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yasockie
7th February 2014, 11:15
Ken Livingstone proposed turnover tax (http://www.crunch.co.uk/news/2014/02/07/ken-livingstone-proposes-turnover-tax-counter-avoidance/?utm_source=crch.co&utm_medium=social&utm_campaign=social_newsfeed)
possibly a perfect tool to stifle economic activity...

doodab
7th February 2014, 11:19
It might be a legitimate way to approach transfer pricing. If 90% of turnover is offshored avoiding tax on profit why not tax it as turnover instead?

AtW
7th February 2014, 11:28
If I remember correctly Ken allegedly used Ltd himself to get a big wad of cash which he later allegedly paid out in parts thereby avoiding (allegedly) high rate of tax.

Turnover tax idea has got to be among the most cretinous ones as profitability varies massively in different sectors.

MicrosoftBob
7th February 2014, 11:34
It might be a legitimate way to approach transfer pricing. If 90% of turnover is offshored avoiding tax on profit why not tax it as turnover instead?

Why not have a transfer pricing tax and be done with it ?, just call it an offshore tax avoidance charge

Mich the Tester
7th February 2014, 11:41
Why not have a transfer pricing tax and be done with it ?, just call it an offshore tax avoidance charge

Why not have a government that stops pissing so much money into the wind?

doodab
7th February 2014, 11:45
Why not have a transfer pricing tax and be done with it ?, just call it an offshore tax avoidance charge

Good idea

DirtyDog
7th February 2014, 11:46
It might be a legitimate way to approach transfer pricing. If 90% of turnover is offshored avoiding tax on profit why not tax it as turnover instead?

As the article says, if you taxed turnover at 1% for Google, you'd get £30 million instead of £11; for Amazon it goes from £2.4m to £43m.

Of course you'd have to piss off the big companies who aggressively avoid paying corporation tax in this country, so it's not going to happen.

d000hg
7th February 2014, 11:52
If I remember correctly Ken allegedly used Ltd himself to get a big wad of cash which he later allegedly paid out in parts thereby avoiding (allegedly) high rate of tax.

Turnover tax idea has got to be among the most cretinous ones as profitability varies massively in different sectors.So does VAT.

MicrosoftBob
7th February 2014, 11:58
Why not have a government that stops pissing so much money into the wind?

To do that involves having a smaller government and public sector, even Maggie struggled to do that!

VectraMan
7th February 2014, 12:02
As the article says, if you taxed turnover at 1% for Google, you'd get £30 million instead of £11; for Amazon it goes from £2.4m to £43m.

I don't know why Amazon always get attacked in these debates as they a) sell real things that cost money, and b) have always operated fairly low profit margins (arguably as a way to put others out of business but that's a different issue). Google, claiming they only make money in Ireland, is a bit more difficult to defend. Apple make terrifying profits everywhere in the world but somehow manage to not pay tax anywhere, and yet are never mentioned in these stories, no doubt because media types are drooling Jobsian fanbois.

And for companies that sell mostly to the public, VAT is a turnover tax.

Mich the Tester
7th February 2014, 12:03
I don't know why Amazon always get attacked in these debates as they a) sell real things that cost money, and b) have always operated fairly low profit margins (arguably as a way to put others out of business but that's a different issue). Google, claiming they only make money in Ireland, is a bit more difficult to defend.

And for companies that sell mostly to the public, VAT is a turnover tax.

c) they manage money rather better than politicians have done for the last 100 odd years

d000hg
7th February 2014, 12:17
And for companies that sell mostly to the public, VAT is a turnover tax.Except you can choose where to pay it...

DirtyDog
7th February 2014, 12:19
I don't know why Amazon always get attacked in these debates as they a) sell real things that cost money, and b) have always operated fairly low profit margins (arguably as a way to put others out of business but that's a different issue). Google, claiming they only make money in Ireland, is a bit more difficult to defend. Apple make terrifying profits everywhere in the world but somehow manage to not pay tax anywhere, and yet are never mentioned in these stories, no doubt because media types are drooling Jobsian fanbois.

And for companies that sell mostly to the public, VAT is a turnover tax.

