in the supply chain are merely collection and payment agents for the government, and VAT is not a cost to them at all (with exceptions, but the general principle holds good).
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Hope that clears up my thinking on this a bit.
It does and the issue comes back to transfer pricing whereby 95% of profits are invoiced away out of UK - I can look up the origins of this ... clearly being exploited
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales.
No, I know perfectly well what VAT is, and it is NOT a tax paid by the seller but by the final domestic consumer. The companies in the supply chain are merely collection and payment agents for the government, and VAT is not a cost to them at all (with exceptions, but the general principle holds good).
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Hope that clears up my thinking on this a bit.
It does and the issue comes back to transfer pricing whereby 95% of profits are invoiced away out of UK - I can look up the origins of this ... clearly being exploited
Agree re transfer pricing. This is commonly achieved by shifting IP offshore then charging back a royalty to the UK based trading entity for use of the brand, which absorbs a large proportion of the profit leaving a very small tax bill in the UK, while the royalty income to the IP holder in, say, the Caymans or Luxemburg, is taxed at low or nil rates. I have also worked for companies that engage in this kind of practice, and it's not difficult to put a very significant proportion of profit that is essentially generated in the UK beyond the reach of the UK tax authorities. Besides, the regulatory framework and levels of disclosure in such low/no tax domains are close to non-existent, so it's almost impossible to follow the transaction chain through.
Which is exactly why the tax must arise on turnover in the UK, not profits. Profits are easily manipulated, turnover is not. Its really just a case of saying "If you want to do business selling to UK consumers, the cost of that will be 2% of everything you sell. Hardly onerous to a company whose overhead cost-base is low by comparison to their tax-paying competition.
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales.
No, I know perfectly well what VAT is, and it is NOT a tax paid by the seller but by the final domestic consumer. The companies in the supply chain are merely collection and payment agents for the government, and VAT is not a cost to them at all (with exceptions, but the general principle holds good).
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Hope that clears up my thinking on this a bit.
Sorry, but I think you have got an over simplistic way of how VAT actually works in practice. You try telling your average retailer that it doesn't cost them anything.
And how is your "sales tax" going to work? Go back to my example of a small uk business who supplies stuff to a customer in France. So they have to pay tax in France? And Germany, and Italy? And who is responsible for collecting that tax - would the small UK business have to register and account for tax in every country where they happen to have a customer? All sounds a bit unworkable to me.
Lots of hand wringing and complaints that the current system is "wrong"', but I'm not hearing many viable and workable alternatives. And therein lies the problem.
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales.
No, I know perfectly well what VAT is, and it is NOT a tax paid by the seller but by the final domestic consumer. The companies in the supply chain are merely collection and payment agents for the government, and VAT is not a cost to them at all (with exceptions, but the general principle holds good).
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Hope that clears up my thinking on this a bit.
It does and the issue comes back to transfer pricing whereby 95% of profits are invoiced away out of UK - I can look up the origins of this ... clearly being exploited
Agree re transfer pricing. This is commonly achieved by shifting IP offshore then charging back a royalty to the UK based trading entity for use of the brand, which absorbs a large proportion of the profit leaving a very small tax bill in the UK, while the royalty income to the IP holder in, say, the Caymans or Luxemburg, is taxed at low or nil rates. I have also worked for companies that engage in this kind of practice, and it's not difficult to put a very significant proportion of profit that is essentially generated in the UK beyond the reach of the UK tax authorities. Besides, the regulatory framework and levels of disclosure in such low/no tax domains are close to non-existent, so it's almost impossible to follow the transaction chain through.
Which is exactly why the tax must arise on turnover in the UK, not profits. Profits are easily manipulated, turnover is not. Its really just a case of saying "If you want to do business selling to UK consumers, the cost of that will be 2% of everything you sell. Hardly onerous to a company whose overhead cost-base is low by comparison to their tax-paying competition.
Sorry, but that last bit is utterly ridiculous. Are you intending to include all existing UK businesses win this new 2% tax? Or just the businesses you think are "at it" ?
