Facebook pays INFINITELY MORE UK corp tax than in 2012 Facebook has responded to critics who attacked the free content ad network for contributing exactly zero bucks to UK corporation tax in 2012, by dishing up a a tiny sum of just £3,000 to HM Revenue & Customs last year. However, the £3,169 bill Facebook owed to the Treasury in 2013 was offset by tax credits – which in fact left …
I'd be looking less at the share value and more at the dividends.
https://en.wikipedia.org/wiki/Dividend_yield
Stocks can go up, or down. Up is nice, but down happens too.
More importantly, a stock only has any value when sold. Up to that point it's just scrip and I've seen "blue chip" high flyers evaporate overnight when the markets lose confidence in them - which is germane, because I think the earnings potential of facebook or other "social media" sites is vastly overestimated.
Its only bleeding because it chooses to bleed. Set corporate taxes at 9% and watch how much Starbucks, google, apple, farcebook etc make in profit in the UK.
If you were a shareholder, you'd know that from an investment point of view, this is a very good thing. You keep about 90% of what the investment earns, rather than keeping about 70% of it by choosing not to bleed.
As a shareholder I would like to know if someone in the company committed fraud that there would be police with the right training to investigate and someone in the CPS who could prosecute. I would like the people going to work there to be able to drive on safe roads and if anything happens that there are emergency services that can help. Now, when if facebook going to get into the road building, security and medical business?
I tend to agree that the fault lies with the taxation system - internation and national.
For Governments to blame companies for optimising their use of these complex systems is like blaming the rain for coming in through the hole in the roof.
Bureaucrats create an overly complex taxation systems - something that perhaps gives them a sense of job satisfaction and importance.
However, the more complex a system, the more loop-holes inevitably exist within it.... and it is the wealthy international companies who can afford the lawyers and accountants to best exploit such a system, not the Governments or their agencies.
Some national governments forget that they are in competition for the tax income of international companies, and seem shocked when companies move their revenue to more favourable environments.
I *would* like to see big companies paying more tax in my home country (UK). But its the responsibility of the various governments to make this happen, and not relying on charity from companies.
The problem isn't the tax system, it's that these international corporations are allowed to get away with massive misreporting of revenues, sales, profits and costs which leads to them not paying any tax. Cart/horse and whatnot. It's accounting law to blame to explicitly tax law, the accounting voodoo allows them not to pay tax.
The worst part of all this is if any companies are able to accurate identify where the money comes from and where it goes it's the mostly-online ones like google and facebook - they know where their advertising customers are from and they know the location of the users they're targeting (at an individual level, not just by sampling) so they should be held to a higher standard when they're filing accounts; not a lower one.
"allowed to get away" is exactly the problem though. They are allowed, officially, because the law says they aren't doing anything wrong. If the laws were worded differently, they wouldn't be able to do it. Literally, these companies can be audited en-masse, brought to court, and still be found compliant.
That's the problem. Not whether Mr Plod gets suspicious or not. It's that, by the word of the law, these companies are NOT doing anything illegal and yet still paying zero tax. How they report the income, or misreport it, is a matter of law. If they are able to misreport it, it means that the law allows that.
"You must pay X% of your UK business income to the UK government." - seems pretty simple to me. I'm sure there are side-issues and corner cases but quite what's difficult about legislating that with enough clarifications to make what you mean by "UK business income" explicit?
"You must pay X% of your UK business income to the UK government." - seems pretty simple to me. I'm sure there are side-issues and corner cases but quite what's difficult about legislating that with enough clarifications to make what you mean by "UK business income" explicit?
The definition of "UK business income" is the problem.
The company does pay X% on the UK companies profits (business income). The problem is that companies can, through various legal means, shift those profits around. International companies can shop around for the best deals. In fact, it is pretty much a legal requirement for PLCs to do so, as they have a legal obligation to maximise shareholder value.
It is not even as though we can just "close the loopholes". All (or at least almost all) the "loopholes" are actually sane, logical rules. Let's take one of the widely used ones: shifting profits by licensing IP. The companies Irish arm holds a load of patents, trademarks etc. They charge the UK arm a license fee for using them. This "loophole" can't be closed (easily). If company A licenses IP from company B, that is a valid business cost and company A can't be expected to pay tax on it. Seeing as a multinational's UK & IE arms would be separate legal entities, the rules can't easily distinguish between this case and the case of two entirely separate companies.
The tax system is complex, but it is complex for a reason.
"If they can do it then we can too, we just lack the will (or rather our government does)."