Amazon (and Apple as well) are surely worse - they sell physical things, shipped from UK warehouses by UK staff, but they then claim that they aren't liable for UK corporation tax. They also pay a different rate of VAT - they charge the client 20% and then pay Luxembourg VAT rates at the end (which are significantly lower than the UK).

Journalists will pick and choose the companies that they focus on for things like this - the Guardian never mentions that their parent company did something similar when they bought a magazine group (can't remember the details, but it's mentioned in Private Eye every so often).

VectraMan
7th February 2014, 12:39
Amazon (and Apple as well) are surely worse - they sell physical things, shipped from UK warehouses by UK staff, but they then claim that they aren't liable for UK corporation tax.

Amazon would say that's just a distribution business. If a French company makes something for £900 and sells it for £1000 in the UK delivering it via DHL, are DHL avoiding tax by not paying 30% of the £1000 of goods that they're selling? It's still "shipped from UK warehouses by UK staff".

If Amazon did start shipping everything from Luxembourg, would that make it okay? The end result would be higher costs for the consumer, and some UK workers losing their jobs.

vetran
7th February 2014, 12:50
a turnover tax is not suitable and I guess would be illegal under EU law.

they need to revamp the UK tax laws for the modern economy.

Vat paid on sub £17 items by the overseas supplier would be sensible. The supplier pays Vat for low price items and gets a trackable 'vat paid' customs label. That levels the playing field for UK firms. tax free gift status only available for private individuals.

Exporting profits need control as every multinational is doing it. Not sure how but pay and claim back foreign tax would seem sensible.

Mich the Tester
7th February 2014, 12:52
Folks, it's Ken Livingstone; stop taking it so seriously.

Ticktock
7th February 2014, 12:56
Amazon would say that's just a distribution business. If a French company makes something for £900 and sells it for £1000 in the UK delivering it via DHL, are DHL avoiding tax by not paying 30% of the £1000 of goods that they're selling? It's still "shipped from UK warehouses by UK staff".

If Amazon did start shipping everything from Luxembourg, would that make it okay? The end result would be higher costs for the consumer, and some UK workers losing their jobs.

No - DHL are not selling the goods, just delivering them - what they are selling are their delivery services. :facepalm:

If Amazon were truly operating out of Luxembourg and delivering from there, then yes, that would be OK. The higher costs to the consumer argument is irrelevent to whether they are paying the correct amount of tax. Pricing should be driven by the market - if Amazon tried to pump up their prices too far then other companies would seek to undercut them - if those price rises were due to high delivery costs, then other companies might find it cheaper to operate from the UK, despite paying tax.

DodgyAgent
7th February 2014, 12:56
To do that involves having a smaller government and public sector, even Maggie struggled to do that!

Alternatively we could get better production from public sector workers.

Mich the Tester
7th February 2014, 12:59
Alternatively we could get better production from public sector workers.

That won't happen while they are;
a) heavily unionised and
b) difficult to fire and
c) often doing meaningless 'jobs' anyway

VectraMan
7th February 2014, 13:16
No - DHL are not selling the goods, just delivering them - what they are selling are their delivery services. :facepalm:

So same as Amazon UK. If I buy something from Amazon, i.e. the website, I'm buying it from Amazon EU SARL, a company in Luxembourg who happen to use a delivery and distribution business in the UK. I've never bought anything from Amazon UK. How is that different from using DHL?

AtW
7th February 2014, 13:17
If Amazon did start shipping everything from Luxembourg, would that make it okay? The end result would be higher costs for the consumer, and some UK workers losing their jobs.

It would be just fine so long as Luxembourg was charging corp tax at close levels to other EU countries - however charging it at effective 0 creates loophole whereby Amazon and others pay f-all.

doodab
7th February 2014, 13:24
So same as Amazon UK. If I buy something from Amazon, i.e. the website, I'm buying it from Amazon EU SARL, a company in Luxembourg who happen to use a delivery and distribution business in the UK. I've never bought anything from Amazon UK. How is that different from using DHL?

Amazon uk don't deliver, they use dhl or yodel or....

Dhl don't keep thousands of items in stock in a warehouse or sell them to consumers

VectraMan
7th February 2014, 13:24
It would be just fine so long as Luxembourg was charging corp tax at close levels to other EU countries - however charging it at effective 0 creates loophole whereby Amazon and others pay f-all.

