"Profit" is very easy to hide. Income, not so much.
The difference is 'net' vs 'gross'.<p>The horrid nature of current tax law is geared towards lawyers and accountants being creative. The system is geared to reward con-men and punish the honest.<p>A flat-rate tax system based on income might be more effective but the real danger is the tax-breaks that companies get. I see this all the time with Ford/Chrysler/GM. "We will build a factory in your city/state/county if you give us X-billion in tax breaks."<p>My thoughts: You want to sell your product don't you? In Canada we had a law called "The AutoPact" [1] which basically said that for every 3 cars that you sell in Canada, 1 must be built here.<p>Corporate welfare will always be a greater hindrance to tax-coffers then personal welfare will ever be.<p>Why are we paying companies so they have the privilege of taking our money?<p>[1]<a href="http://en.wikipedia.org/wiki/Canada%E2%80%93United_States_Automotive_Products_Agreement" rel="nofollow">http://en.wikipedia.org/wiki/Canada%E2%80%93United_States_Au...</a>
As far as I can tell, they shift profits overseas by shifting extra, semi-fictional 'costs' to the UK subsidiary - for example, if the UK subsidiary of Starbucks makes $100m profit, but has to pay the Canary Isles subsidiary $100m in licensing costs, suddenly the UK subsidiary owes no tax.<p>Given this structure, how does the HMRC plan on distinguishing between legitimate costs and semi-fictional ones? I imagine as soon as the law is changed, the companies will alter their books so that they shift all their 'legitimate costs' to the UK subsidiary.<p>I suspect that this shift will end up benefitting tax accountants and lawyers.
I'll be interested to see how this is implemented in practice. The way this kind of tax avoidance works is for subsidiaries in low-tax jurisdictions to charge the ones incorporated in higher tax jurisdictions high fees for things like access to IP.<p>This "artificially" inflates the profits for the low-tax company and depresses the profits for the high-tax company.<p>Artificially is in quotes because it's hard to establish a legal rule to determine what is and isn't fair pricing for IP and services which is why I'm interested in seeing how this will be enforced.<p>Edit: the reason that so many of these were based in Ireland was because until 2015 Ireland won't have rules on this sort of intra-group "transfer pricing" transaction. You can't do this between two US or a UK and a US company because those countries have rules that prevent it.
At least it hasn't taken the Tories nearly a whole term to begin to address this issue...<p>Got to say I agree with this <a href="http://www.thetimes.co.uk/tto/news/politics/article4285739.ece" rel="nofollow">http://www.thetimes.co.uk/tto/news/politics/article4285739.e...</a> (paywall).<p>Summary: Hodge wants to make it a criminal offence to sell or promote illegal tax avoidance schemes in the first place. So if HMRC challenge a scheme and it's found illegal, the lawyers/accountants who developed it can be criminally prosecuted as well as those who used it.
Here's a list of all the companies registered in the UK with the string 'Google' in them, that aren't listed as 'dissolved' (there are a lot of those), and aren't obviously registered by morons[0][1][2][3][4][5][6][7][8][9] who think they can infringe on the trademark.<p><pre><code> BR017040 GOOGLE COMMERCE LIMITED UK ESTABLISHMENT
FC031970 GOOGLE COMMERCE LIMITED UK ESTABLISHMENT
5903713 GOOGLE PAYMENT LIMITED
3977902 GOOGLE UK LIMITED
9183796 GOOGLE VENTURES UK MANAGEMENT COMPANY, LIMITED
</code></pre>
I believe the first two are part of their Double Irish tax dodge: <a href="http://vimeo.com/68581263" rel="nofollow">http://vimeo.com/68581263</a> so those should disappear soon.<p>[0] <a href="http://www.endole.co.uk/company/09054162/google-ninjas-limited" rel="nofollow">http://www.endole.co.uk/company/09054162/google-ninjas-limit...</a>
[1] <a href="http://www.endole.co.uk/company/08533581/google-pizza-ltd" rel="nofollow">http://www.endole.co.uk/company/08533581/google-pizza-ltd</a>
[3] <a href="http://www.endole.co.uk/company/08770094/google-it-ltd" rel="nofollow">http://www.endole.co.uk/company/08770094/google-it-ltd</a>
[4] <a href="http://www.endole.co.uk/company/09263100/google-international-web-ltd" rel="nofollow">http://www.endole.co.uk/company/09263100/google-internationa...</a>
[5] <a href="http://www.endole.co.uk/company/08537202/google-ads-ltd" rel="nofollow">http://www.endole.co.uk/company/08537202/google-ads-ltd</a>
[6] <a href="http://www.endole.co.uk/company/08497535/google-analytics-limited" rel="nofollow">http://www.endole.co.uk/company/08497535/google-analytics-li...</a>
[7] <a href="http://www.endole.co.uk/company/08615290/google-logistics-ltd" rel="nofollow">http://www.endole.co.uk/company/08615290/google-logistics-lt...</a>
