43 5 businesses running rings round HMRC Posted on December 7 2012 43 43 Responses to “5 businesses running rings round HMRC” Guest says: December 7 2012 at 4:26 pm I’ll bet Starbucks is off Eric Schmidt’s Christmas Card list now then… David B says: December 7 2012 at 5:53 pm Richard: Just a quick thank you for all your sterling efforts on this. Hopefully you will manage to keep this in the public eye for sometime to come. As a corporate tax adviser this is the best business opportunity to come along in many many years. I hope you are doing equally well. Tim Phillips says: December 9 2012 at 11:04 am Dear David B, You are right. Non- exec Directors are saying: “Sounds like free money. Are we doing yet what they are doing? We need to because we spend money more efficiently than Govts.” Which is fine within its own enclosed frame of reference. More widely, it ignores the sad reality that non-payment of taxes is a short cut to failed State status. What’s so great about pushing a country down that road? JED says: December 7 2012 at 5:54 pm The Ebay figures are a new one on me, outrage now turned up to 11! The thing that gets me the most on this issue is that the absolute best we can say about our elected representatives is that they’ve been asleep at the wheel. They should be ashamed of themselves but instead what do we get? Blame the other lot, blame the last lot, wring their hands and say there’s nothing they can do about it. No acknowledgement that the whole damn lot of them have been captured by the rich and haven’t the backbone to stand up for the rest of us. Pathetic. Michael B says: December 8 2012 at 9:20 am I think you’ll find our Eton-educated elected representatives ARE the rich… john says: December 7 2012 at 7:36 pm As I understand it, these firms reduce their UK taxable profits through fees paid for the use of their IP and debt. There is transfer pricing legislation in place to stop this, but it is down to HMRC to challenge the transfer pricing arrangements. I don’t really think these firms can be blamed for doing everything they can to reduce their tax liabilities. Richard Murphy says: December 8 2012 at 3:28 am What? When it harms their long term prospects contrary to their duty to shareholders? David Moore says: December 8 2012 at 4:32 am Amazon’s profit worldwide for last year was $900 million on a revenue of $50 billion. There operating margin is nowhere near 3.5%, it’s around half that. To claim that there ‘real’ profit in the UK was half there global profit on a fraction of the turnover doesn’t seem realistic at all. The reason they never pay a lot ot tax seems to be pretty much that they don’t make a lot of money full stop. Both Facebook and Google made loses, yet still paid tax. Isn’t that better than should be expected? If you don’t make a profit, there should be no profit related taxes surely? Richard Murphy says: December 8 2012 at 9:24 am No one is arguing tax should be paid when not due We are arguing it should be paid where it is due And Amazon is emphatically not doing that john says: December 8 2012 at 12:58 pm Amazon is not emphatically doing that as tax is not due. The relevant transfer pricing law is in place and it is up to HMRC to enforce it. Richard Murphy says: December 8 2012 at 3:02 pm You ignore the fact that the creation of the structures was when the avoidance took place If the trade does not occur in Luxembourg then the claim it does is the act of avoidance The pricing is then a mere side issue David Moore says: December 8 2012 at 2:03 pm Really? There is no tax due from them is there? Your claims are based on what you seem to want them to pay, nothing at all to do with what is actually due at all. Richard Murphy says: December 8 2012 at 3:00 pm If you put structures in place to avoid tax you may not owe tax It does not mean you did not avoid tax john says: December 8 2012 at 4:16 pm The transfer pricing is the very issue. No one argues that the trade is not occurring in the UK, but the profits of that trade are sucked out through transfer pricing. It does not matter when the structure is put in place, as HMRC should be arguing that the transfer pricing payments which are sucking the profits out are too large. We have sufficient law in place to combat this, but HMRC are not challenging the payments made to a group entity outside the UK which holds the IP or loads up the UK businesses with debt. Richard Murphy says: December 8 2012 at 4:38 pm No transfer pricing is not the issue Residence and whether there is a permanent establishment is the issue Max says: December 8 2012 at 9:14 pm Don’t suppose this’ll get through moderation but: Isn’t the basing of Amazon’s business in Luxembourg complying exactly with the EU law on single market etc under which the taxation of transfer charges is specifically illegal? And.. There is a treaty signed in 1968 with Luxembourg which specifically states that ‘warehouse’ are not considered as business locations? Richard Murphy says: December 8 2012 at 9:52 pm And isn’t it amazing that all were signed with good intent and all have since been massively and artificially abused since then Justin Pearce says: December 9 2012 at 8:31 am Let’s get 2 things clear: 1. Amazon EU SarL is not a resident in the UK. 2. And it does not have a Permanent Establishment is the UK. Therefore it is a transfer pricing issue. Richard Murphy says: December 9 2012 at 9:27 am And I have to say that it is only be exploiting the rules that they are not resident and do not have a PE So, it’s time to re-write the rules When will you get it into your thick heads (correct terminology) that is what we’re saying And that we’re saying the abuse of these rules is the avoidance? Barry says: December 9 2012 at 11:10 am What is interesting though is how should they have set up to fit into the current rules? Presumably you are not suggesting they should ignore the current rules in order to pay the amount of tax you think is due. Richard Murphy says: December 9 2012 at 8:40 pm Yes I am It would pay Honesty always does Gary says: December 9 2012 at 11:19 am Out of interest, if you had been Amazon’s tax advisor on the initial international expansion of their business what would structure would you have suggested in order for them to be fully compliant? Richard Murphy says: December 9 2012 at 8:40 pm A UK operation paying tax on profits earned here And fees for services supplied straight to the USA And they’d make more money because honesty always pays – and management that deceives itself is not honest Gary says: December 10 2012 at 7:19 am So the net position in the UK would be the same as it is now (ie an appropriate return for a warehousing and distribution operation). Or are you saying that you would