Tax dodging is not only limited to the UK

[scottycelt]

:winkeye:

[John Wright]

Tax dodging is not just for the rich and big business.

http://money.aol.co.uk/2013/04/29/the-towns-that-dont-pay-their-council-tax/

http://www.theargus.co.uk/news/10384931.Sussex_local_authorities_owed_more_than___55_million_in_unpaid_council_tax/

http://www.birminghammail.co.uk/news/local-news/birmingham-city-council-owed-100-3157755

[aeolium]

I think this article argues the moral case against tax avoidance pretty effectively.

[mangerton]

I think this article argues the moral case against tax avoidance pretty effectively.

It certainly does. :ok:

[ahinton]

I think this article argues the moral case against tax avoidance pretty effectively.

It might at first seem that way, but the nub of the problem appears to me to be that, whereas the subject is supposedly "tax avoidance" per se, what's really at stake is tax location, so we're not talking about companies that avoid paying tax at all but those who lower their tax liability by choosing the location in which they make returns and pay tax. If a large multinational corporation - or even a smaller international company - does business in, say 100 countries - i.e. has customers based in that many locations - the argument that choosing a location to pay tax is not immoral might be that the counter-argument would be that companies should pay taxes on profits made from their customers in each of those countries at the rates levied by those countries, irrespective of where the company is based.

Where the article falls down, I think, is that it makes no attempt to address the problem at the heart of this, which is that taxation is a competitive market of which advantage is taken by certain firms and individuals alike in order not to pay more tax than is necessary, rather than to avoid paying it at all. I cannot see how this "avoidance" can be "avoided" until and unless there is a global harmonisation of corporation tax rates so as to remove their competitive aspect and that would appear to be impossible in practice and I note from the Starbucks débâcle that has evidently turned into ongoing negotiations with HMRC that this firm has not made the £20m donation to HMRC that, as what I presume to have been a cynical PR-type exercise, it appeared to promise to do some months ago when it was first exposed.

The facts that (a) trading of all kinds is more international on all levels than once it was and that (b) some companies can accordingly choose where to locate their operations (just as individuals with more than two homes in different countries may choose in which of those countries to elect to be taxed) demonstrate that trying to close what are widely regarded as "loopholes" is likely to be on a hiding to not very much because not only is the legality beyond doubt but the immmorality is by no means as black and white a consideration as it might at first appear to some. For example, my own intention to relocate to France (NOT for tax reasons!) is something that I'll have to consider very carefully in order to try legitimately to remain a British taxpayer because, were I to become a French one instead, the income tax for which I'd be liable would not be much different but the social charges that I'd attract would be prohibitive enough to bankrupt me - and we ain't talking big or even medium-sized bucks here!

[aeolium]

I think the answer to that is to redirect taxation away from company location and towards transaction location. Corporation tax is becoming a tax more honoured in the breach than in the observance in any case so it seems pointless for countries to try and compete in a race to the bottom, especially as they get very little back for it. I would suggest a two-part transaction tax, one part - the greater part - based on the location of the recipient of goods or services, and the other part based on the location where the transaction originates. It would be a flat percentage rate - say 10% of transaction value for the 'recipient' location - and payable to the revenue services of the country where the goods or services were delivered. Unlike VAT it would not be added to the transaction cost and therefore not payable by the customer or adding to inflation, but instead levied on the company. So Google's estimated £4.2 bn of sales in the UK would have generated £420 million in tax in this country rather than the £3 million or so it paid, due to various subterfuges. There would also be a lower flat rate tax payable in the location where the company based its operations. There would be an obvious benefit for all countries in implementing such a scheme and combined with enforced tax transparency would enable a fightback against the grip of the multinationals. Since it would be a tax on transactions and not on profits there would have to be exemptions and reductions for small companies, but the main aim would be to get the multinationals to contribute to the countries in which they operate - as they clearly ought.

[Serial_Apologist]

I think the answer to that is to redirect taxation away from company location and towards transaction location. Corporation tax is becoming a tax more honoured in the breach than in the observance in any case so it seems pointless for countries to try and compete in a race to the bottom, especially as they get very little back for it. I would suggest a two-part transaction tax, one part - the greater part - based on the location of the recipient of goods or services, and the other part based on the location where the transaction originates. It would be a flat percentage rate - say 10% of transaction value for the 'recipient' location - and payable to the revenue services of the country where the goods or services were delivered. Unlike VAT it would not be added to the transaction cost and therefore not payable by the customer or adding to inflation, but instead levied on the company. So Google's estimated £4.2 bn of sales in the UK would have generated £420 million in tax in this country rather than the £3 million or so it paid, due to various subterfuges. There would also be a lower flat rate tax payable in the location where the company based its operations. There would be an obvious benefit for all countries in implementing such a scheme and combined with enforced tax transparency would enable a fightback against the grip of the multinationals. Since it would be a tax on transactions and not on profits there would have to be exemptions and reductions for small companies, but the main aim would be to get the multinationals to contribute to the countries in which they operate - as they clearly ought.

Wo8ld this not massively hike the price of goods and services, though - offloading the tax problem onto the consumer?

[aeolium]

Wo8ld this not massively hike the price of goods and services, though - offloading the tax problem onto the consumer?

I wouldn't think so. The tax would not be frontloaded to the value of the transaction, i.e. a book sold for £10 on amazon would not have the tax added to it. It would simply form the basis for calculating the tax due at the end of the year. Of course, companies could try to compensate by increasing the prices of goods or services but they would thereby risk reduced sales - and of course the transaction tax liability would increase, since it is based on the transaction value.