Yep. So why is everybody moaning about Amazon et al when what we should be doing is moaning about Luxembourg?

doodab
7th February 2014, 13:25
It would be just fine so long as Luxembourg was charging corp tax at close levels to other EU countries - however charging it at effective 0 creates loophole whereby Amazon and others pay f-all.

It also means we effectively subsidise luxembourg at our expense.

TheCyclingProgrammer
7th February 2014, 13:27
They also pay a different rate of VAT - they charge the client 20% and then pay Luxembourg VAT rates at the end (which are significantly lower than the UK).

Wait, surely Amazon have to remit the 20% UK VAT to HMRC?

I know that Amazon (and Apple) currently have a big advantage over smaller retailers when it comes to ebook sales as they can charge Luxembourg VAT rates on ebooks (due to place of supply rules being different), however that will all change from January next year when electronically supplied services have to have VAT charged *where the customer belongs*. Its easy to see why the change is being brought in but its going to be a nightmare for any small business that sells any digital content to consumers.

doodab
7th February 2014, 13:28
Yep. So why is everybody moaning about Amazon et al when what we should be doing is moaning about Luxembourg?

Because luxembourg should be free to set corp tax at whatever level it chooses. The problem is companies using artifice to pay that rate of tax on profits generated in other countries.

VectraMan
7th February 2014, 13:32
Amazon uk don't deliver, they use dhl or yodel or....

Dhl don't keep thousands of items in stock in a warehouse or sell them to consumers

I would guess DHL do have thousands of items in warehouses, and Amazon UK doesn't sell the contents of its warehouses to consumers either. They just process orders on behalf of Amazon EU for a small fee.

Okay, call it a storage facility. If a business rents storage space from those Big Yellow people and sells £1m of stock from that storage space, are Big Yellow responsible for the corporation tax on £1m? That would be insane, but that's what people expect Amazon UK to be doing.

doodab
7th February 2014, 13:39
Okay, call it a storage facility. If a business rents storage space from those Big Yellow people and sells £1m of stock from that storage space, are Big Yellow responsible for the corporation tax on £1m? That would be insane, but that's what people expect Amazon UK to be doing.

No but the rented space would constitute a permanent establishment, making tax on the profit generated due in the UK. Avoiding that tax is what Amazon is doing, not running a storage facility.

Mich the Tester
7th February 2014, 13:44
Why do you lot want anybody at all to pay more tax? You know that a lot of the money will be pissed into the wind and that however much tax the government collects it'll always spend 3 to 7 % more, so stop calling for companies like Amazon to hand them even more cash. You just end up with more debt, more bureaucrats, more politicians, more speed bumps, more nonsense regulations and so on.

I, for one, applaud Amazon and Google for putting more money in the hands of their shareholders and keeping it out of the hands of wasting, ill disciplined politicians who've almost never balanced the books.

doodab
7th February 2014, 13:47
Why do you lot want anybody at all to pay more tax? You know that a lot of the money will be pissed into the wind and that however much tax the government collects it'll always spend 3 to 7 % more, so stop calling for companies like Amazon to hand them even more cash. You just end up with more debt, more bureaucrats, more politicians, more speed bumps, more nonsense regulations and so on.

Because when they dont pay it I have to make up the shortfall.

Mich the Tester
7th February 2014, 13:48
Because when they dont pay it I have to make up the shortfall.

No; the government should stop making shortfalls by pissing money away.

Ticktock
7th February 2014, 13:48
I would guess DHL do have thousands of items in warehouses, and Amazon UK doesn't sell the contents of its warehouses to consumers either. They just process orders on behalf of Amazon EU for a small fee.

Okay, call it a storage facility. If a business rents storage space from those Big Yellow people and sells £1m of stock from that storage space, are Big Yellow responsible for the corporation tax on £1m? That would be insane, but that's what people expect Amazon UK to be doing.

Again, no.

Company A rents space from Old Yeller and sells £1m of stock. People would expect Company A to pay tax based on that business, and OY to pay tax on the rental business in the UK.
If Company A rents space from Big YOLO and sell £1m of stock which they source from Company B (based in Lux), people would expect Company A to pay tax in the UK, Company B to pay tax in Lux, and BY to pay tax on the rental business in the UK.

