Topic: | Re:Re:Should Chiswick Go Off-shore to Stop Tax Avoiding Chains? | |
Posted by: | T P Howell | |
Date/Time: | 13/11/15 11:46:00 |
I think that the businesses in Crickhowell are making a point. Why should local (i.e. UK) businesses pay “full whack” corporation tax when international businesses arrange their affairs to avoid paying tax in the UK? (In fact at one level at least, Starbucks is a “local” business insofar as their Europe, Middle East and Africa group is based in Chiswick Business Park.) Companies get away with it in three ways: i) “thin capitalisation”, where a company has very little paid up share capital, and loads the UK subsidiary with loans and interest and pays away its profits to an off shore company in interest charges ii) “transfer pricing”, where supplies are sold into the UK company from an off shore company in the same group at an artificially high price (so that excessive profit is realised in the off shore company); and iii) by licence fees on intellectual property rights, for example, for use of the “Starbucks” trade marks. According to the BBC Starbucks used all three of these old tricks (“As part of its tax affairs, the firm transferred some money to a Dutch sister company in royalty payments, bought coffee beans from Switzerland and paid high interest rates to borrow from other parts of the business.”) (BBC news 23 June 2013). There is already tax legislation in place to prevent all of these tactics being used artificially –but just not the political will or competence to enforced it (at least against the “big boys”). The old argument that “if we force them to pay tax they will just move out of the UK” doesn’t wash. You can sell coffee or (for example) deliver Amazon goods to UK consumers from the Netherlands or Switzerland (the coffee would get cold). So, if companies are carrying on business in the UK, there are ways of taxing them properly in the UK. Interestingly, the Starbucks UK companies appear to have recently undergone a restructuring. A new English company “Starbucks EMEA Investment Ltd” (registered in Chiswick Business Park) was registered on 28 November 2014, with US$ 1.5 billion paid up on incorporation and another US$ 1.5 billion paid up on 8 January this year. So their total paid up capital is now £2 billion. So perhaps the pressure has at least encouraged them to address the “thin capitalisation”. I don't think we can blame the corporations for paying as little tax as possible. It is the nature of the beast. The answer lies with our government and HMRC having the will and competence to enforce the existing legislation, or if that doesn't work to amend the legislation. |