Sorry, but I think you have got an over simplistic way of how VAT actually works in practice. You try telling your average retailer that it doesn't cost them anything.
And how is your "sales tax" going to work? Go back to my example of a small uk business who supplies stuff to a customer in France. So they have to pay tax in France? And Germany, and Italy? And who is responsible for collecting that tax - would the small UK business have to register and account for tax in every country where they happen to have a customer? All sounds a bit unworkable to me.
Lots of hand wringing and complaints that the current system is "wrong"', but I'm not hearing many viable and workable alternatives. And therein lies the problem.
That's my point. No contradiction there.
No, that's how VAT works. Any cost to the retailer arises from the administration of the tax, but the cost of it is borne by the final consumer. The retailer will pay input tax charged to them by their supplier, charge the customer output tax on the sale, then pay the difference over to HMRC. So there's no cost to the retailer at all, and though they might argue that their prices are higher due to VAT, that simply demonstrates that the VAT is in fact paid by the customer. I'm not thinking beyond standard rated goods sold in domestic transactions. Such matters as partial exemption, tour operators margin schemes, exempt/zero rated goods and services or cross border selling just complicate the debate and are largely irrelevant.
Your point on who should be covered by a turnover tax is a very fair one. I'm not a tax expert and havent worked out every detail. But I see no reason why such a tax should not be applied to all companies with UK turnover in excess of say £100 million. This means it's irrelevant to the small guy, and companies properly established in the UK would recover their turnover tax against their mainstream CT charge anyway, so would largely be unaffected assuming they make taxable profits. Alternatively, you could also reduce the standard CT rate by say 10% on profits but implement an irrecoverable turnover tax instead, pitched so as to balance out for the generality of properly established UK businesses. There'd always be winners and losers, but tax rules need to be simple to be effective.
Idle Hans, lets just agree to disagree on this one.
I know how VAT works. Trust me. I know what I'm talking about here. To say that VAT is not relevant or a cost to retailers is just wrong. I could give you lots of examples, but I just really can't be bothered.
IdleHans - instead of looking at a brand new tax why can't the experts look at how corporation tax is being avoided through transfer pricing and other recharges... perhaps the Chinese approach where IP has no value ! So 95% of profits cannot be recharged via licence. Given that this 95% on licenced IP has to be signed off within global tax treaties which have to be agreed by local tax authorities then maybe this % should be reduced?
Or perhaps look at the fair value of re-charges between connected entities... careful not to use real life examples here as I might not be precise but the basic issue is that a plumbing business can only recharge widgets (coffee beans!) at fair value and not with some exorbitant mark up...
Internet shopping, advertising and dissemination of information is only going to get bigger and bigger so the peeps had better come up with some proposals - once again my preference is that the politicians take a stance and, if voted in, get the technicians to make something workable happen.
Or maybe forget all of this and messrs Slater, Prothero, Murray and Jiminez set up an offshore entity to which we all pay a membership fee (without VAT) which in turn entitles us all to buy a £1 season ticket subject to UK VAT - after all if you can't beat them...
Or maybe forget all of this and messrs Slater, Prothero, Murray and Jiminez set up an offshore entity to which we all pay a membership fee (without VAT) which in turn entitles us all to buy a £1 season ticket subject to UK VAT - after all if you can't beat them...
People are talking on here about a "turnover tax" for the UK - we have one - It's called VAT! What everyone here is referring to is corporation tax and the use and abuse of transfer pricing plus the lack of clarity and definition in UK / European tax law when it comes to internet sales.
No, I know perfectly well what VAT is, and it is NOT a tax paid by the seller but by the final domestic consumer. The companies in the supply chain are merely collection and payment agents for the government, and VAT is not a cost to them at all (with exceptions, but the general principle holds good).
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Hope that clears up my thinking on this a bit.