force them to move more economic activity here too? Richard Murphy says: December 10 2012 at 7:38 am They have the economic activity here We’re not taxing it We should be This is not a warehousing and distribution operation – unless you’re wilfully blind – this is a full commercial operation David B says: December 12 2012 at 3:23 pm So to Barry’s point, we are beating them up for not applying rules that don’t exist. Richard Murphy says: December 12 2012 at 5:51 pm No – we’re beating them up for unethical application of the rules Five businesses running rings round HMRC « onlythelittlepeoplepaytaxes says: December 8 2012 at 11:36 am […] friend and fellow Chartered Accountant, Richard Murphy has a delightful infographic on his website courtesy of Management Today. This is just a […] JohnM says: December 8 2012 at 1:40 pm http://newsthump.com/2012/12/07/taxpayers-queuing-up-to-try-starbucks-pay-what-you-think-it-fair-tax-model/ PhilT says: December 8 2012 at 3:58 pm Where’s Apple ? One of the most riduclously profitable companies in the world and despite all those UK iPhones and iPads they don’t even have a corporate presence here, with the Apple UK website being that of Apple Distribution Europe based in Dublin. They have a UK VAT number, but enjoy Dublin’s favourable corporate tax regime on their $15bn European sales at >40% profit. Richard Murphy says: December 8 2012 at 4:31 pm Agreed Not sure why the focus is off them Or Microsoft Tim Phillips says: December 8 2012 at 4:00 pm Companies which avoid tax due by actively going round the law, legally, in the way they do their accounts are said to be keeping money from the State so they can do useful things with it. If so, and if one accepts that paying tax is a legal and a good thing to do because of schools roads etc, then the tax avoiders are actually taking an investment from the public not from the markets, and are paying the public, at 0% interest and with no repayment requirement. Good business or what! So, if companies insist on this socially bad yet for them commercially good behaviour, why not charge them the market rate on their investment take? And add a premium plus a repayment clause or a resident debt obligation in the form of a seat on their Board? This on top of transparent tax planning disclosures and tax liability in the place where the transaction happened. I pay Amazon here! Not in another country, might help level the playi g field. Richard Murphy says: December 8 2012 at 4:39 pm Quite so Tim Good to have you on here Mark says: December 8 2012 at 6:25 pm It would be great for the consumer if there was a website or greater media reporting given over to comparative analysis of how businesses in different market sectors manipulate their tax affairs to give the consumer the information to adjust their behaviour and shop at those businesses paying tax. For example, since Wal-Mart took over Asda, their tax bill – thanks to ‘royalties’ – has predictably been cut by over £100million annually. How do other supermarkets and business sectors compare? Perhaps a grading system could be used to assess how aggressively they manipulate their tax affairs giving the consumer the ability to take their custom to those who contribute without gaming the tax system. The consumer has the power to change business behaviour, they just need the information. Richard Murphy says: December 8 2012 at 9:54 pm I am working on this Wait for the new year William says: December 9 2012 at 1:35 am TBBH, this was one for NuLab. Under that swine’s agreement to be “massively relaxed about people getting rich” we agreed to give 100% tax deduction for interest on buying a co. At the same time, NuLab discouraged Company House from enquiring too closely (i.e at all) whether takeovers actually met Company Law. Result. We actually gave people a tax subsidy to take business out of Britain ! In fairness that was all Nu-Lab, nothing to do with Gideon. Too many people were close to the city of London & rather absent from, say, Wolverhampton. Richard Murphy says: December 9 2012 at 9:25 am I have to agree JohnM says: December 9 2012 at 9:11 am It may be better to research how aggressively they pursue the policy of buying politicians and public servants. After all, many of these laws seem tailor-made to produce as little tax as it is possible to get away with paying. One should then follow the logical thought that our “elected representatives” have a not-so-hidden agenda of enriching themselves as much as possible, while continually telling the electors that they have taken too much from the “pot” for so long that they can have nothing now. I prefer to not think much about the owners of asda/walmart, whose riches exceed the combined income/assets of the poorest 48 million US citizens. William says: December 10 2012 at 12:43 am JohnM Yes, it would always be worth asking (perhaps Richard Brookes could) which individuals were responsible for drafting the last few years’ legislation & who they are working for now. Graham says: December 9 2012 at 2:11 pm @Mark. But wouldn’t Walmart be paying tax on the royalty income at 35% in the US? It wouldn’t be very smart to be taxed at 35% to save tax in the UK at 20 odd percent. Thomas says: December 9 2012 at 10:24 pm Richard, You say if you were in charge you would have had Amazon set up an full UK operation, which would make them liable to pay corporation tax here. Presumably, to be consistent, this would mean you would want them to setup a separate operations in each EU country they wish to sell to? 27 separate Amazon companies in Europe? By why? The European Single Market was created specifically to make operating in Europe easier and less cumbersome, which is why it was setup so a company can operate across Europe from a single base. This is what the EU wants companies to do. Amazon a complying with the desire of the EU: establish yourself in one place and sell everywhere. This is TAX COMPLIANT. Given that the EU has made things much easier to operate in Europe, why on earth would a company decide to operate in a more cumbersome, expensive, inefficient manner? If there is no requirement to establish individual companies, indeed it isn’t even what the EU wants, why would they do it. Thanks for your time. Richard Murphy says: December 10 2012 at 7:39 am Why not? Please explain why each country is not entitled to the tax earned within its domain JohnM says: December 10 2012 at 9:32 am @William Quite. But also look at who they were working for BEFORE they started public service/politics/banking. Lift that stone and you frequently find an example of fauna that was employed by Goldman sachs, in a previous existence. Funny how, when you look into things, you always end up back at GS ?