There was a fascinting article in The Scotsman late last year on Amazon.
The Scottish government has subsidised Amazon by £10.6 million to undermine Waterstnes and the small booksellers north of the border, whilst not paying tax in the UK.
You couldn't make it up, could you?
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Is it not the general case that warehousing and distribution activities do not give rise to a permanent establishment and therefore create a taxable presence?
If there are no selling activities undertaken in the UK then there is no UK tax.
If the UK or Scotland don’t like this then they could change the law.
But then wouldn’t Amazon just move their Warehousing and Distribution operations to say Ireland, or France?
What’s the solution?
Of course they’re a permanent establishment
You Isle of Man lawyers have a very weird understanding of tax
How very dare you. I am not an isle of man lawyer and demand an apology !!
What about the OECD model convention on income and on capital?
Isn’t this form of facility that amazon operate ok the ul a “specifically excluded place” under the PE definition within the treaty ?
I think that is what Amazon would suggest.
I doubt it
The whole point of “tax effective supply chain management” is to dissect the supply chain into as many different activities as possible. Purely theoretically in the case of amazon in the UK all the sales and marketing activity will take place through a Luxembourg company. Who knows where their servers are based but that may well be where sales are concluded and it will be definitely be in a “low tax jurisdiction”. The stuff that needs to be done in the UK or as a bone thrown to say Scotland will be done through a low value possibly UK registered company and an “armslength” price imputed by marking up the UK branch costs incurred at a mark up rate, say 10%. Any HMRC enquiry might focus on whether this should really be a bit higher, but who’s to say and what publicly available comparables are there to determine what the price should be. If we had country by country reporting what they do would be more transparent and we’d be able to see how profits are allocated between countries. As it is we should change the law throughout the EU to deem that sales contracts involving for instance UK residents buying goods for delivery in the UK are treated as UK contracts and taxable as such. Hmm who would object, obviously Luxembourg, you don’t get to have the highest GDP per head in the world by playing fair with your partners. Luxembourg is a cuckoo in the nest of the EU and should be taken apart. It is the main tax avoidance centre for multinationals involved in dodgy tax arrangements in Europe, which is virtually all of them.
Agreed
Amazon will have warehousing in the UK. They will pay rent on that warehousing. Some of it will already be subject to the UBR. Their staff will pay tax so that is also ultimately a cost to Amazon. The growth of outfits like Amazon is just a sign that the old models of company taxation are technically outmoded. Governments need to adapt to the new situation if they are to protect their sources of revenue. We all know how they can avoid losses due to transfer pricing and it is not through attempts at ever more draconian controls which are ultimately futile.
Henry
If you’re happy with £3.30 I’m not
Richard
Where does that £3.30 figure come from?
Typical warehousing in Scottish lowlands is £4 per square foot annual rent. A 100,000 sq ft warehouse will be £400,000 pa and pay £160,000 pa in present UBR. And none of it can be avoided.
If Corporation Taxes are cut, business rents will rise and largely absorb the cuts. But in any case the UBR could be a much higher percentage of the rental value than the present 40%.
And none of that rental value can be made to pop up in a tax haven. What is there not to like about that?
It was metaphoric
On a unitary basis amazon should I think pay £35m
You will settle for £400k
And you call that a good tax system?
If they run five warehouses that will make £4 million. But on what basis do Amazon owe £35 million a year to the UK government? Do they get £35 million worth of services from the UK government? Most of the value of the services they get from the UK government is either money paid through the UBR or else as rent to their landlords. And I see no reason why Amazon or anyone else should pay for what they do not receive in benefits from the community. Any more than they should receive benefits that they do not pay for – and I am not talking about people on welfare, I am referring to Lord Marchmain.
Oh for heaven’s sake – since when was tax due in exchange for the value of services supplied?
You really are a waste of time – a libertarian time waster in disguise
Please do not bother to comment again – you will just hit the trash bin – because such is your incomprehension of tax that is exactly where you belong
What’s a unitary basis?
