A tax accountant has commented on 38 Degrees Facebook page suggesting they misread the law when, working with Ethical Consumer, they began their campaign on the Olympics tax exemptions. You can read what he said here.
I don't agree with him for many reasons. If only it were as simple as he suggests! So let me offer some reasons why I think he's wrong to say this campaign misses the point.
First, there is a the very good question of why if people are working here they should not pay tax here. Why is the Olympics, paid for by the UK taxpayer, so special that it should be tax exempt and so make no contribution back to the UK for the enormous cost of staging the event? The general principle that sports people earning in the UK pay basic rate tax on those earnings in this country - which is then offset against any tax they owe in their home country - is widely applied. So, for example, it will apply to all Wimbledon winners if not from the UK and the winner of the Open Golf if similarly not from this country. It's the way sport and high earning sports people give back to host countries for letting them earn their income in events that usually require considerable tax subsidy. 38 Degrees are making that point with their campaign.
The same aplies to broadcasters covering the Olympics. Those broadcasters are at the Olympics in the UK - paid for by the UK - to make
profit. Why shouldn't a fair part of their profit be taxed here? The rules to attribute profit to the UK exist - but they're not going to be applied. Why not is the fair question to ask?
And third, to claim major corporates could not
exploit this opportunity for gain is ludicrous. Sure, their normally UK resident operations will pay tax here but in multinational corporations, many with hundreds or thousands of subsidiaries, the Olympics exemption would provide a perfect opportunity to make profit in the UK for companies based elsewhere and to extract that profit tax free. Any tax accountant could create such a scheme for a multinational group with little thought when all the normal rules on creating a permanent establishment in the UK have been suspended. In that case we're asking companies to commit to not doing this. Some have. Good for them. Others have not and that leaves questions marks on what choices they've made.
Those choices are legitimate, of course, no one is saying anything else. But it's also true that ethics drive tax choices, and corporate responsibility demands tax is paid in the right place. In this case tax should be paid in the UK if profits arise here - as they will on Olympics related activity - and 38 Degrees are therefore challenging those companies to make the right choices, to pay tax here on all profits arising in this country and to confirm they have.
To suggest this is a black and white issue is as a result to wholly misrepresent the nature of group tax, the ways in which groups can shift profits and the opportunities that tax havens - whether permanent or temporary like this one - give to corporations to drop profits through non-taxed loopholes. That's what 38 Degrees are highlighting and what they're asking for is a commitment to not exploit this opportunity. That's fair, and wholly appropriate and consistent with what the legislation might permit. And that's why I've supported this campaign.
You seem very confused Richard.
First you suggest taxing the athletes on their Olympics earnings. It might be a good idea were it not for the fact that there is no prize money on offer.
Second you suggest taxing the broadcasters. Again, this might be a good idea, but the vast majority of broadcasting-related revenues will be earned outside of the UK by foreign broadcasters. Taking NBC as an example, how would you propose to tax a US company on revenues and profits earned in the United States.
Finally, neither Wimbledon nor the Open require any subsidy. Wimbledon is organised entirely by a private members club that, far from receiving government support, re-invests every year approximately $50 million into grassroot British tennis.
Not at all confused – all statements of fact
And all the broadcasters would be taxable here but for this exemption – with transfer pricing rules in operation
So band on right I’m afraid
I would indeed be interested to know just how major sporting events such as Wimbledon, the Open and British Grand Prix are receiving a “tax subsidy”?
I think you have made this up to support your argument. And just to add, the Olympic athletes compete as amateurs so no prize money for them.
I said winners were taxed there. I did not say they were subsidised
And you seriously think those athletes are amateurs? Pull the other one, or stop trying to look stupid
Foreign broadcasters are not carrying on a trade trading here through a permanent establishment. They may have reporters/correspondents working here temporarily (generally covered by DTAs but the general exemption broadens that to non-treaty countries), while there revenue will be advertising revenue back home outside the UK tax net. They will be paying fees to the BBC which will be taxable. Likewise there reporters and other staff will be paying for food and accommodation to the benefit of the UK economy (probably much more than a few weeks income tax).
The main beneficiaries of any tax exemption is the IOC, which is supposed to be a non-prifit, although to me it looks as though there are quite a few fortunes being made.
HMRC S
specifically thought this applied to broadcasters, amongst others
I think you need to understand how easy it is to establish a PE
I was emailed by 38 degrees today to report progress with their campaign.It said “a worried sounding man from Coca cola rang to say they wouldn’t be using the tax dodge.” Visa, EDF and General electric had followed. I wonder if this will make the BBC or the newspapers?
Looks like “people power”. If we harness it, we could move closer to the courageous state.
I have backed this campaign
There’s a strong PR campaign against it
But what it showed was companies have choice
And pressure seems to have an impact
“specifically thought this applied to broadcasters, amongst others
I think you need to understand how easy it is to establish a PE”
Not very easy at all if the parties concerned are only intending to be in the UK for a matter of weeks.
More obviously, it is hard to say that the foreign resident is trading in the UK when it is actually buying UK services (broadcast rights) and has no sales in the UK. Case law from 1860 says that the profits of a US firm that bought goods in the UK and sold them at a profit in New York.had profits arising in the US, not the UK. Fairly basic stuff.
The very point was they weren’t going to be here for a week or two
But why let facts get in the way?
Even 3 months wouldn’t have made it a permanent establishment. Many professionals.a good example would be a news reporter or journalist can spend several weeks in a foreign country without creating a PE (essentially what is going o at the Olympics), but in addition the reporter is not making any sales and hence there is no taxable profit arising in the UK.
You continue to make excuses…. Or show your ignorance of PEs and how long it takes to set up a major outside broadcasting event