[Serial_Apologist]

I wouldn't think so. The tax would not be frontloaded to the value of the transaction, i.e. a book sold for £10 on amazon would not have the tax added to it. It would simply form the basis for calculating the tax due at the end of the year. Of course, companies could try to compensate by increasing the prices of goods or services but they would thereby risk reduced sales - and of course the transaction tax liability would increase, since it is based on the transaction value.

I see, I think.

[ahinton]

I think the answer to that is to redirect taxation away from company location and towards transaction location. Corporation tax is becoming a tax more honoured in the breach than in the observance in any case so it seems pointless for countries to try and compete in a race to the bottom, especially as they get very little back for it. I would suggest a two-part transaction tax, one part - the greater part - based on the location of the recipient of goods or services, and the other part based on the location where the transaction originates. It would be a flat percentage rate - say 10% of transaction value for the 'recipient' location - and payable to the revenue services of the country where the goods or services were delivered. Unlike VAT it would not be added to the transaction cost and therefore not payable by the customer or adding to inflation, but instead levied on the company. So Google's estimated £4.2 bn of sales in the UK would have generated £420 million in tax in this country rather than the £3 million or so it paid, due to various subterfuges. There would also be a lower flat rate tax payable in the location where the company based its operations. There would be an obvious benefit for all countries in implementing such a scheme and combined with enforced tax transparency would enable a fightback against the grip of the multinationals. Since it would be a tax on transactions and not on profits there would have to be exemptions and reductions for small companies, but the main aim would be to get the multinationals to contribute to the countries in which they operate - as they clearly ought.

I think that this would be incredibly complex if it could ever be brought about in the first place, because, like most possible solutions to this problem, it would presume that many countries would deal with in an identical way. I agree that a race to the bottom is pretty daft, which is why going straight to the bottom by abolishing corporation tax altogether seems like a more practical option and, since only one country would have to do it for others then to feel obliged to follow suit pretty rapidly, it would at least overcome the problems associated with persuading many countries to agree on the same rates of and approaches to corporate taxation.

Who's to say where a transaction "originates"? If someone orders goods or services when abroad temporarily, whether on vacation, working or for any other reason, would you treat the transaction location as that foreign location, even though the purchaser is not a taxpayer there? What about delivery location? If someone domiciled in Britain orders some goods in France to be delivered to an address in Spain, what then? Without wishing to sound facetious here, how would you envisage treating a transaction made outside any jurisdiction, for example when on a plane or boat travelling between countries? Is there even any certainty as to the location from which someone orders something? - anyone with more than one home or business location could still choose to order items from the one that's the most competitive.

As has already been pointed out, levying transaction taxes on suppliers would result in purchasers paying more tax through price increases imposed by those suppliers to cover the amount of such a tax. The fact that, as you suggest there would have to be exemptions and reductions, guarantees that such an approach would not only mean higher taxes funded by customers but also immensely increasing complexity, even if everyone played ball with such a scheme which, as we know, they wouldn't, because they'd hire expensive lawyers and accountants to find and exploit every conceivable loophole and, let's face it, the more complex the tax régime, the more loopholes can and will be created and used.

[ahinton]

I wouldn't think so. The tax would not be frontloaded to the value of the transaction, i.e. a book sold for £10 on amazon would not have the tax added to it. It would simply form the basis for calculating the tax due at the end of the year. Of course, companies could try to compensate by increasing the prices of goods or services but they would thereby risk reduced sales - and of course the transaction tax liability would increase, since it is based on the transaction value.

I'm less than convinced that firms' inevitable attempts to circumvent the negative effects of such a scheme by means of price increases would necessarily risk reduced sales because their competitors would all find themselves in the same boat; the customer would be the one to suffer every time, just as would be the case were the financial transaction tax to be introduced. Also, it would cause increases in inflation which could be more damaging to some countries than to others.

[aeolium]

It is at least a plausible proposal and imo better than the status quo which is clearly unacceptable. Corporation tax has had it as a meaningful tax-raising measure because of the ease with which companies can avoid it. An alternative measure is desperately needed for societies which require tax revenue to keep their infrastructure and welfare & health systems operational. Can you come up with a better suggestion?

[ahinton]

It is at least a plausible proposal and imo better than the status quo which is clearly unacceptable. Corporation tax has had it as a meaningful tax-raising measure because of the ease with which companies can avoid it. An alternative measure is desperately needed for societies which require tax revenue to keep their infrastructure and welfare & health systems operational. Can you come up with a better suggestion?

I agree that the status quo is unacceptable but, in my view, corporation tax has had it as a meaningful tax-raising measure not because of the ease with which companies can avoid it (which they don't anyway -they simply reduce their liability to it by electing to pay in at more favourable rates by choosing the locations in which they generate a liability to it) but because it's a tax on funds that will be taxed again and again, not least in terms of the VAT paid by customers on assessable goods and services. I already have come up with an alternative suggestion, albeit self-admittedly not with the confidence in its workability that might otherwise have been available to me as an expert in the field!

That said, were Britain to ditch corporation tax, it would almost immediately be deluged with firms relocating operations there which would soon generate other tax revenues for the UK Treasury.

[aka Calum Da Jazbo]

interesting report this; corporation tax is 7.4% of total revenue - see Table 1 just after p 4

[teamsaint]

and falling.
Looks like an agenda to get it to the point where its not worth collecting, and then abolish it.