I was amused to find this on the KPMG UK web site under the heading Tax Efficient Supply Chain Management:
TESCM integrates supply chain design with tax optimisation delivering significant increases in profits. It is based on the premise that incorporating tax arbitrage into supply chain structures (typically by optimising the location of the key supply chain functions, assets and risks) realises benefits well beyond conventional operational savings on their own. TESCM is especially topical as tax authorities are challenging traditional tax planning structures and products. At the same time businesses are changing their operating models in response to the economic downturn.
Now let's remind you first of all that KPMG operates in 47 of the 60 secrecy jurisdictions surveyed by the Tax Justice Network as part of its Financial Secrecy Index work. The reality is that if a place is a major tax haven / secrecy jurisdiction then KPMG is there.
And next let's unpack what their web site says.
"Tax optimisation": = tax avoidance to transfer tax due into private profit
"Tax arbitrage" = trading off the tax system of one state (usually a place like the UK) against the tax system of another state (usually a tax haven)
"Optimising the location" = artificially transferring or relocating solely to get a tax gain
"Relocating risks" = claiming risk is in tax havens through reinsurance contracts, hedging and other artificial means which have no overall impact on the overall profit or loss of a deal
"well beyond conventional operational savings" = we're bereft of entrepreneurial insight but we know how to play the tax system for the advantage of the already well off
"tax authorities are challenging" = so let's relocate things to secrecy jurisdictions where they're hidden from view
"changing their operating models" = we don't try to make money anymore, we just try to abuse the tax system - it's easier than the hard work of actually making things
"economic downturn" = nobody wants what we make so we'll capture state revenues instead.
So what does all this actually mean? Simply this: KPMG will shift key parts of your supply chain into tax havens, setting up insurance, licensing, hedging, marketing, transport and other supposed functions in those locations each of which can take a chunk of the profit and leave it there tax free - an activity all being heavily promoted by George Osborne who has, by promising a move to territorial taxation in the UK guaranteed that all such profits will stay out of the UK tax net. Talk about looking after his friends and guaranteeing his own future income from grateful companies!
That's modern capitalism for you, in a nutshell. Just a giant con-trick because it's bereft of any real innovative or entrepreneurial ideas.
And KPMG are, of course, pillars of society for doing this: something that their apologists repeatedly say does not happen, but which they're openly advertising.
Time for a reappraisal, I think.
And it's also worth a mention that there's something that could easily expose this abuse: it is, of course, country-by-country reporting. No wonder the Big 4 and their clients are so heavily opposed to it.
Note: I was trained by Peat Marwick Mitchell & Co, now KPMG. I left a long time ago, and for good reason.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Your forensic dissection of the guff, cant, and spin of the accountancy world, is worth reading any day, Richard. Keep at it (as I know you will).
Why are you opposed to the territorial basis of taxation? It merely taxes profits in the country in which these profits arose? Most instances of source-residence conflict are resolved by double taxation agreements.
Surely it is far simpler taxing profits that arise or are actually sourced in a country than having to address cross border issues that can result in double taxation or even in some instances double non-taxation.
a) Because it means profits are artificially relocated to tax havens = abuse
b) Because individuals are rightly taxed on world wide income – so why not corporations? If not, no level playing field = benefit for rich
It’s tax justice……
What are you talking about? The source of profits or taxable income is a question of fact!
It is either sourced in the UK or it is not! Simple!
Where on earth does shifting profit ex post facto enter the discussion of source.
Assuming you are correct, which you are not, how do you suggest that the UK taxes non-residents who are trading and deriving profits in the UK – seeing as they could just as easily artificially relocate such UK-sourced profit.
Only a tax simpleton or tax charlatan could write something quite so stupid
I suspect you’re both from your many previous comments
Richard: You are rather like a forensic pathologist (if there is such an occupation!) as you skilfully cut-the-crxp these people publish and convert it into recognisable form.
This is one of the most appalling exposures to appear on your website for several weeks — more than half the world goes to bed hungry every night while these fat-cats plot financial innovations which will result in the world’s underprivileged facing even further depravation.
If the PSG were to write more you will reject it for bad (although entirely appropriate) language.
Keep up the good work.
Good one. Also, in this vein, take a look at TJN’s Dictionary of Offshore Obfuscation http://bit.ly/iuZKlO
We are not a tax haven = We are a tax haven, but don’t tell anyone.
We offer agile and flexible / light-touch regulation = We offer lax / complacent regulation
We respect privacy = We will turn a blind eye to your dirty money
Tax-friendly = Friendly for us, but probably not for you
This should be regulated elsewhere = This will be regulated nowhere
We maximise our tax efficiency = We avoid tax (the “Bono defence”)
No tax was due, so no tax was avoided = We dodged the tax, so that no tax was due (the “Philip Green defence)
We manicured our taxes = We evaded our taxes (The “Yukos defence”)
Taxwash = When companies use questionable third party endorsements to counter allegations of tax avoidance. Click here.
We use innovative tax planning = You paid your taxes? Sucker!
I am terribly thick re these matters, but just tell me if I have this right – KPMG think avoiding tax payment is good, KPMG want to run GP consortia, NHS is paid via my taxes, KPMG want to make money from my tax payments for NHS services. Take and give little back. That is their ethos? Perhaps I am way off the mark