Why multinationals love the EU ... and spread so much fear about Brexit

[millyonth]

I read this article this morning by Graham Stringer MP. I thought I would put it here just to add a Leaver's perspective to these Remain-dominated boards. I have a small business and I agree with everything he says. It's worth noting that small businesses employ more people in the UK than the multinationals do - but the multinationals' voices are much louder - especially in parliamentary lobbies. Their voices are behind all the Brexit fear and doom-mongering which is so prevalent on MN - and gets in the way of planning a positive future for the UK.

This is how Stringer's article starts ...
"If you found yourself in conversation with a top executive from the tax-shy American multinational Amazon what do you think you would say? My guess is that most people would start with something like: “Why don’t you stop avoiding our taxes and pay your fair share, you scabrous fat cat?!” Taking this obvious line did not seem to occur to the man responsible for raising taxes, Chancellor Philip Hammond. Instead, in conversation with Amazon Vice President Doug Gurr and other top executives of multinationals, he chose to explain how he would thwart both the decisions of the House of Commons and the electorate on Brexit. No talk of Amazon tax but commitments given to conspire against the electorate and Parliament. This gives us a useful insight: that multinationals want to keep the EU just as it is ..."

brexitcentral.com/political-establishments-sense-entitlement-overtaken-sense-democracy/

And before you point out that the EU sometimes raps Amazon on the knuckles with a fine, those sort of managed reprimands are just token gestures that make the whole thing even more maddening. If you're interested you can google Juncker Amazon Luxembourg to find out more about Amazon's place at the heart of the EU.

Most small companies don't export at all because they are service businesses providing physical services: cleaners, childminders, plumbers, hairdressers etc. I suppose plumbers might gain if the supply of qualified plumbers falls, although that might be offset by loss of business if your clients are losing their jobs. But plumbers and hairdressers aren't going to boost UK trade by selling innovative highlights or high-tech toilet mending services to Australia, however optimistic Brexit makes them feel. (If it makes them feel pessimistic, they might export themselves of course).

The barriers to ex-EU trade are quite large in most sectors, because you need to employ someone to handle the paperwork - visas for visits if you are providing physical services at an overseas site (unless you fraudulently travel on a visitor's visa), or customs and other documentation for physical goods (unless you're an eBay trader who fraudulently sends goods as "gifts"). In the business unit where I work, we have an entire department dedicated to moving raw materials around the world, and they employ agents too. A small company can't do that.

Indistinct. Keen to know what you think of EU's actions with respect to Apple (tax avoidance). To me these cases demonstrate the value of a supra-national organisation like the EU that has the combined weight to control the poor behaviour of multi-nationals.
Hahaha!
As soon as they shut down one EU-based multinational tax avoidance scheme another one opens up. The supranational structure of the EU facilitates it:
“Double Irish” / “Single Malt” / “Capital Allowances for Intangible Assets” and so it goes on ...
en.wikipedia.org/wiki/Double_Irish_arrangement

Millyonth
{Most of my customers are in Southern Europe but they will keep on buying from me because they trust me and my team and they need what we provide. }
Kind of curious in what you actually do.
Do you buy materials from outside the UK for your 'product' and are you prepared for tariff increases and additional paperwork to cover import duties, certifications etc?
When you sell, do you have to provide export paperwork and guarantees etc?
Will you need to hire an extra 'expert' to make these necessary documentation?
Smaller companies cannot let their true concerns be made public for fear of rivals 'stealing a march' on them. Large companies have similar concerns but their public face is vital to them. Dieselgate is a ridiculously expensive exercise. There is nothing 'wrong' with the vehicles, it is that fact they 'lied' about emissions, which anyone who actually watches a vehicle can see anyway.
There is much that is wrong about all of human activity, but you have to be selective about what you are going to complain about and decide who is going to be hurt.

{Hahaha!
As soon as they shut down one EU-based multinational tax avoidance scheme another one opens up. The supranational structure of the EU facilitates it:}
Multinationals find it profitable to have highly paid lawyers raking through legislation to find the tiniest of loopholes, so there is a trade off with 'whack a mole' to try and stop the multinationals but not totally kill any smaller companies trying to keep a workforce of a few hundred or less.

@millyonth
Accept that multi-national companies will continue to find tax loop-holes but the "Double-Irish" was a known loop-hole (i.e. known by US, UK others) and the EU was the one that closed it. Yes, new loop-holes are identified (sometimes seemingly engineered in collusion with states - see Ireland/Malta) but I have seen no efforts from any organisation apart from the EU to close these loop-holes.
Don't disagree that member states may be part of the problem but the EU itself seems to be the only organisation trying to shut this down (based on a skim of the Wikipedia link you provided).

indistinct. I see what you're saying. I suppose the question is, what is it about the structure of the EU that enables member states like Ireland to become tax havens for multinationals?

@millyonth - think it's more to do with the rights of member-states to set their own financial and taxation laws rather than anything the EU is doing/failing to do.

