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Thread: MNC Corporation Tax - avoidance and payments. UPDATE June 2014- EU State Aid Investigation to Commence

  1. #16
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    Default Re: MNC Corporation Tax - avoidance and payments.


  2. #17
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    Default Re: MNC Corporation Tax - avoidance and payments.

    UK and Germany want to stop this..

    George Osborne has joined forces with the German finance minister, Wolfgang Schäuble, to announce an international crackdown on tax avoidance by big multinationals, such as eBay and Amazon.

    Osborne said he and Schäuble, meeting at the G20 finance ministers's summit in Mexico, had called for "concerted international co-operation to strengthen international tax standards that at the minute may mean international companies can pay less tax than they would otherwise owe".
    The joint statement by the two countries – a rare example of Anglo-German co-operation – said: "International tax standards have had difficulty keeping up with changes in global business practices, such as the development of e-commerce in commercial activities."

    It adds: "As a result, some multinational businesses are able to shift the taxation of their profits away from the jurisdictions where they are being generated, thus minimising their tax payments compared to smaller, less international companies."
    http://www.guardian.co.uk/business/2...multinationals
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

  3. #18
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    Default Re: MNC Corporation Tax - avoidance and payments.

    Opportunistic by Osborne, the UK want to keep "the City" going, probably the biggest example of tax avoidance, much worse than the IFSC. So, divert the attention to E-bay, etc.

  4. #19
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    Default Re: MNC Corporation Tax - avoidance and payments.

    not going away. Starbucks going to Westminster

    IRELAND'S corporate tax regime is coming under renewed scrutiny as governments around the world question how some of the biggest companies on the planet are using this country to avoid paying tax at home.

    Within the last week it has emerged that Apple and even Mitt Romney's Bain Capital private equity firm have avoided hundreds of millions of dollars in tax by setting up in Ireland, while executives from Starbucks will appear before Britain's equivalent of the Oireachtas Public Accounts Committee next week to explain how it has paid only £8.5m (€10.6m) in tax on £3bn of UK sales in the past decade.
    The Government, however, defended its tax regime. A spokesman for the Department of Enterprise said the 12.5pc corporation tax was essential for creating jobs here.

    "The Government has repeatedly made clear its absolute determination to retain the 12.5pc rate of corporation tax.

    "It is also important to point out that, in contrast to most other countries, Ireland has few exceptions and loopholes in our corporation tax system, meaning that our effective tax rate is very similar to our headline tax rate. One recent report has indicated that the effective rate is 11.9pc," he added.
    http://www.independent.ie/business/i...e-3286091.html
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

  5. #20
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    Default Re: MNC Corporation Tax - avoidance and payments.

    The FT take is that a CCTB is a hapless quest

    There are many things a committed chancellor or finance minister could pursue to change this. The most ambitious would be the EU’s hapless quest for a common consolidated corporate tax base (CCCTB). This would have states tax a mutually agreed share of a multinational’s profits, not the share the group decides to account for in each jurisdiction. For all their fine words, the UK would find this hard to accept and even Germany is ambivalent.

    That is no excuse for merely paying lip service to the cause. The greater the role of intangibles in economic activity and trade, the less realistic it is to think tweaked transfer pricing rules can stop multinationals from making corporation tax liabilities evaporate – or rather condense on the backs of smaller companies with less ability to shift profits between tax jurisdictions. Other, perhaps cruder, measures should be contemplated.

    One is a hard limit on the share of turnover that is deductible for payments to foreign affiliates. Calculating chargeable profits by formulas reflecting sales to customers in the taxing authority is another option, which could be particularly important for electronic goods sold from websites in tax havens. Other possibilities exist. They should be used – unilaterally if necessary – where the principle of no double taxation turns into a practice of double non-taxation.
    http://www.ft.com/cms/s/0/23b525a0-2...#ixzz2BWt2uCac
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

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    Default Re: MNC Corporation Tax - avoidance and payments.

    My crystal ball is a bit dusty, but if I look really close I can see this happening in Ireland in the not too distant future

    Three of Britain's biggest water companies paid little or no tax on their profits last year while generously rewarding their executives and investors, the Observer can reveal. Thames Water and Anglian Water paid no corporation tax on the profits made from their utility businesses while Yorkshire Water kept its payments to the Revenue in the low millions.

    Anglian Water's cashflow statement for 2012 reports that the company paid no corporation tax on its regulated water business in the financial year ending in March. The company paid £500,000 corporation tax in the previous year and £1.4m the year before.

    Anglian, which lent £1,609.1m to a subsidiary company in the Cayman Islands in 2002, paid £478.1m in equity dividends to investors this year, including its subsidiary in the tax haven. Yorkshire Water, which made an operating profit of £303m in 2012, paid £2.9m in tax on its water profits last year and £11.1m in the year before, having increased the debt on its books recently, which offsets tax payments.
    http://www.guardian.co.uk/business/2...-companies-tax
    Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other. ~Oscar Ameringer

  7. #22
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    Default Re: MNC Corporation Tax - avoidance and payments.

