Can I ask something relating to tax avoidance because I genuinely dont know the answer?

[Bagofworries]

I am in the UK and I hear a lot about companies basing their headquarters abroad to avoid paying UK rates of tax on their business transactions.
Why can't companies be forced to pay tax based on where the transaction took place, rather than where their headquarters are based?
So for example, Costa coffee/McDonalds/Amazon/Vodafone would pay UK rates of tax on every purchase made in the UK.
Is this possible? And if it is, why is it not done?

Sorry if this is a stupid question, I genuinely dont understand why this cant be done but I often wonder about it.

So for example, Costa coffee/McDonalds/Amazon/Vodafone would pay UK rates of tax on every purchase made in the UK.

Isn't that 'VAT'? They pay that. I think the issue is with profits, on which they would normally pay corporation tax. However, if you can arrange payments to an offshore parent company for use of the logo etc and reduce profits to nearly nil, you 'dodge' tax that way.

Yes, it could be legislated that corporation tax must be paid in the country in which the profit is made. The current government won't do that though as it will mean their rich pals will be slightly less rich.

They will have set up a company in the UK which is owned by the parent company in the lower tax country. There will be a legal agreement (possibly a licensee/licensor arrangement) where the parent owns a % of revenues generated from the the UK. So the UK company will pay some corporation tax but more will be passed to the parent company who own the rights to revenues.

THe legal Agreements will be set up to maximize transfer to the parent company thereby reducing the tax burden in the UK. Depends what they can get away with.

There was a BBC documentary about this a few years ago ... "The Town That Took On The Taxman".

www.bbc.co.uk/programmes/b06ygl19

inews.co.uk/news/business/town-took-taxman-gave-battle-whos-going-take-mantle-519423

As I understand it the basic "trick" is that the company in the low-tax jurisdiction charges big prices for something it sells to the company in the high-tax jurisdiction. This means the profits for the high-tax company get artificially lowered, lowering the tax.

I'm sure there's a LOT more complexity than that though.

Does anyone know how Amazon can avoid paying any tax whatsoever? Given it's a massively successful organisation that sells (often) British goods to British customers, how can it say there's no profit?

There are agreements in place between countries to stop double (or triple/ quadruple) tax burden for international
Companies

It’s not sales they’re paying tax on, it’s profit. The profit doesn’t necessarily sit in any one country.

Safari that’s transfer pricing and is generally highly regulated- that’s not to say it’s not commonly practised but I think in a more subtle way thank you might expect

Amazon do pay corporation tax- not much though 😭