It does and the issue comes back to transfer pricing whereby 95% of profits are invoiced away out of UK - I can look up the origins of this ... clearly being exploited
Agree re transfer pricing. This is commonly achieved by shifting IP offshore then charging back a royalty to the UK based trading entity for use of the brand, which absorbs a large proportion of the profit leaving a very small tax bill in the UK, while the royalty income to the IP holder in, say, the Caymans or Luxemburg, is taxed at low or nil rates. I have also worked for companies that engage in this kind of practice, and it's not difficult to put a very significant proportion of profit that is essentially generated in the UK beyond the reach of the UK tax authorities. Besides, the regulatory framework and levels of disclosure in such low/no tax domains are close to non-existent, so it's almost impossible to follow the transaction chain through.
Which is exactly why the tax must arise on turnover in the UK, not profits. Profits are easily manipulated, turnover is not. Its really just a case of saying "If you want to do business selling to UK consumers, the cost of that will be 2% of everything you sell. Hardly onerous to a company whose overhead cost-base is low by comparison to their tax-paying competition.
Sorry, but that last bit is utterly ridiculous. Are you intending to include all existing UK businesses win this new 2% tax? Or just the businesses you think are "at it" ?
It's clear that you know a great deal about this subject and that you have a very good understanding of what it seems are quite complex issues. You are certainly much better informed than I am.
I'd be interested, therefore, in any thoughts you might have about what society might do to ensure outcomes that better reflect both the objectives and the spirit of our system of taxation. As I think you might be implying, this would be helpful even if the actions only focused on the most egregious examples of tax "avoidance", i.e. on those companies who are really "at it".
The fault entirely lays with HMRC who don't seem to have the will to challenge these companies. There are enough laws in place to challenge transfer pricing rules. There are enough licenses and franchises between independent companies for HMRC to see who is taking the piss. The most ridiculous one is Amazon who have a warehouse and distribute goods from the UK. How they are not challenged under transfer pricing rules is beyond me. It seems to me as though HMRC aren't fit for purpose anymore. You can't blame companies for trying to pay less tax. Everybody should do that.
Great debate but not very interested in the accountancy details (what is VAT/turnover tax etc) as it entirely misses the point. To me, the idea of politicians taking the moral high ground on any issue is a joke but on tax legislation which is their responsibilty as lawmakers is an insult to our intelligence.
On what logical basis should commercial companies pay more tax than they are required to by law? Its a joke. Lets get some politicians with some intelligence who will change the law to make it fairer not just bleat on camera to improve their popularity ratings.
Anyway,the moral choice is one for us, the consumer, not the supplier. Most of us are just too lazy to seek products from local suppliers who have to pay not only corporation tax on their profits but also national insurance contributions for themselves and their employees, non-domestic rates, VAT plus all the other little indirect taxes like parking fines, TV licenses. MOT's, insurance etc. They probably also use local suppliers and maybe contribute to our local community on the school PTA, supporting the local football team or just having a charity tin on the shop counter.
Every time we purchase from a large scale mega-efficient online global retailer who invest diddly-squat in the local community, whether it be Amazon, Tesco or Apple we drive one more sharp nail into our local economy. At least consider this when you save a few quid on the next DVD box set.
And I think ties to my point re. politicians... they should either campaign to bring tax law up to date to cover internet purchases and/or, as Redman suggests give a directive to the civil service to go collect ... and go challenge these value chains which go in and out of UK/EU without economic purpose.
This is a bit more of a challenge than creating Mansion Taxes which raise diddly squat and it is not as simple and hostile as "tax the rich". But it is important and I have faith in the electorate that they can differentiate regarding the choices. At the moment UKIP is exploiting the lack of solutions offered by the mainstream and blaming the EU, Romanians etc. not dissimilar to post WW1 Germany!
Right now the economy is nearly the same size as it was pre-crash and yet youth unemployment is higher and the deficit is 6-7% with no party coming up with a rational package to create jobs/growth AND reduce the deficit. In short there is a social contract between consumers, retailers and government which has to be developed and made fit for purpose in this post crash world
And Vodaphone, Starbucks, Amazon and E Bay quite obviously don't have it.
They've cost the exchequer (and subsequently the hard working tax payers) several billions of pounds in their corporate tax avoidance.
And they think they're clever.