[8] <a href="http://www.endole.co.uk/company/09042316/google-property-limited" rel="nofollow">http://www.endole.co.uk/company/09042316/google-property-lim...</a>
[9] <a href="http://www.endole.co.uk/company/08573677/google-recruitment-limited" rel="nofollow">http://www.endole.co.uk/company/08573677/google-recruitment-...</a>
Missing end of the sentence: "...which they then artificially shift abroad."<p>Details aren't very clear. It's called the Diverted Profits Tax, there's a longer article here: <a href="http://www.bbc.co.uk/news/business-30306266" rel="nofollow">http://www.bbc.co.uk/news/business-30306266</a>
In order to make this workable, the government would assume that certain industries make certain profit margins
e.g. 8% assumed profit for the sale of goods to 32% assumed profit for the sale of services. [0][1]<p>According to the FT:<p>"the new tax would be a “deemed profits” tax rather than a corporation tax, so as to sidestep issues about double tax treaties.<p>[...] the Treasury would identify profits that escaped tax in the UK because of royalty arrangements or the absence of a taxable presence.<p>[...] It seems to be something completely novel . . . It is a huge stick that will stop this artificial avoidance. The difficulty will be how it is defined in practice.” [2]<p>[0] Similar way to the way the UK flat rate VAT scheme works<p>[1]<a href="http://www.internationallawoffice.com/newsletters/Detail.aspx?g=df76beff-e892-4399-a960-04b1de632483" rel="nofollow">http://www.internationallawoffice.com/newsletters/Detail.asp...</a><p>[2] <a href="http://www.ft.com/cms/s/0/127010ea-7af9-11e4-b630-00144feabdc0.html#ixzz3KqqtmghP" rel="nofollow">http://www.ft.com/cms/s/0/127010ea-7af9-11e4-b630-00144feabd...</a>
I wonder if this will affect Ikea, which pretends to be a charity [1], as well as the usual Starbucks/Amazon/Google suspects.<p>[1] <a href="http://www.economist.com/node/6919139" rel="nofollow">http://www.economist.com/node/6919139</a>
Funny how the say banks and multinationals will pay, I really think they should in turn put on every receipt how much the end consumer is actually paying in tax, all under the idea of disclosure.<p>Food places like starbucks and McDonalds they could put it next to the mandated calorie count. This sandwich will cost 400 calories and 40 cents in built in taxes and twenty cents in sales taxes.<p>People really need to understand just how much they are truly taxed, far too many see only the sales tax and not many more understand payroll. Indirect taxes is the big skeleton in the closet.
If I glossed over that correctly, it seems more like a "Bank tax rule tightening", they estimate 5B over 5 years, 4 of which come from changing/tightening banking regulations and 1B (over 5 years) of which comes from mutlinationals operating in the UK. Not sure if that's ~200M a year or if there's some front/back loading and I really have no clue as to UK revenue/profits for all multinationals combined but (fuzzy math) is 200M a year for all of them a significant change? Does this only target companies of a certain size/category?
Devil will be in the detail, and he's not giving any details yet.<p>Without significant simplification of the tax system, no such tax bill will be accountant-proof, or treaty-proof.
Good luck with that. There is no way short of global world government to force a company with subsidiaries and business all over the world to pay taxes everywhere.
Funny how the same UK government propose to have devolution of corporation tax in Northern Ireland (NI), which is still part of the UK so the NI Government can match the corporate tax of the Republic of Ireland.<p><a href="http://www.bbc.co.uk/news/uk-northern-ireland-30131556" rel="nofollow">http://www.bbc.co.uk/news/uk-northern-ireland-30131556</a>
I think this is good news. Companies such as Google and others have been avoiding paying taxes for too long. They do this in ways which up until now were fraudulent but technically legal, by creating fictional companies or by laundering money via havens.
The term "google tax" made me think is was related to google having to pay ISPs for using their tubes. Glad to see that is about actual tax evasion.
I'd rather see profits in the workers pockets than the UK government's coffers. If we keep ramping up taxes on large corporations, they're just going to move abroad.<p>Take Starbucks for example, they're not even turning over a profit in the UK... yet they created thousands and thousands of jobs.<p>We'll keep ramping up taxes, they'll close down stores, move abroad and then wonder why youth unemployment keeps rising.
Low taxes? I almost fell off my chair. With all of the rules, regulations, not to mention v.a
T. A 25% additional because we can tax doesn't seem very low or fair.<p>If my company was having these taxes imposed on me, I would move all of my offices and companies out of the U.K. within the next couple of years. I will be interested to see what happens to the economy after these changed.