Yeah coz we really want to follow the french. Not like they are tanking impressively. Not like they are promising the earth, taxing like hell and being kicked in the nuts over and over for not balancing their budgets.
Businesses are taxed on profit rather than income because governments want to promote businesses and startups, and frequently businesses can run for some years at a loss even when making money. Taxing profits rather than income helps small businesses to grow, the thing is that big multinationals abuse of these rules in ways that smaller businesses cannot.
A possible solution: Instead of a high corporate tax (25% or 30%) on profit, have a low (5%?) corporate tax based on income. Then allow startups a 3 to 5 year window of breathing space, starting with 0% tax their first year and gradually ramping up to the full rate at the end of the 'breathing space' window. This has the advantage of being very clear (companies will always know their current tax liability and be able to accurately estimate future ones - business likes predictability). It is also much easier to calculate, because you don't need to mess around with complex accounting rules of what expenses are allowed to be deductible, and it's also easy to see what income is really being generated in which country.
I expect that companies might try to dodge this by re-incorporating a new company every few years so safeguards need to be built in against this.
Income is one side of the coin - Doing this would effectively destroy an awful lot of companies with low margins. If I get income from selling a chair, i have to buy the wood and the electricity for the lathe. If you tax the chair on sale (as in me, the manufacturer, not the customer who will pay VAT on top), without allowing me to offset the sale price against the wood and the electricity, then this all falls down.
Here's a radical solution - don't tax profits. Don't offer subsidies for losses either.
Why do profits need to be taxed? You pay workers, who pay tax
You provide customers with goods, who pay tax
You provide shareholders with income or assets, who pay tax.
Why should any more tax be paid on top of other taxes? you've already covered all of the money exit routes - it's not like a company is going to buy itself a fancy house and a yacht for itself - and even if it does, the housebuilders and yacht builders will be paying tax via one of the 3 methods above. I mean the only thing that "profit tax" allows the exchequer to get their hands on is a pile of cash hoarded by a company. And why would a company hoard cash when inflation means it's losing money? which shareholders are going to stand for it? It's all utterly pointless.
I mean, have I missed something? surely corporation tax is double taxation, plain and simple. I fundamentally disagree with double taxation, though I'm prepared to listen to how I've misunderstood the situation...
At present in the UK, a shareholder in receipt of a dividend gets a tax credit to take account of the fact that the company paying the dividend has already had to pay corporation tax. If the shareholder's dividend income added to any other income is below the higher rate threshold, they pay no tax at all. If the shareholder pays 40% tax on their earned income, the tax credit means that the effective tax rate for the dividend is only 25%.
There's no double taxation for companies that distribute profit as dividends, it might look like it, but all that happens is an adjustment to the tax rate to take account of the personal circumstances of the person who receives the dividend.
Customers pay a sales tax, which the company collects on behalf of HMRC. The company doesn't pay it. No double taxation there either.
Companies only pay corporation tax on profits. Gross pay (i.e. salaries including income tax) is an allowable expense and therefore no double taxation there.
Corporation tax is _not_ double taxation, pure and simple.
If a company retains profits, they will (and should IMHO) pay tax on them. If they invest those profits in things that are useful to the country (like investing in capital equipment to develop the business) then there are further tax credits available.
Unless the whole world moved to a system where there was a 0% tax rate then this wouldn't work either.
You seem to be mis-understanding how all of all of this works.
Most of the tax they are paying is in the place where it cost them the least in taxation, and guess what, usually that is also the place where they have the fewest (in some cases, NO) staff.
So sure, make $2bil, and pay 0 staff $0, so yea... That's going to work well.
You COULD bump taxes up on workers, but that doesn't work either for a huge amount of reasons.
Also, "information" sold as "goods" would be hard to tax too, you would end up with the same thing where some office (with 0 staff) is paying 250 million $ a year to another office (with 0 staff) for data information, but the island state charges 0% corporation tax... Then the buyer ships their "Global information" to the "UK Arm" for, oh, free, or even a huge fee (lets say 250 million $) and the plastic ducks they sold this year (and made 250 million $ profit on YAY) gets a tax offset due to the data they had to buy from themselves (BOOO) thus negating any profit.
DEAR GOD MAN, CAN YOU SEE WHAT YOUR DOING, TAX FREE PLASTIC DUCKS...
Until I replied to you I didn't know how bad you had it in for us, but no I know..
Now I know.
"The companies Irish arm holds a load of patents, trademarks etc. They charge the UK arm a license fee for using them. This "loophole" can't be closed (easily). If company A licenses IP from company B, that is a valid business cost and company A can't be expected to pay tax on it."
