Tax dodging is not only limited to the UK

[scottycelt]

well Margaret Hodge should know about this stuff if anybody does...:whistle:

http://www.ft.com/cms/s/0/d1193b70-be2b-11e2-bb35-00144feab7de.html#axzz2TU7dlEWF

http://www.telegraph.co.uk/finance/businesslatestnews/9668396/Margaret-Hodges-family-company-pays-just-0.01pc-tax-on-2.1bn-of-business-generated-in-the-UK.html

at least there is an expert on the case.

You've hid the nail right on the head there, team ... :biggrin:

She also appears to treat some of these company directors who are hauled before her and her committee as some sort of criminals. They are not .. at least on the subject of company tax. Their tax arrangements are perfectly legal and is what any semi-competent finance director would arrange. These companies contribute to the UK economy hugely in terms of jobs and NI contributions. Certainly much more than our state-funded politicians. We are all 'guilty' of 'avoiding tax' every time we get the opportunity to grab as many bottles of spirits as we can in a duty-free shop at the airport.

The sight of politicians like Hodge and her smug committee colleagues lecturing others on such matters is hypocrisy in the extreme and an expensive time-wasting sham. It is the politicians themselves who are responsible for any legal tax avoidance by others. It is only they who can change things with amendments to the law and international tax agreements with low-tax countries like Luxembourg.

Any 'blame' for the current tax situation lies right there at Westminster and not in company boardrooms.

[ahinton]

You've hid the nail right on the head there, team ... :biggrin:

She also appears to treat some of these company directors who are hauled before her and her committee as some sort of criminals. They are not .. at least on the subject of company tax. Their tax arrangements are perfectly legal and is what any semi-competent finance director would arrange. These companies contribute to the UK economy hugely in terms of jobs and NI contributions. Certainly much more than our state-funded politicians. We are all 'guilty' of 'avoiding tax' every time we get the opportunity to grab as many bottles of spirits as we can in a duty-free shop at the airport.

The sight of politicians like Hodge and her smug committee colleagues lecturing others on such matters is hypocrisy in the extreme and an expensive time-wasting sham. It is the politicians themselves who are responsible for any legal tax avoidance by others. It is only they who can change things with amendments to the law and international tax agreements with low-tax countries like Luxembourg.

Any 'blame' for the current tax situation lies right there at Westminster and not in company boardrooms.

I agree entirely with all of this. That said, it's not much use blaming politicians of one country for failing to persuade those in others to do exactly as they themselves do or wish to do. Taxation, for some companies and individuals, has become a competitive market place and will remain such until and unless all taxation arrangements affected by that market are harmonised and, since that will require an across the board agreement of all developed countries at the very least, the prospect of its occurrence is clearly remote.

As I have said previously, one way to achieve this would be for just one major country to abolish corporation tax altogether and make up for the temporary losses so caused by increases in other taxes; provided that companies who make the tax savings thus created could be forced to use them solely on expansion and increased employment (and that is by no means certain) and not for any other purpose, unemployment could fall rapidly, which would mean more taxes being paid by employers and employees and less benefits being paid out to people, so that any tax increases to make up for the amounts lost in corporation tax would likely be very temporary indeed. Other countries would find themselves forced to follow suit or lose tax revenues as a consequence of companies' and individuals' tax liabilities being relocated to Britain. I accept that this may all be pie in the sky in practice and might also be hard to sell to people, but I don't even see any sign of it being seriously considered.

[Serial_Apologist]

I agree entirely with all of this. That said, it's not much use blaming politicians of one country for failing to persuade those in others to do exactly as they themselves do or wish to do. Taxation, for some companies and individuals, has become a competitive market place and will remain such until and unless all taxation arrangements affected by that market are harmonised and, since that will require an across the board agreement of all developed countries at the very least, the prospect of its occurrence is clearly remote.

As I have said previously, one way to achieve this would be for just one major country to abolish corporation tax altogether and make up for the temporary losses so caused by increases in other taxes; provided that companies who make the tax savings thus created could be forced to use them solely on expansion and increased employment (and that is by no means certain) and not for any other purpose, unemployment could fall rapidly, which would mean more taxes being paid by employers and employees and less benefits being paid out to people, so that any tax increases to make up for the amounts lost in corporation tax would likely be very temporary indeed. Other countries would find themselves forced to follow suit or lose tax revenues as a consequence of companies' and individuals' tax liabilities being relocated to Britain. I accept that this may all be pie in the sky in practice and might also be hard to sell to people, but I don't even see any sign of it being seriously considered.