Please search the site for the answer
Hmmm…..having done a little reading, I can’t say this unitary taxation business is that interesting. It may well work to a limited degree, but there seems to be no consideration here of whether that is actually a good thing. Your questions to Henry Law are indicative of this:
“You will settle for £400k. And you call that a good tax system?” – You seem to have made a few too many assumptions in your numbers here, but I’m not really concerned about that right now. What I am concerned about is that you appear to think the ultimate criteria for a tax system is the total revenue raised, which seems a little short-sighted. It is perfectly possible to become increasingly efficient at the wrong actions.
To answer your other question “since when was tax due in exchange for the value of services supplied?” – the concept of justifiable parties seems to apply here. There must be some actual reasonable justification for the government to be doing the taxing or it’s no different from theft.
To be clear, I think that such justifications do exist, but there are implications for the methods of taxation that are applied.
Whenever someone mentions tax and theft in the same phrase the response ‘anti-social libertarian’ (or worse) comes to mind.
How about tax for redistribution?
Or for repricing market failure?
Or economic management?
You dismiss all of those?
Self interested thinking guides your thinking. Try a little empathy and real analysis
“Whenever someone mentions tax and theft in the same phrase the response ‘anti-social libertarian’ (or worse) comes to mind.” – Yeah, the AnCaps do kind of spoil it for everyone.
“How about tax for redistribution? Or for repricing market failure? Or economic management? You dismiss all of those?” – Depends on what you mean by those terms (I find myriad people understand all these terms in a myriad of different ways). Economic management, for example, can mean just about anything. My problems with ‘repricing market failure’ and ‘redistribution’ is that they are typically invoked in a blunt reactive manner, simply trying to alleviate symptoms rather than dealing with root cause.
“Self interested thinking guides your thinking. Try a little empathy and real analysis” – You presume a lot about me. Understandable, but disappointing. It was precisely my empathy that took me away from the AnCap position.
Your ‘real analysis’ barb is simply condescending claptrap as you can define ‘real analysis’ to simply be something with which you agree, and vice versa. You should know better than to invoke such a meaningless rhetorical device.
As for what guides my thinking, the best way I can descibe it is ‘justice’. I realise that too is a word sometimes hijacked by the AnCaps, so I realise that may ring hollow to you. C’est la vie.
Well I apologise if I read you wrong
Try avoiding using the phrase theft and tax in the same breath if you want to be read right
Now tell me how you’d solve the problem of international allocation of taxable profits if I’ve got it wrong, as have the OECD
Unfortunately, the Scottish Government has no control over taxation. Not sure what you want them to do here, pass up the chance of 2000 jobs in a depressed area?
But they do have a duty to take it into account when undermining local business
As we all should do,if we consider shopping at a new Tesco,ASDA or such?!
As a matter of interest,have Amazon been allowed similar encouragement in England,and do they avoid Luxembourg corporation tax as well?
I am always puzzled how Luxembourg,a founder EU member,gets away with so much? Perhaps a haven for Eurocrats tax free earnings!
I am staggered Luxembourg is allowed to hold the EU to ransom
It does
I wonder why it is tolerated
Candidly, it is absurd
If, like the UK government, Salmond had any control over who does and does not pay tax, I could see your point. I don’t see how he is supposed to know the corporation tax details of every company in Scotland. That’s HMRC’s job at the moment.
It is called due diligence
For £10 million you do it
You shouldn’t believe everything you read in the BritNat Hootsmon; collection of Corporation Tax is not devolved and has nothing to do with the Scottish Government. http://newsnetscotland.com/index.php/scottish-news/4732-scotsman-publishes-attack-on-salmond-over-hmrc-amazon-tax-blunder
Sorry nothing to do with Amazon but you.ll already have heard that AIB are pulling out of Jersey and the IOM no doubt as part of the agreement to the bail out as with Dexia bank
What I am really struggling to understand is your position that foreign companies which sell into the UK should be taxable on those profits in the UK, instead of where the company is located and resident for tax purposes. Forget for one moment that it is not Luxembourg but Germany that we are talking about. Your point is that the German company selling into the UK should be taxable in the UK rather than Germany on its sales. In that example, BMW and Mercedes sell to UK distributors, so presumably you are claiming that the UK rather than Germany should be taxed on the profit margin of BMW and Mercedes? Somehow I don’t see the Germans finding that acceptable.