It can pay VAT though (which is a consumption tax).
If I, as a small business or individual, buy an IP license from Microsoft UK, then I pay vat on that transaction even if nothing actually changes hands.
When Microsoft UK pays license fees to Microsoft USA, no vat is paid on that transaction.
There's a bunch of long and complicated reasons given for this kind of shenanigan, but it boils down to the age old argument of "Our employees pay tax, why should we pay too?"
The problem isn't the tax system, it's that these international corporations are allowed to get away with massive misreporting of revenues, sales, profits and costs which leads to them not paying any tax
They don't misreport anything. They fulfill all of the reporting criteria to the letter of the law. The tax man is informed of the use of any structure in advance. It very much is the tax system that is the "problem".
Ultimately the only way to fix the "problem" is to move to a flat tax on corporate profits, dividends, and paye all set at the same level, and make that level low enough to not need to avoid paying it. The main issue with that, is that the public sector would have to be half the size it is now.
Mine was several times the amount stated, actually. Also as a one-man show with an office at home (if I'm not on-premises with customers).
I don't mind paying that, because enough money remains in my pockets. What I do mind is people and companies who try to find all possible international loopholes to not "contribute" any taxes. Yet they want their children to grow up in clean countries with excellent health care, education and low-crime rates, and once they are old enough they'd prefer them to have streets without potholes, too.
It's sickening that $megacorp keeps getting away with this practice. I know, it's not illegal. But it sucks, because I contribute a great deal of my revenue to various taxes, while they do fuckall.
While I don't mind paying taxes either you have to realize that you and I want our children to grow up in clean countries/Healthcare/education/crome/potholes.
$megacorp does NOT want Healthcare, they want you to pay $$ for it, they do NOT want education, because then you will be able to reason out the horse crap they throw at you in ads, and they DON'T want low crime rates, so they can sell you protection in a box. They want the potholes in the streets so the now broke government has to borrow money to hire $megacorp to repave the roads.
It keeps their stock prices going up. has zero overall real value to society, but it keeps the stock prices going up.
(gumpy old bastard, and yes I'm in a supremely bitchy mood today)
But you didn't have to suffer the stress of paying wages of £49mn and footing a loss of £11mn.......
I empathise with you, my 3 man company, run from my spare bedroom, paid around £18k last year in corp tax, plus about £8k per quarter in VAT.
It is starting to grate on me, multinationals who take lots of money out of the pockets of UK consumers but don't contribute their fair share.
"Labour MP Margaret Hodge, who chairs the public accounts committee, has chastised a number of companies about the apparent exploitation of legal tax loopholes by multinationals such as Google and Amazon."
Change the tax law if it's that big a problem. At what point is following the letter of taxation law exploitation? Sure if it was, then the 'loop holes' should be addressed? But aren't these the same rules they use to attract businesses?
Which law do you want to change?
The laws being exploited are global ones. Every company can have multiple divisions all taxed separately and trading as different entities.
So in the case of Starbucks they transfer cash from their UK division to another one (in a low tax country) by having the brand trademarks registered in another country, paying royalty payments to lease the brand to the UK.
How do you stop that with a UK law change without going against international trading laws?
eloquently answered...
Those tax practices were intended so that multi-national companies could take advantage of areas of expertise and share the output across divisions in the other countries. It is still used that way by the majority of companies (how many data-centres do you really want to have running?) but is being 'abused' by a small number. Is it really practical to change the laws and penalise everyone because the 'bad-guys' accountants are better at finding loopholes than the Governments are at closing them?
" Is it really practical to change the laws and penalise everyone because the 'bad-guys' accountants are better at finding loopholes than the Governments are at closing them?"
Yes - if a couple of kids in a playground can't avoid breaking the windows when playing cricket then no-one gets to play cricket any more.
Profit exporting is clearly daft - tax laws are far too complex and need a good rewriting (preferably onto no more than 4 sheets of A4)
The loophole seems to be mostly around valuing intellectual property rights sales between related companies. A tax minimising organisation will register the IP in the lowest tax country and charge as much as they can get away with for the IP to minimise their total tax liability.
One mechanism would be to tax all IP transfers in and out of the EU at a standard rate. This has to be EU wide otherwise customers will simply buy grey market goods from elsewhere in the EU (well, they can for software, not so much for a cup of overpriced coffee). Of course, they can still buy from outside the EU, but then you put a tariff on anything that attracts this EU-wide tax and pass the problem to customs officers to police.
It'll never happen because we haven't got tax harmonisation across the EU.
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