Or you could argue that HMRC's failure to properly detect and counter the problem - and successive governments failure to properly legislate against it - has caused the hard working taxpayers many billions of pounds.
After all, the businesses are just doing their jobs - maximising profits to return to owners/shareholders (which incidentally will include pension funds, so taxpayers may benefit in other ways), whereas HMRC and the politicians have clearly not been doing theirs.
I agree with redman that HMRC are not fit for purpose. They haven't been for years.
Idle Hans, lets just agree to disagree on this one.
I know how VAT works. Trust me. I know what I'm talking about here. To say that VAT is not relevant or a cost to retailers is just wrong. I could give you lots of examples, but I just really can't be bothered.
Happy to be educated, Off it, and to concede the point - I may well have missed something...
Take it the same venomous contempt is held for all of those who avoid tax by setting up offshore....I dunno football clubs registered in reknowned tax havens such as the British Virgin Isles for example?
What did Muzza say when you ripped into him about this Prague for being party to such a business? ;-)
Or the fact that the £53m group losses carried forward by the group means that tax paid by our beloved club will be on par with what those heartless bastards at amazon and google put into the system.
Maybe im massively off the mark but as I understand we are set up in BVI for the benefits of anonymity of the ownership structure (and I imagine with some element of tax efficiency being a bonus) and I also recall from New York Addicks blog that we wont be paying much tax for the forseeable future.
Fair enough when you are running at a loss you have no dough to pay tax but surely the set up and carrying forward of extended group losses is as equally questionable in this moral maze?
Apologies if ive got it wrong and we are helping make Britain Great again by pumping dosh back into the public purse like the outraged suggest other organisations should.
1) While we are members of the EU there is nothing we can do as we have ceded most of our powers to act independently in this area.
2) HMRC are muggers in suits. They go for the little old ladies' handbags (small businesses who cannot afford to contest their extortion) and leave larger concerns who can afford to argue the toss and prove them wrong alone.
Comments
I'm not saying that's good or bad, just that its not as easy to work out what "should" be paid where when there are so many different rules in different countries. We might think that more "should" be taxed here, but if the rules don't provide for it or another country says they want that income taxed in their country under their rules then who takes priority, country A or country B?
Also, in Amazons case I don't really see how they are masquerading as a UK business either. So they've got a UK web address, big deal. Doesn't mean they have to have any physical presence here at all (although in their case they have).
Europe as a whole consumes a lot! And effective government / legislation should ensure that a fair share of sales tax and profits on that consumption should be collected in Europe and used to deliver decent services. I love
There are various comments on here about technical issues and I could go into detail about coffee, books etc. and how some companies do not pay much tax in this country/ Europe. But there is a bigger point for me... where is the clarity from any political party on what must be a fairly big opportunity to lift the UK out of deficit AND lift Europe as a whole out of austerity/recession?
For it is the politicians who should express clarity to the legislators and level this playing field. And delivery on this one area alone would nail the lie that is UKIP! The UK cannot operate in isolation and our issues are not down to the imminent arrival of 26M Romanians and Bulgarians! There are some fairly simple macro economic issues at stake including government revenues / spending which need sorting.
None of this is about attacking global entities or driving them out of the country... just that if you buy a book or coffee for £3 which is distributed and consumed in this country then you expect a fair portion of the sales tax and profits on that item to go to UK plc.
Off-it is contradicting himself but this has only helped me to construct the argument above which I hope will appear at the next election... for like News of the World when you boil it down it is fairly simple
Actually, don't bother. I'm tired of trying to help people understand the problem. You think what you want old son.
I think what it boils down to is the morals and attitude of big companies, which in my opinion is a bit different from someone earning 30k a year saying they would pay less tax if they could.
Last time I looked at transfer pricing, tax treaties allowed global entities to shift 95% of profits abroad via licence agreements. Yes they go to Dublin but then 95% of all European profits disappear out of the EU. I think the plumbing analogy is perfectly valid and that the tax laws in UK and EU should be changed to make the whole thing fairer while still encouraging global entities to trade here.