    "It is also important to point out that, in contrast to most other countries, Ireland has few exceptions and loopholes in our corporation tax system, meaning that our effective tax rate is very similar to our headline tax rate. One recent report has indicated that the effective rate is 11.9pc," he added.
    No mentioning how narrow the net is though. Small companies with no overseas subsidiaries may have to pay 12.5% but the big boys pay nowhere near the official Irish corporation tax rate- headline or 'effective'.
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

  8. #23
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    Default Re: MNC Corporation Tax - avoidance and payments.

    I am slightly wary of jumping into this thread for the personalised obbrobrium that may follow but here goes.......

    A lot of commentary on this topic of late has been misinformed or just plain wrong. There is disparaging talk of companies obeying the "rules" but by doing so "not paying their fair share".

    Lets go back to the start here:

    The "rules" which are often mentioned are actually tax principles which have actually been in place and applied by nearly all OECD countries and stretch back over nearly 100 years. Do they need to be examined in light of 21st Century Business Models - undoubtedly yes, but until they are you have to follow these existing principles.

    If I was trying to boil them down, I'd probably summarise them as follows:

    1. The profits of any organisation can be , in effect, broken down and attributed to various aspects of the business. Specifically you'd be looking at where (a) the key activities and functions are (b) where the commercial risks are being taken and (c) where the key assets are. So if you think about this, you'd say if a product is manufactured in a country, the key executives are there, the key activities are there, the contracts are concluded from there and the key assets ate there, well then that's where the profits should be located.

    2. A company can only be taxed in another country if it has what is called a "permanent establishment" there. This is a well developed OECD principle which is contained in every bilateral Double Taxation Agreement entered into between countries.

    So let's take an example. A company manufactures products in Ireland , has all its activities and people in Ireland and sells product direct to customers in the UK. Should it pay any corporation tax in the UK? HM Inspector of Taxes would say not (as would the Irish Revenue if the position was reversed) since there is no permanent establishment. (Btw every other country with which Ireland has a DTA would say the same.). That is a bedrock principle which has grown up with the expansion of international trade right through the 20th Century.

    If this company set up a UK subsidiary to purchase the product from the irish manufacturer and then sell on to UK customers, then that entity would pay UK tax on it's profits. It has an activity in the UK, it is taking commercial risk (very important) in that it could be left with bad debt risk, obsolete inventory risk etc. Therefore the UK Revenue will insist it makes a profit commensurate with the activities being carried on and will look what other wholesalers in the industry might make. (This is "transfer pricing" - not a bad or good thing, just dealing with the required pricing between related entities).

    Let's say the UK entity wasn't buying or selling but instead was carrying out marketing activities for the manufacturing entity. It's commercial risk is less (no bad debt or stock risk) and therefore the profits which are left in the UK are significantly less than would be the case if it was buying and selling.

    Underpinning all this is significant transfer pricing legislation which countries have which allows them to examine and , if necessary, reprice transactions between connected parties to ensure the correct profit margin is left in the UK.

    Now apply this to 21st century business and many of the companies who are being lambasted........

    In many instances it is possible for a customer to "self serve" - they don't have to engage with someone in the jurisdiction and can engage directly over the internet with the selling company wherever it is based. So going back to our manufacturing company, they may have a lot of sales in the UK but the principles underlying international business and taxation would say there is no corporation tax to pay on those sales because the activities are taking place outside that jurisdiction. There may well be sales support \ marketing functions in the UK (in my example) and the UK Revenue will make sure the appropriate tax is paid on those activities. But in relation to sales, there is nothing in the UK to tax.

    To be clear, these are not "rules" which companies are "cleverly" seeking to "bend" - they are principles established and agreed to by all OECD countries over many many years.

    Why all the commotion now? Two reasons

    (a) 21st Century commerce and in particular digital products and services mean that it is easier than ever to do business with citizens of a country without ever setting foot there. Think of the record (how old fashioned!) industry. The physical product would have to come into the country and the Revenue would get their cut of the profit as it went through the distribution chain. Now a consumer can download it at the click of a button and the cutting out of the middle man has meant that the profits in the "selling country" on the sale of the product have disappeared.

    (b) Intellectual Property and the profit that can be attributed to it. This is tricky. How much of the overall profit can be ascribed to IP? Again , transfer pricing rules kick in when (say) a US company is exporting that IP offshore to some haven entity and the same TP rules should kick in when a royalty is being paid to that entity for the use of the IP. The current criticisms around the low tax do relate in part to this and a perception that too mcuh profit is being attributed there.


    So, in summary it's all well and good to say this should be examined (and the OECD have actually started to look at this) but the implication that companies are doing something "clever" by "taking advantage" of "rules" is just wrong. It's the way every OECD country applies it's tax regime and if countries want to relook at this in the light of the 21str century then well and good but it is something that must be done in a way that doesn't end up damaging international trade.

    My tuppence worth...............

  9. #24
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    Default Re: MNC Corporation Tax - avoidance and payments.