Instead, what happens is more like,
Company A rents space in the UK - they fill this space with goods and sell the services of storing and shipping these goods. Running these services and paying the rent cost £x.
These services are sold to Company B in Lux for £x. Company A are in effect a non-profit entity.
Company B sell goods being held in the UK to customers in the UK, using a website with a UK domain, but say "We're not operating in the UK", and so are not liable for tax in the UK.
It is the fact that company A is owned by B (or is it the same parent company?) that rankles, as this is quite obviously set up simply to avoid the tax by claiming the revenue is generated in one country and not the other.

VectraMan
7th February 2014, 13:49
No but the rented space would constitute a permanent establishment, making tax on the profit generated due in the UK. Avoiding that tax is what Amazon is doing, not running a storage facility.

So a French company ships 1000 widgets to a storage company in the UK, who then store them a while and redistribute them one at a time for a fee, because doing it that way is cheaper than shipping one at a time from France. Is that company making profits in the UK? And which company exactly? How can you work out the CT that the French company has to pay in the UK given that their costs are mostly in France and in a different currency? And does that mean that every company that wants to ship internationally has to register and pay CT in the end user's country?

Just pointing out how unworkable these "solutions" are. We need to either a) leave the EU and abandon free trade (call that the UKIP option), b) the EU needs to decide one CT rate for everyone, or c) accept that this sort of crap is always going to happen and we're powerless to prevent it.

Mich the Tester
7th February 2014, 13:49
So a French company ships 1000 widgets to a storage company in the UK, who then store them a while and redistribute them one at a time for a fee, because doing it that way is cheaper than shipping one at a time from France. Is that company making profits in the UK? And which company exactly? How can you work out the CT that the French company has to pay in the UK given that their costs are mostly in France and in a different currency? And does that mean that every company that wants to ship internationally has to register and pay CT in the end user's country?

Just pointing out how unworkable these "solutions" are. We need to either a) leave the EU and abandon free trade (call that the UKIP option), b) the EU needs to decide one CT rate for everyone, or c) accept that this sort of crap is always going to happen and we're powerless to prevent it.

I vote for option c.

doodab
7th February 2014, 13:51
No; the government should stop making shortfalls by pissing money away.

Even a well run country needs a tax take of 30-35% if you're going to have healthcare, social security, education, roads etc that work. In the grand scheme of things very little is pissed away, most of it is actually spent on important stuff and some bureaucratic overhead is inevitable IMO.

VectraMan
7th February 2014, 13:58
It is the fact that company A is owned by B (or is it the same parent company?) that rankles, as this is quite obviously set up simply to avoid the tax by claiming the revenue is generated in one country and not the other.

So if Amazon UK was sold and rebranded "Dodgy Dave's Distribution Ltd.", that would be okay by you? Nothing would change: you'd still buy from the Amazon website, the boxes would still say Amazon on them, they wouldn't pay any more tax, but the problem would be solved?

Ticktock
7th February 2014, 14:00
So if Amazon UK was sold and rebranded "Dodgy Dave's Distribution Ltd.", that would be okay by you? Nothing would change: you'd still buy from the Amazon website, the boxes would still say Amazon on them, they wouldn't pay any more tax, but the problem would be solved?

If Dodgy Dave's Dist. Ltd was truly independent, would they really act as a non-profit entity? Someone who knew how to actually make money would snap them up.

Mich the Tester
7th February 2014, 14:03
Even a well run country needs a tax take of 30-35% if you're going to have healthcare, social security, education, roads etc that work. In the grand scheme of things very little is pissed away, most of it is actually spent on important stuff and some bureaucratic overhead is inevitable IMO.