On the other hand, it would mean that UK companies selling overseas would only be paying tax “there” rather than in the UK, which doesn’t seem logical either.
Am I missing something obvious?
You miss three points
One is I challenge our current concepts of residence. I do not accept current standards of control, designed in the steamship era
Two, you do not see that I am challenging OECD standards on transfer pricing
Three you miss the fact I am challenging distance selling
That apart you get it
But it seems to me that you are, in the process, endorsing territorial taxation which will benefit the UK in respect pf overseas companies doing business here, but will cost the UK as UK companies trade overseas and pay less tax here as a result. It may be swings and roundabouts, but equally it may not.
Any challenge to the UK’s concept of residence will equally require a challenge to every other country’s concept of residence. That just doesn’t seem remotely likely. Challenging OECD standards on transfer pricing is perhaps more feasible.
A challenge to distance selling is at the heart of the territorial tax argument.
I note yot haven’t commented on my BMW/Mercedes example, but it seems to be an example which highlights the crux of the issue. How would you propose to tax them when they sell German cars to UK distributors without taking tax revenue which clearly seems to otherwise belong to the German exchequer? Is that distance seeking? I think it’s normal cross-border trade between EU member countries.
You may not have noticed – but in respect of corporation tax may aim has always been to assist developing countries at cost to developed ones. I am consistent – and know what I am doing
Except by removing tax havens both gain
And what is wrong with BMW paying tax here, anyway? What is your issue with that?
If you really can’t be bothered to read what I’ve written, let alone think about it, why comment on it?
“Oh for heaven’s sake — since when was tax due in exchange for the value of services supplied?”
Since the Great Book said so Mr Murphy.
Banks think like you too. “We own the mortgages, gives us your money”. Mortgage interest is nominally “Rent”. Or a tax on the peoples production. Yet what services do they supply? So why are the people compelled to pay this tax to banks for land services?
Leviticus 25, 1 Samuel 8 and Romans 13 are pretty good expositions of this. It shows what happens when humans oppose these natural laws of the Creator with their own human laws. Committing the ultimate sin, by trying to do it all better than God.
Such as by refusing to redeem the fruits of His work. And by systemic robbery of the fruits of each persons labour.
Mr Murphy, isn’t it true you tell people you are a believer? Yet you ignore these natural laws?
Do you understand Biblical Economics? Do you understand the meaning of the term scribe or Pharisee?
Did you know your main funder JRRT are Quakers. Quakers invented the Monopoly game to show how what you propose ALWAYS destroys the economy and delivers poverty and destruction. Then the simple remedy using the biblical Jubilee you so harshly refute. All in harmony with the natural law.
Do you know these things. We keep trying to point them out politely. We want to help you. You are misdirecting the people against the wishes of the Creator. But don’t seem to know it.
“This is the reason why Jesus said that they were blind guides leading the blind. They knew the surface of the law but not that which supported the law”
http://www.christianmuse.com/DailyCom/1/6.htm
I’d be happy to discuss this more. It would help if you were to look away from your mind or pocket, and deep into your heart.
If you really think an appeal to specific scriptural authority will work with a Quaker you have a long way to go to understanding a Quaker perception of Christianity.
These so called natural laws may very well be human constructs
And Quakers, for the record, did not invent Mononopoly. A Quaker may have done. It’s not the same thing
So please don’t play God with me – it’s precisely the type of preaching that would make me an atheist of it was the only choice f faith on the table
Thankfully it isn’t