As the Guardian has reported:
GlaxoSmithKline lent its support to the UK economy on Tuesday by pledging to hire more staff and pay more taxes — in stark contrast to its US rival Pfizer, which is shutting a key centre in southern England.
Glaxo's chief executive, Andrew Witty, reiterated that the government's patent box — which will offer lower rates of corporation tax on profits generated from the fruits of UK research and development from 2013 — had made the UK more attractive. He has previously attacked British companies that relocate in search of lower taxes, lambasting businesses that turn themselves into "mid-Atlantic floating entities" with no connection to society.
Of course I welcome this, but only cautiously.
GSK has a long history of tax avoiding, on transfer pricing and of usingof tax havens.
So this change is welcome - but I'll be convinced when I see the evidence. So my challenge to GSK is a simple one. Adopt country-by-country reporting and then we'll know if you are delivering the tax we expect. Doing so would make you a real world leader.
Bite the bullet: walk the talk and show us you pay your tax to build the type of society - the democratic society that supports health for all paid for from tax - that is the only sustainable base for your business.
If you don't this is welcome - but only as a gesture.
The choice is yours: gestures, or the real thing?
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Dear Richard,
You write: “GSK has a long history of tax avoiding, on transfer pricing and of using of tax havens”, which is quite a strong accusation. Could you develop these two tax avoiding strategies that you say have been used by GSK in a recent past?
Cheers,
David
GSK made one of the biggest ever settlements on transfer pricing – in UK and USA – and has openly said in its accounts low tax rate was due to use of tax havens such as Puerto Rico
I agree with your cautious comments. GSK is basically using tax avoidance as a marketing tactic now. They’ve just opted to use the UK tax haven called “lobbying the government” instead of relocating profits to Jersey.
They should be fingered for being dishonest, not for using tax havens (Which are perfectly legal).
Hello Richard,
I wanted to ask how Goggle one of the biggest companies in the world pay 2.5% tax ??
I think its very interesting but unsure on how they do it as its an online global company would this be the same if it was started in the UK ?
http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
Kind regards
Alex
If you google “Tax Research Google Tax” I think you should find the answers….
If not the last Bloomberg story (Google Bloomberg Jesse Drucker Google tax) explains
Not quite sure I follow this obsession with country by country reporting. Isn’t it just going to show low taxable profits in the uk and higher profits elsewhere ? What do we gain from this understanding (by implication we already know this is the case)
Am I missing the point?
Yes – you do miss the point
We’d know the facts – not the guess work
And HMRC could then target the real worst offenders
But there is much more too – see the breifing sheet page for more info
I’ve read the paper under the major publications tab and I still don’t get it from a tax perspective. You seem to be saying mncs can shift profits around at will, but all the euro countries have transfer pricing regs and anything else would probably get picked up under the cfc regs. I’m still unsure what you are trying to achieve here
You ignore the fact that a) the Revenue say this will help them risk assess beter and raise more money b) it will put data in public domain we don’t have now and that stops behaviour c) tax will be paid in developing countries d) use of tax havens will fall e) investor risk will fall f) transparency will increase g) governance will improve (ta havens reduce it) h) cost of setting upo strcutures will fall etc etc etc etc
Is it possible in a world that’s more transparent, that nothing actually ends up changing?
If an MnC is in fact transfer pricing their profits away from 2 jurisdictions simultaneously, ie. telling jurisdiction 1 (i paid tax in jurisdiction 2), and vice versa, then yes okay transparency will stop that blatant type of fibbing. But that’s the exception and not the rule right?
With country-by-country reporting, I can see for example News Corp publicly laying out where it generated it’s profits and where it paid tax country by country…. then what?
Who besides you would be interested?
In countries that matter (like USA, Canada, etc), most offshore tax structures have to be filed with the tax authority anyways.
Your points (a) through (h) above are all basically the same point: transparency, it will be public — which then you extrapolate to being — so they will be ashamed of saving so much tax and will change their behavior.
But I ask you: has any multi-national corporation been shamed into paying more tax? Or been shamed into no longer tax planning? Not that I’ve seen….from where I sit, capital has no shame.
Don’t you believe it
Capital can be shamed
I call R Murdoch
The revenue already have the power to ask for any info they like about a groups structure and it’s tax planning so I don’t get how your a) is any different from now
B) well is suppose if you look at the ukuncut mob and their attacks on to shop and vodafone outlets that bought the issue to the foreground but all it led to was those 2 organizations saying that the numbers uncut were using were wrong and that they complied with all tax rules. Not sure how much more shame you can apply than what uncut did and it still didn’t make any difference
C) don’t understand this. If they are making profits in a developing country they would pay tax there already? Or are you suggesting they are making profits there and fraudulently underreporting – which one would assume the auditors might have an issue with
D) this is unlikely. I question how much real use of tax havens really happens anyway. One of your other papers had a survey of the number of tax havens used by mnc’s. The cayman islands was up there near the top of the list. Unfortunately your data is likely to be skewed. You do not appear to have factored in the fact that any company (whether in the caymans or anywhere else) can be uk tax resident and thus pay uk tax. The use of companies like this is very common as it avoids having to deal with the cumbersome uk company law rules around capital reductions etc
Your other points are minor in comparison to the first few in my opinion
A) But CBC identifies where risk i very quickly – hence lower cost / higher collection = improved yield overall
b) We have to differ – you clearly don’t know about business paranoia on these issues
c) Transfer pricing rules don’t work in developing countries for lack of data – this gives the data
d) With the greatest of respect – that’s an excuse, not an explanation
I don’t follow your comment on d? As I said it’s common to use a uk tax resident cayman company to make it easier to do group reorganizations. That I’m afraid is a fact. There is no tax avoidance motive. I accept this isn’t the case in 100pc of cases but it’s likely to be in a significant number of examples. It’s not an excuse, it’s the prime motivation for some of these structures. What’s more there is no loss to the uk treasury as these entities are taxed as if they are normal uk incorporated companies
I do enjoy these intellectual debates, but one day Richard you might accept that someone else’s argument at least has some merit! 🙂
I have no doubt whatsoever that what you say is true: some Cayman Island companies will be used for this purpose, but let us be quite honest about the motivation for this use: it is a fundamentally anti-social, anti-regulation, anti-democracy, anti-society activity adopted to avoid those obligations placed upon limited liability entities in the UK to protect creditors including the government itself. Of course people may use Cayman Island companies to get round the democratically adopted will of Parliament in the United Kingdom, and the Cayman Islands undoubtedly deliberately promotes these companies to undermine the democratic will of the UK Parliament to put in place legislation to protect British people from abuse, in the process showing its own antidemocratic motivation, the those who act in this thoroughly reprehensible fashion, showing contempt for society at large in the process, need to be exposed to the abuse that they are undertaking.
Please do not presume that every use of tax havens is about tax: I and my colleagues did not rename them secrecy jurisdictions for nothing.
Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Now if you wish to condone this, please feel free to do so, about happily condemn you for it. I’m not a friend of those who seek to undermine democracy.