How do you do that? Don't know but to me that is why we have politicians and think tanks! Last time I looked only Italy and Spain have any kind of formal audit of transfer pricing arrangements so perhaps we start there?
A tax on turnover would be paid by a company selling to UK consumers. I would construct such a tax that any amount paid on sales to UK customers would be offset against any mainstream CT paid by the company, though if this is minuscule as with Amazon/Starbucks etc, then they wouldn't of course be able to recover it.
Such a tax might put up consumer prices a little (but at most by the amount of the tax at 1-2%), but it would simply level the playing field a tiny bit. I used to work for Borders, and even after a staff discount of 30%, Amazon was largely still cheaper. This is mainly due to the massive overheads suffered by bricks and mortar retailers for rent, rates etc. And after all that, they are still expected to pay UK CT tax if there's any profit left, while Amazon et al avoid it almost entirely.
Hope that clears up my thinking on this a bit.
Which is exactly why the tax must arise on turnover in the UK, not profits. Profits are easily manipulated, turnover is not. Its really just a case of saying "If you want to do business selling to UK consumers, the cost of that will be 2% of everything you sell. Hardly onerous to a company whose overhead cost-base is low by comparison to their tax-paying competition.
And how is your "sales tax" going to work? Go back to my example of a small uk business who supplies stuff to a customer in France. So they have to pay tax in France? And Germany, and Italy? And who is responsible for collecting that tax - would the small UK business have to register and account for tax in every country where they happen to have a customer? All sounds a bit unworkable to me.
Lots of hand wringing and complaints that the current system is "wrong"', but I'm not hearing many viable and workable alternatives. And therein lies the problem.
That's my point. No contradiction there.
Sorry, but I think you have got an over simplistic way of how VAT actually works in practice. You try telling your average retailer that it doesn't cost them anything.
And how is your "sales tax" going to work? Go back to my example of a small uk business who supplies stuff to a customer in France. So they have to pay tax in France? And Germany, and Italy? And who is responsible for collecting that tax - would the small UK business have to register and account for tax in every country where they happen to have a customer? All sounds a bit unworkable to me.
Lots of hand wringing and complaints that the current system is "wrong"', but I'm not hearing many viable and workable alternatives. And therein lies the problem.
That's my point. No contradiction there.
No, that's how VAT works. Any cost to the retailer arises from the administration of the tax, but the cost of it is borne by the final consumer. The retailer will pay input tax charged to them by their supplier, charge the customer output tax on the sale, then pay the difference over to HMRC. So there's no cost to the retailer at all, and though they might argue that their prices are higher due to VAT, that simply demonstrates that the VAT is in fact paid by the customer. I'm not thinking beyond standard rated goods sold in domestic transactions. Such matters as partial exemption, tour operators margin schemes, exempt/zero rated goods and services or cross border selling just complicate the debate and are largely irrelevant.
Your point on who should be covered by a turnover tax is a very fair one. I'm not a tax expert and havent worked out every detail. But I see no reason why such a tax should not be applied to all companies with UK turnover in excess of say £100 million. This means it's irrelevant to the small guy, and companies properly established in the UK would recover their turnover tax against their mainstream CT charge anyway, so would largely be unaffected assuming they make taxable profits.
Alternatively, you could also reduce the standard CT rate by say 10% on profits but implement an irrecoverable turnover tax instead, pitched so as to balance out for the generality of properly established UK businesses. There'd always be winners and losers, but tax rules need to be simple to be effective.
I know how VAT works. Trust me. I know what I'm talking about here. To say that VAT is not relevant or a cost to retailers is just wrong. I could give you lots of examples, but I just really can't be bothered.
Or perhaps look at the fair value of re-charges between connected entities... careful not to use real life examples here as I might not be precise but the basic issue is that a plumbing business can only recharge widgets (coffee beans!) at fair value and not with some exorbitant mark up...
Internet shopping, advertising and dissemination of information is only going to get bigger and bigger so the peeps had better come up with some proposals - once again my preference is that the politicians take a stance and, if voted in, get the technicians to make something workable happen.