You are right, but 'some overhead'? SOME? Wars in Iraq, speed bumps every fooking 100 metres, quangos, endless planning procedures, bureaucrats dreaming up tulipe like IR35, quality systems wonks putting hospitals, schools and so on into league tables, come on; how much is really spent on unproductive cack? Everywhere you look you can see money being wasted and then along comes Mr Government demanding more. Somewhere this waste has to end. The whole of Europe (except Germany and Norway) has just come through, or is arguably still going through, a huge government debt crisis. You vote conservative and the debts keep building up. UKIP can't be expected to make a difference because they don't even turn up to work. Labour still think they didn't spend enough. Libs are much the same. The only way governments will ever be forced to control their spending is when they are starved of the cash they spend.

doodab
7th February 2014, 14:04
So if Amazon UK was sold and rebranded "Dodgy Dave's Distribution Ltd.", that would be okay by you? Nothing would change: you'd still buy from the Amazon website, the boxes would still say Amazon on them, they wouldn't pay any more tax, but the problem would be solved?

Ok, lets say it's myco. Lets say i import stuff from.luxembourg and sell it here. Where should i pay tax on my profits?

Mich the Tester
7th February 2014, 14:05
Ok, lets say it's myco. Lets say i import stuff from.luxembourg and sell it here. Where should i pay tax on my profits?

Monaco.

doodab
7th February 2014, 14:07
You are right, but 'some overhead'? SOME? Wars in Iraq, speed bumps every fooking 100 metres, quangos, endless planning procedures, bureaucrats dreaming up tulipe like IR35, quality systems wonks putting hospitals, schools and so on into league tables, come on; how much is really spent on unproductive cack? Everywhere you look you can see money being wasted and then along comes Mr Government demanding more. Somewhere this waste has to end. The whole of Europe (except Germany and Norway) has just come through, or is arguably still going through, a huge government debt crisis. You vote conservative and the debts keep building up. UKIP can't be expected to make a difference because they don't even turn up to work. Labour still think they didn't spend enough. Libs are much the same. The only way governments will ever be forced to control their spending is when they are starved of the cash they spend.

speed bumps? Cheaper than treating rta victims probably. War fair enough. Measuring things is required to improve them otherwise you're flying blind, so thats not waste imo.

Mich the Tester
7th February 2014, 14:09
speed bumps? Cheaper than treating rta victims probably. War fair enough. Measuring things is required to improve them otherwise you're flying blind, so thats not waste imo.

Right, so there's the business case for speed bumps; they save money. Yep. If our governments are so good at writing sound business cases, why do we have so much debt?

Ticktock
7th February 2014, 14:12
I haven't really looked into this all that much, but isn't the catch here simply where the sale is deemed to have taken place?

Amazon / Apple and so on would like the sale to take place based on where the salesperson is.
I would say it makes more sense to say the sale takes place based on where the customer is. If I go to France to buy some frogs legs, I pay French sales taxes, and Kermits Kneecaps pays French corporate taxes. If Kermie sees how much I like his legs and decides to open a market stall near me and I start buying from there, I pay UK sales tax and KK (UK) Ltd pay UK corporate taxes, and are then free to repatriate any profits back home to the parent company in France.

The waters are muddied by Amazon not using door to door salespeople. Those bastards.

DirtyDog
7th February 2014, 14:17
Wait, surely Amazon have to remit the 20% UK VAT to HMRC?

I know that Amazon (and Apple) currently have a big advantage over smaller retailers when it comes to ebook sales as they can charge Luxembourg VAT rates on ebooks (due to place of supply rules being different), however that will all change from January next year when electronically supplied services have to have VAT charged *where the customer belongs*. Its easy to see why the change is being brought in but its going to be a nightmare for any small business that sells any digital content to consumers.

My mistake - only for eBooks do they charge UK consumers 20% and pay over 3% to Luxembourg.

doodab
7th February 2014, 14:18
The problem lies in the current definition of permanent establishment in the relevant tax treaty. It needs to be updated for the internet age.

DirtyDog
7th February 2014, 14:33
Don't some companies pay a "licence fee" to the overseas company which allows them to use their name? And that fee just happens to almost match their sales profits, wiping out any UK-based profit.

doodab
7th February 2014, 14:36
Don't some companies pay a "licence fee" to the overseas company which allows them to use their name? And that fee just happens to almost match their sales profits, wiping out any UK-based profit.

Yes, that's part of the transfer pricing we were talking about. Or they import very expensive coffee beans or similar. Bear in mind this trick is also used to transfer profits out of poor countries as well as rich western ones.