    Looking at how companies arrange their profits is another matter. For example you can say that companies break down their profits across sectors of the company but if they are hiding their overall corporation tax liability by doing so and funnelling profits to another jurisdiction with the express intent of avoiding corporation tax is that right and proper?

    One could use the logic that what is legal is proper and get away with murder as long as you can't be charged because there is no victim's body to show. But is that right?

    I'm well aware of the massaging of accounts that MNCs get up to to prevent their profits surfacing in any jurisdiction that charges corporation tax in any meaningful way. I'm also aware that company accounts, notably Anglo Irish Bank as an example, can be manipulated to 'forget' to report as much as £80million in loans to directors- a material figure I am sure you will agree and where company reporting is concerned all the major domestic Irish investment banks were clearly underreporting liabilities for a number of years.

    I would agree with you in some ways Athlone Dub but there are principles of taxation as well, one of which is that tax should be and be seen to be equitable in any system. This is plainly not the case where a domestic company has to pay 12.5% and a competitor can massage its tax bill down to between 0% and 3% purely because it has the ability to pull an international accounting trick.

    The taxation accords with other countries- are you aware that Valartis, the company that bought Anglo Irish Bank Austria AG was able to profit by the transaction not only by buying 600million in euros Anglo-Irish clearly didn't want anyone looking at, but also by buying in such a way as to be able to profit from the Irish Banking Guarantee even though Valartis had no presence in Ireland at all?

    These taxation 'claim lanes' are lobbied for by business in a number of jurisdictions. If those facilities are not available to domestic businesses in each national jurisdiction then is the business environment an equitable, stable and level playing field?

    Lastly, would you then be in favour of a globalised corporation tax set at a minimum of 12.5% per cent? And would you agree that Multinational Boards, where they are found to be accepting money from criminal enterprises should have their Directors arrested, charged and jailed for criminal money laundering?
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

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    Default Re: MNC Corporation Tax - avoidance and payments.

    The difference between 'evasion' and 'avoidance' is now so thin that MNCs need batteries of lawyers to insist that they are doing one and not the other.

    We have Starbucks in the UK claiming they pay £61million tax 'including VAT' to the UK exchequer.

    As has been pointed out to them they collect VAT and pay it to the government- the VAT doesn't come from their coffers.

    Doesn't stop them knowingly trying to imply that that is their bill they are paying- their accountants and lawyers know full well that they are collectors of VAT- not originators of VAT.

    Where, in the world of the corporate lawyer and tax accountant, does the word 'mis-statement' become a 'lie'? Only when they are called on it? People in the UK now have a clear right and duty to boycott that company and make its operations in the UK unsustainable.

    I believe we are now at a stage, like with food labelling, that all corporations and companies should have to display their audited sales figures for the previous year in their outlets and the amount of tax they paid on it. People have a right to know, as consumers, the right information regarding the choices they make as consumers.
    Last edited by Captain Con O'Sullivan; 12-11-2012 at 02:38 PM.
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

  11. #26
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    Default Re: MNC Corporation Tax - avoidance and payments.

    Imagine being responsible for warming and fluffifying Starbuck's relationship with its happy family of warm loving consumers.

    You'd got a CRM database, a budget for warmth and fluffiness and general love of your people 'in market' and then the new breaks that your company while pulling down hundreds of millions in sales in the market is a bit behind the door (a long way behind the door) when it comes to paying taxes which keep the streetlights on and hospital doors open.

    Screwed, is the word that comes to mind. FU beyond all PR recognition. Starbucks are staring down the barrel of a boycott now.
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

  12. #27
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    Default Re: MNC Corporation Tax - avoidance and payments.

    The House of Commons Public Accounts Committee in interrogating Google, Starbucks and Amazon on their tax avoidance in the UK.
    Streaming here:
    http://www.bbc.co.uk/news/business-20288077

  13. #28
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    Default Re: MNC Corporation Tax - avoidance and payments.

    Starbucks claim that the Dutch Government have asked them to keep their tax rate confidential.

    @fiatcurrency
    *STARBUCKS: DUTCH GOVT ASKED CO. TO KEEP TAX RATE CONFIDENTIAL -YWhy?
    Thomas Jefferson : Banking Establishments are More Dangerous to our Liberties than Standing Armies.

  14. #29
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    Default Re: MNC Corporation Tax - avoidance and payments.

    Starbucks for example were asked why they were reporting operating at a loss in the UK for 15 straight years.

    Under normal circs this is not a good business model in any market. Then again if you want to show a loss for tax reasons and can effectively hide the profit you make from your UK customers then that's the sort of apparent barminess that turns up.

    Debts are assets (banks), Losses are profitable (MNCs) and 'There has never been such a thing as a good year in Irish farming. My family have been doing it for three hundred years and have never made a penny, ever. (Irish Farmers).
    Think National. Act Local. Oh- and superstition is just the dark matter of human history.

  15. #30
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    Default Re: MNC Corporation Tax - avoidance and payments.

    Ireland is coming up a lot in this hearing. The DOF won't be happy.

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