Or maybe forget all of this and messrs Slater, Prothero, Murray and Jiminez set up an offshore entity to which we all pay a membership fee (without VAT) which in turn entitles us all to buy a £1 season ticket subject to UK VAT - after all if you can't beat them...
I'd be interested, therefore, in any thoughts you might have about what society might do to ensure outcomes that better reflect both the objectives and the spirit of our system of taxation. As I think you might be implying, this would be helpful even if the actions only focused on the most egregious examples of tax "avoidance", i.e. on those companies who are really "at it".
The most ridiculous one is Amazon who have a warehouse and distribute goods from the UK. How they are not challenged under transfer pricing rules is beyond me.
It seems to me as though HMRC aren't fit for purpose anymore. You can't blame companies for trying to pay less tax. Everybody should do that.
Great debate but not very interested in the accountancy details (what is VAT/turnover tax etc) as it entirely misses the point. To me, the idea of politicians taking the moral high ground on any issue is a joke but on tax legislation which is their responsibilty as lawmakers is an insult to our intelligence.
On what logical basis should commercial companies pay more tax than they are required to by law? Its a joke. Lets get some politicians with some intelligence who will change the law to make it fairer not just bleat on camera to improve their popularity ratings.
Anyway,the moral choice is one for us, the consumer, not the supplier. Most of us are just too lazy to seek products from local suppliers who have to pay not only corporation tax on their profits but also national insurance contributions for themselves and their employees, non-domestic rates, VAT plus all the other little indirect taxes like parking fines, TV licenses. MOT's, insurance etc. They probably also use local suppliers and maybe contribute to our local community on the school PTA, supporting the local football team or just having a charity tin on the shop counter.
Every time we purchase from a large scale mega-efficient online global retailer who invest diddly-squat in the local community, whether it be Amazon, Tesco or Apple we drive one more sharp nail into our local economy. At least consider this when you save a few quid on the next DVD box set.
And Vodaphone, Starbucks, Amazon and E Bay quite obviously don't have it.
They've cost the exchequer (and subsequently the hard working tax payers) several billions of pounds in their corporate tax avoidance.
And they think they're clever.
On Anazon?
This is a bit more of a challenge than creating Mansion Taxes which raise diddly squat and it is not as simple and hostile as "tax the rich". But it is important and I have faith in the electorate that they can differentiate regarding the choices. At the moment UKIP is exploiting the lack of solutions offered by the mainstream and blaming the EU, Romanians etc. not dissimilar to post WW1 Germany!
Right now the economy is nearly the same size as it was pre-crash and yet youth unemployment is higher and the deficit is 6-7% with no party coming up with a rational package to create jobs/growth AND reduce the deficit. In short there is a social contract between consumers, retailers and government which has to be developed and made fit for purpose in this post crash world
After all, the businesses are just doing their jobs - maximising profits to return to owners/shareholders (which incidentally will include pension funds, so taxpayers may benefit in other ways), whereas HMRC and the politicians have clearly not been doing theirs.
I agree with redman that HMRC are not fit for purpose. They haven't been for years.
What did Muzza say when you ripped into him about this Prague for being party to such a business? ;-)
Or the fact that the £53m group losses carried forward by the group means that tax paid by our beloved club will be on par with what those heartless bastards at amazon and google put into the system.
Maybe im massively off the mark but as I understand we are set up in BVI for the benefits of anonymity of the ownership structure (and I imagine with some element of tax efficiency being a bonus) and I also recall from New York Addicks blog that we wont be paying much tax for the forseeable future.
Fair enough when you are running at a loss you have no dough to pay tax but surely the set up and carrying forward of extended group losses is as equally questionable in this moral maze?
Apologies if ive got it wrong and we are helping make Britain Great again by pumping dosh back into the public purse like the outraged suggest other organisations should.
1) While we are members of the EU there is nothing we can do as we have ceded most of our powers to act independently in this area.
2) HMRC are muggers in suits. They go for the little old ladies' handbags (small businesses who cannot afford to contest their extortion) and leave larger concerns who can afford to argue the toss and prove them wrong alone.