It's often said that tax havens are a part of life and there's nothing we can do about them. That's not true, as a new series on the Tax Justice Network's Tackle Tax Havens web site shows.
Thanks to some clever wizardry, the company's advisors claim that most of its business takes place in the Cayman Islands.
Ah, the Cayman Islands. Fantastic climate, awesome watersports and lovely fresh seafood.
Plus a tax rate that's close to zero.
So the company's nifty footwork means that it avoids paying vast amounts of tax in Sweden and France, which means less money for public services in those countries.
Now, enter Unitary Tax!
Unitary tax involves taxing multinational corporations according to the real economic substance of where they actually do business.
Where is their workforce based? Where are their assets actually held? In which country do they really make their sales?
Under unitary taxation, France and Sweden would get to tax (almost) half of the corporation's overall profits at their own tax rates, and only tiny weeny amounts of its profits would be allocated to Cayman to be taxed at its zero percent rate.
And that's exactly what the UK needs right now to beat multinational corporations who'd rather not pay tax here.
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There is no political will for this for two reasons. Firstly a lot of multinationals make donations to political parties(usually the tories) which means that they are able to influence legislation through their donations. Secondly the ministers are usually looking forward to a directorship after their ministerial careers end.
Richard, A post I put on here is missing!!!, I will put the link on again, it does make for an extremely good read and very educational …
http://educationforum.ipbhost.com/index.php?showtopic=6382&st=0
Time for an anti-corporation, pro-business, pro-fair tax, high-minimum wage Political Party to be formed, which is also antipolitics.
Richard, can UK do this alone?
In theory yes
In practice, very hard
But enough countries in Europe now want to do it to make it viable
So we could definitely do it soon if we wanted
When California tried this in the 1980s to boost their state tax take they took so much grief from the republicans, multi-nationals corporations and foreign tax jurisdictions like the Inland Revenue as was, they threw in the towel and a year or two later the supreme court upheld their right to do it, which saved them repaying billions.
There are one or two reports on the web that Obama might be interested in looking at this as a mechanism of “global taxation”. It would be well worth exploring but anything that looks like EU meddling in the UK tax take is doomed from the start in the current climate. Even if the UK didn’t veto it, Luxembourg would.
Our politicians actually believe as a matter of ideology that the “wealth creators” should pay less and less tax and us poor saps should pick up the tab. The idea that multi-nationals should pay their fare share is anathema to them. The more this is exposed as hopelessly out of touch with the voters of this country the better.
There is no reason for Luxembourg to be involved: the new European FTT proves less than 27 states can act
California lost to Barclays, ironically……
Good luck with unitary tax: impossible to work without a majority of countries supporting it.
The OECD and UN Committee of Experts have rejected it.
You would be better off seeking reform of the unwieldy and somewhat outdated UK tax act and the tax system as a whole.
You are wrong
It is allowed under UN rules
It is the UN who objects – but TNMM is effectively unitary tax and has been allowed by it since 1995
We’ll win this one
If TNMM meets your requirements for unitary taxation then both the UN and OECD models provide for it, then there is no problem..
Just apply TNMM to the Starbucks case and then it is job done, no issue.
Er, you don’t understand transfer pricing and how it works, do you?