{"id":22668,"date":"2013-10-11T07:32:21","date_gmt":"2013-10-11T06:32:21","guid":{"rendered":"http:\/\/www.taxresearch.org.uk\/Blog\/?p=22668"},"modified":"2013-10-11T07:32:21","modified_gmt":"2013-10-11T06:32:21","slug":"wonga-goes-to-switzerland","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2013\/10\/11\/wonga-goes-to-switzerland\/","title":{"rendered":"Wonga goes to Switzerland"},"content":{"rendered":"

The Daily Mirror has a story on Wonga this morning, reporting that<\/a>:<\/p>\n

Payday lender Wonga has moved key parts of its business to Switzerland in a move that could slash its tax bill, experts have revealed.<\/p>\n

The controversial firm\u00a0began lending to UK customers<\/a>\u00a0through its Swiss operation last year \u2014 even though it does not offer loans to people in Switzerland.<\/p>\n

Wonga\u2019s main UK arm\u00a0paid \u00a338.5million last year<\/a>\u00a0to its sister company in Switzerland, a notorious tax haven where foreign firms can pay as little as 1% tax.<\/p>\n

Tax experts told the Mirror that the set-up could be used to reduce the company\u2019s tax bill in the future, but Wonga denied it had used an \u201cartificial or aggressive scheme\u201d to avoid tax.<\/p><\/blockquote>\n

As the Mirror reports:<\/span><\/p>\n

Corporate Watch began an investigation after Wonga\u2019s new office opened last year in the Swiss city of Geneva.<\/span><\/p>\n

Richard Whittell, from Corporate Watch, which hails itself as a research group supporting the anti-corporate movement, said: \u201cWonga needs to explain why it\u2019s moved key parts of its business to a country it doesn\u2019t even make loans in.\u201d<\/p><\/blockquote>\n

Wonga's defence is:<\/p>\n

Wonga said the payments to Switzerland were made \u201cin the usual run of business\u201d.<\/p><\/blockquote>\n

However, that makes no sense: Switzerland is simply not the normal place for a UK based doorstep lender to begin routine back office and credit processing. It may well be that is where Wonga has decided to locate its business but that does not make it usual. But ot's important to say, and I am sure it is true:<\/p>\n

There is no suggestion that the firm\u2019s tax affairs have broken any laws.<\/p><\/blockquote>\n

What the Mirror does seem to know is this:<\/span><\/p>\n

It is not known how much profit Wonga\u2019s Swiss firm made or how much tax it paid as not all companies in Switzerland have to publish accounts.<\/span><\/p>\n

Last year Wonga transferred the ownership of its trademark from its UK parent company to the Swiss subsidiary. This included \u201ccomputer software for enabling financial transactions\u201d.<\/span><\/p>\n

The arrangement could see Wonga\u2019s businesses around the world, including the UK, paying \u201croyalty\u201d fees to Switzerland every time a loan is issued.<\/p><\/blockquote>\n

And, it is only fair to note:<\/p>\n

A host of Wonga execs such as chief operating officer Niall Wass are now based in Geneva.<\/p><\/blockquote>\n

This may suggest that this is about personal tax as much as anything else: it's imply not known. But:<\/p>\n

Asked if Wonga would publish the accounts for its Swiss subsidiary, a spokesman said: \u201cWonga is a private company. We are not required to respond to questions about our accounts, which are published in full compliance with our disclosure obligations.\u201d<\/p>\n

He added that the firm had kept its headquarters in the UK \u201cdespite the increasingly international nature of the business\u201d, and said the Wonga group paid \u00a321.8million in UK corporation tax last year. This is understood to be at a level effectively higher than the standard UK tax rate.<\/p><\/blockquote>\n

However, as the Mirror then notes:<\/p>\n

But experts said Wonga\u2019s Swiss operations could be used legally to reduce future tax costs.<\/p>\n

Richard Murphy, from Tax Research UK, said: \u201cThis kind of transfer is a classic way in which companies try to move profits between countries to slash their tax bill. It is legal but provides opportunities for firms to shift profits to low tax countries.<\/p>\n

\u201cIt\u2019s very hard to explain why Wonga would shift a key business process of this sort to Switzerland if that was not its aim.\u201d<\/p>\n

Paul Bramall, of tax consultancy Gabelle, said: \u201cThis looks like a similar arrangement to the one used controversially by
\nStarbucks. It appears that Wonga UK are paying a royalty fee to Switzerland for the use of the company trademark here in the UK. This reduces the profits in the UK for tax purposes.\u201d<\/p><\/blockquote>\n

And that's the point: this may be legal, but the fact is that all tax avoidance is legal and yet is now widely recognised to be unacceptable in some cases. That's the basis of much of the OECD's\u00a0Base Erosion and Profits Shifting \u00a0project which does specifically look at issues such as moving intellectual property.<\/p>\n

Wonga has done nothing wrong.<\/p>\n

But equally it now has even more questions to answer about the way it does business.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Daily Mirror has a story on Wonga this morning, reporting that: Payday lender Wonga has moved key parts of its business to Switzerland in
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,63,10,32],"tags":[],"class_list":["post-22668","post","type-post","status-publish","format-standard","hentry","category-economics","category-switzerland","category-tax-avoidance","category-tax-havens"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/22668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=22668"}],"version-history":[{"count":0,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/22668\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=22668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=22668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=22668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}