Given the dominance of the global marketplace I tend to agree, ah.

A major factor in all tis is dependent on the proportion of Corporation Tax local authorities are dependent on to maintain services, and whether or not a proportionate re-jigging of Coucil Tax rates at the upper end, for multimillion Pound-valuable dwellings would be sufficient to counteract losing all CT. The latter is well overdue, one thinks.

[teamsaint]

given the collapse in the Corporation tax take, (which is happening with the aquiescence of governments,) there may be little alternative to changing taxation so that businesses pay, and taxes collected, in different ways.
Since avoidance , especially by companies, is such huge business, we need a move to less avoidable tax, as a pragmatic alternative to the kind of taxes that we might like, or are used to.

[ahinton]

given the collapse in the Corporation tax take, (which is happening with the aquiescence of governments,) there may be little alternative to changing taxation so that businesses pay, and taxes collected, in different ways.
Since avoidance , especially by companies, is such huge business, we need a move to less avoidable tax, as a pragmatic alternative to the kind of taxes that we might like, or are used to.

I've attempted to make a suggestion about this, whilst at the same time admitting that I have no idea if it could be implemented and be made to work effectively; do you have any alternative suggestions to offer?

[An_Inspector_Calls]

She also appears to treat some of these company directors who are hauled before her and her committee as some sort of criminals. They are not .. at least on the subject of company tax. Their tax arrangements are perfectly legal and is what any semi-competent finance director would arrange. These companies contribute to the UK economy hugely in terms of jobs and NI contributions.

I'm not sure Hodge is saying they're criminals, but rather that they're behaving immorally (which in my view, they are). The crux of their avoidance seems to be their ability to deem the point of sale to be the point of billing. I find that strange. If I buy something from a company we enter into a contract at the time and place where the contract is agreed. In my view, for an internet sale, that's at the point when I hit the 'buy' button on my computer in my house. This seemed to be the point of view of several members of the select committee. But the company deems the contract is at the point of billing. The solution would be to change the tax rules (unilaterally for the UK if needs be) to deem the point of internet sale to be at the location of the buyer, to assume this is the UK, and the vendor has any burden of proof that it's elsewhere.

[ahinton]

I'm not sure Hodge is saying they're criminals, but rather that they're behaving immorally (which in my view, they are). The crux of their avoidance seems to be their ability to deem the point of sale to be the point of billing. I find that strange. If I buy something from a company we enter into a contract at the time and place where the contract is agreed. In my view, for an internet sale, that's at the point when I hit the 'buy' button on my computer in my house. This seemed to be the point of view of several members of the select committee. But the company deems the contract is at the point of billing. The solution would be to change the tax rules (unilaterally for the UK if needs be) to deem the point of internet sale to be at the location of the buyer, to assume this is the UK, and the vendor has any burden of proof that it's elsewhere.

The problem with your argument here is that it would necessarily involve the customer's location taking precedence over that of the company selling the product/s; OK, buying a Starbucks coffee in a UK location's one thing, but online transactions are quite another in which there's no obvious reason why the customer's location should be expected to take precedence; what, for instance, would you say about customers in UK who order items online to be sent to locations other than in UK? Also, what would you expect to happen if you order something while in another country to be delivered to you either there or elsewhere including Britain? Your point is in interesting one, but I don't see how it could be made to work credibly. Abolishing corporation tax altogether is something that could be achieved unilaterally to being with, because the moment one country does it, the rest will have to follow suit or else they'll lose business rapidly by reason of business operations swiftly relocating to the tax free country.

[An_Inspector_Calls]

I would say that your two counter arguments were very minor objections and I've dealt with them by saying that the burden of proof for purchase outside the UK rests with the vendor, not with the buyer. Yes, the point of purchase takes precedence, exactly what I said.