VectraMan
7th February 2014, 15:08
Ok, lets say it's myco. Lets say i import stuff from.luxembourg and sell it here. Where should i pay tax on my profits?

If you buy stuff from Luxembourg, and sell it here at a profit, as in you find the customers, you handle the money, then you pay tax in the UK. If you're in Luxembourg, and you sell stuff on a website, the payment goes to Luxembourg, the admin is done in Luxembourg, then you pay tax in Luxembourg. The fact that you might use another company to distribute the goods on your behalf in the UK is irrelevant. It'd be ridiculous if that other company was somehow liable for the tax of the "profit" that you made in the UK.

VectraMan
7th February 2014, 15:13
Don't some companies pay a "licence fee" to the overseas company which allows them to use their name? And that fee just happens to almost match their sales profits, wiping out any UK-based profit.

Google sell everything in Ireland and pay tax at 20%, but avoid 99% of that due to licencing their IP from their company in Bermuda. The real question is how was it that Google, who are undoubtedly an American company, were able to move their IP to Bermuda? All these companies are American, so really it's the US that's losing out most of all as they should all be paying tax on their international profits at home.

vetran
7th February 2014, 15:16
Google sell everything in Ireland and pay tax at 20%, but avoid 99% of that due to licencing their IP from their company in Bermuda. The real question is how was it that Google, who are undoubtedly an American company, were able to move their IP to Bermuda? All these companies are American, so really it's the US that's losing out most of all as they should all be paying tax on their international profits at home.

because they can hire the best lawyers. have you ever seen 'runaway jury'? it illustrates the point quite well.

DirtyDog
7th February 2014, 15:26
Google sell everything in Ireland and pay tax at 20%, but avoid 99% of that due to licencing their IP from their company in Bermuda. The real question is how was it that Google, who are undoubtedly an American company, were able to move their IP to Bermuda? All these companies are American, so really it's the US that's losing out most of all as they should all be paying tax on their international profits at home.

Most incorporate in Delaware anyway, which is an on-shore tax haven. But there's no chance of this government cracking down on DE as a tax shelter.

TheCyclingProgrammer
7th February 2014, 15:42
My mistake - only for eBooks do they charge UK consumers 20% and pay over 3% to Luxembourg.

Actually Amazon don't charge 20% on ebooks (or any digital content), they charge 3% because place of supply rules mean they have to charge Lux. VAT rates on ebooks (hence the rule change from next Jan, when they will have to charge 20%).

https://www.amazon.co.uk/gp/help/customer/display.html?nodeId=502578

Zero Liability
7th February 2014, 20:58
c) they manage money rather better than politicians have done for the last 100 odd years

Plus there isn't this utter air of disdain and condescension you get when dealing with the likes of HMRC, or a local council. Incompetent and arrogant.

I would much rather see Amazon keep the money than give it to a bunch of profligate, snotty know-nothings.

I think the government should come up with a list of services it deems to be "essential" (whether or not they are, or whether or not only it can provide them is another story), come up with a figure for providing them and limit its annual tax revenues to that. No power to borrow, no power to inflate, no power to raise further taxes. I doubt this would last long, but it's not the populace's problem that they can't bloody manage 'their' money and are so addicted to power that they cannot say no to anyone offering them sufficient graft.

I would say get them out of the provision of healthcare and education entirely, and deal with welfare via a negative income tax/guaranteed income, since the ostensible purpose behind supplying these services via the govt is their universal provision, anyway.

Even if fracking does take off in Britain, I still believe our politicians would manage to pocket the revenues but still end up with a huge debt by the end of it.





Just pointing out how unworkable these "solutions" are. We need to either a) leave the EU and abandon free trade (call that the UKIP option), b) the EU needs to decide one CT rate for everyone, or c) accept that this sort of crap is always going to happen and we're powerless to prevent it.

c).

As for a), abandoning free trade has nothing to do with UKIP. They are not protectionists.

AtW
7th February 2014, 21:18
Most incorporate in Delaware anyway, which is an on-shore tax haven. But there's no chance of this government cracking down on DE as a tax shelter.

It's not a tax heaven, the reason companies in USA register there is because its cheap to maintain company and corporate law is very well established in that state so things are a lot more predictable and cheaper to deal with law wise.