[teamsaint]

I've attempted to make a suggestion about this, whilst at the same time admitting that I have no idea if it could be implemented and be made to work effectively; do you have any alternative suggestions to offer?

well, you have to make some pretty big assumptions if you want to play this game.
The first is that the CT take will continue to fall as profits rise. If this is the case, it is part at least because governments don't have the will or means to fight it.
At present CT take seems to be around £30Bn and falling, on corporate profits of about £320Bn and rising.

So if we assume CT take will continue to fall, and that "we" still wish, as far as possible, to get some tax burden onto companies, or as near to them as possible, what are the answers?
one answer of course is a very low rate of CT which encourages companies to declare UK profit....but that might in time be a game we can't win.
so some suggestions.
1. Low or zero CT, but a tax on dividends. Shareholders want profit, and they want dividends. Move the tax burden to this point, and there is an incentive to actually pay tax, as directors want happy shareholders...don't they?
2. More "transaction taxes". The city (bless em) have fought this tooth and nail, with government support. But if CT was reduced /abolished, they could have little objection surely. This might go hand in hand with
3. Another rise in VAT. Ok this shifts tax burden , regressively to individuals, but its collectible and efficient.
3. Widen scope of NI. Ni collects a LOT of money, but from lower and middle earners. If companies are saved the cost of CT, they could have little objection to increases on their contributions for higher earners. What about 5% employer contribution on all employees over £50k (double average wage), 10% (or more) on those over £100k.
( I can hear the squeals of "it will drive talent abroad" re point 3 already).

Just a few thoughts. It's Friday evening , so lets keep responses gentle !!

[ahinton]

I would say that your two counter arguments were very minor objections and I've dealt with them by saying that the burden of proof for purchase outside the UK rests with the vendor, not with the buyer. Yes, the point of purchase takes precedence, exactly what I said.

YOU might have said it, but how do you propose to ensure that the laws of all relevant lands see it the same way, which clearly they do not currently?

[An_Inspector_Calls]

I simply see it as part of the law of contract. If you buy something from these companies, and it goes wrong, the law of contract gives you the right of redress. So why, also, does it not give the country of purchase the right to a fair taxation? If any country wishes to put that all aside, then I say, don't trade with them.

[ahinton]

I simply see it as part of the law of contract. If you buy something from these companies, and it goes wrong, the law of contract gives you the right of redress. So why, also, does it not give the country of purchase the right to a fair taxation? If any country wishes to put that all aside, then I say, don't trade with them.

Then you wouldn't trade with any of them but others will continue to do so, so nothing changes. Of course the law of redress should apply as far as it can, but I don't see this as the same issue as the taxation one which is under discussion here.

[An_Inspector_Calls]

It's entirely the same as the taxation issue because it should all be part of contract law. If you buy something from an internet trader and it goes wrong, you expect retribution. But if the trader were then to claim that the purchase was actually in Dublin (as per Google) so: "you can get stuffed", then pretty soon no one would buy from them. So they can't do that, and honour your right of retribution (under contract law) but then neglect to pay taxes on the sale.

If any other country wants to see things differently, I wish them luck with their trading.

[ahinton]

It's entirely the same as the taxation issue. If you buy something from an internet trader and it goes wrong, you expect retribution. But if the trader were then to claim that the purchase was actually in Dublin (as per Google) so: "you can get stuffed", then pretty soon no one would buy from them. So they can't do that, and honour the right of retribution (under contract law) but then neglect to pay taxes on the sale.

If any other country wants to see things differently, I wish them luck with their trading.

I take your point, of course, but this is not actually about the trading itself, or even necessarily about firms seeking to avoid, or actually avoiding, paying any corporation taxes anywhere; it's about companies relocating operations into the most tax-efficient régime - no more, no less. This is why I seek to advocate the abolition of corporation taxes altogether, because that would, I think, stand some chance of removing, among other things, the particular concerns that you express here.

[An_Inspector_Calls]

But you'd have to do a hell of a lot of taxation elsewhere to recover corporation tax revenue (or perhaps abandon it altogether - the less taxation the less power governments have). My strategy would mean that companies would never gain any benefit by relocation of their trading accounts; they're always trading at the point of sale.

This, of course, only applies to internet and High Street sales. Nothing here to stop a UK company selling its goods abroad under another companies' trading and taxation laws (in which case, the boot would be on the other foot).