My limited understanding: basically, member states get to set their own tax system without any interference from EU. The Irish state appears to be working in conjunction with US companies to create tax avoidance schemes (the wikipedia entry you sent is pretty illuminating) that enables EU sales to be registered to an Irish company (e.g. Apple Ireland) that pays a royalty fee for Intellectual Property (IP) rights to an off-shore tax haven in Bermuda (e.g. Apple Bermuda). The royalty fee is tax-deductable/untaxed under the Irish tax system. Those IP rights are granted/sold to that off-shore tax haven by the original US organisation (e.g. Apple US). Money accrues in the tax haven with investment repatriated to the US as and when required. The fee for the IP rights basically equates to a high proportion of the sales so that almost all the money goes off-shore un-taxed. Apparently, Irish GDP rose by 33.4% in FY18 as a result of Apple changing it's tax avoidance scheme from the Double Irish to something called the CAIA.

EU doesn't get a look-in unless it extends further controls to individual member-states tax systems (e.g. Ireland). Pretty sure Ireland would veto any move to do that and pretty sure UK would resist (if we stay as we should) but on sovereignty/autonomy grounds rather than self-interest.

I mean when you look at it, it seems like the Irish state is facilitating multi-national tax avoidance in return for a small % of the revenue that goes through the companies they host (typically US) and the jobs that all those HQs bring.

As a small business owner you are quite unusual in thinking Brexit will help your business. The general assessment is that small and medium businesses will suffer the most.

theconversation.com/brexits-impact-on-small-businesses-the-experts-may-be-spot-on-after-all-90561

Even the pro Brexit BBC reported on it.

www.bbc.co.uk/news/uk-scotland-42767534

Small and medium-sized businesses may be worst affected when the UK leaves the EU.The study by academics at the University of St Andrews looked at the potential impact of Brexit on SMEs.
Said to be the first study of its kind, it draws on information gleaned from a UK government attitude survey of about 10,000 firms.

...In terms of its perceived impact, Brexit is likely to result in lower levels of capital investment, reduced access to external finance, lower levels of growth, reduced product development and lower levels of business internationalisation.

'Negative consequences'
Dr Ross Brown, who the led the research, said: "The results of our analysis suggest that Brexit-related concerns will result in a range of negative consequences for UK SMEs [small and medium-sized enterprises], especially the impact on reduced capital investment, which critically weakens and undermines their ability to grow and prosper.

"Most worryingly, these perceived negative impacts appear to be foremost in the minds of entrepreneurs and managers located in the types of innovative and export-oriented companies, which are often viewed as the high growth 'superstars' of tomorrow.

"In other words, SMEs thought to be the most significant for boosting productivity and economic growth may be the most negatively affected by Brexit."

The research also found that Brexit-related uncertainty was more likely to affect larger, export-oriented firms and those operating in hi-tech and service-related industries.

Innovative SMEs in particular seemed particularly concerned about the UK's divorce from the EU.

EU seems to be the only organisation trying to rein in this behaviour. Perhaps that's why various right-wing US organisations are so supportive of Brexit - they see it as an extension of their multi-national tax avoidance policy by weakening the EU which started to show some spine by enforcing a real fine of €13bn on one of their organisations. The US occasionally has a tax holiday for repatriated funds to enable money to come back to the US from the havens (think the last one was done by Bush some time ago).

I love this naive idea of all multi nationals being tax avoiding scumbags who are purely motivated by the political side of Brexit. I work for a global multinational

• Eu owned/listed , corporate headquarters and manufacturing base based in uk, supply chain in and out of Eu. We will very likely be fucked by brexit...possible loss of 2000 uk jobs as the company understandably looks to move the manufacturing base to its supply and market. But, hey, we’re a multi national so any complaints re Brexit are to be disregarded as being ‘politically motivated .. You really have not a clue.

So US companies have used independent european countries to set up tax avoidance schemes, (in their most profitable & open foreign market, compared to Asia) the EU then does its best to close them down but because countries have sovereignty on taxation (and on almost everything else) that becomes the EUs fault and we should leave in protest?

I've heard it all now!

Agree with you Boopear. Think many/most multi-nationals are going to be genuinely adversely impacted by Brexit and will reduce investment in and/or remove operations from UK locations to the disadvantage of UK employees and their families. There is limited up-side to Brexit to improve the attractiveness of the UK to multi-nationals after Brexit.

Seems that most of the MN tax avoidance comes from US based MNs using Ireland as a base for their tax avoidance measures. Not sure if MNs from other nations are similar. EU does appear to be one of the few organisations that's clamping down on multi-national tax avoidance rather than colluding/facilitating with it as per the suggestion in the original post.

@millyonth - would be interested to know if this changes your mind at all?

Millyonth - Why do you think that the UK withdrawing from every single international trade agreement it has will have no negative consequences? Presumably trade agreements exist for a reason so not having them would have downsides?

Your Southern European customers may well still buy from you, but doesn’t the same argument hold for the UK already being able to trade with the rest of the world while part of the EU? How did it hold it back?

Agree with you as well jasjas1973, can't see how us leaving will help at all. Brexit diminishes the power and influence of the EU which seems to be one of the few organisations countering MN tax avoidance and other abuses (e.g. Google - anti-competitive practices). Perhaps it's being intentionally supported by US (as well as Russian) concerns to damage the EU rather than to support UK independence - wild unfounded speculation but not inconceivable.

The UK government promised in 2010 to enforce open company registers on all of its offshore dependencies

the ones that multinationals use for tax avoidance

it did not do so
because the UK government is full of slimy toads who want jobs in big companies

the EU is changing the rules on offshore tax three days after Brexit
go figure

The only thing that has the power to reign in multinationals are strong national and super national states. The EU probably sets the highest standards for quality and environmental protection in the world and is trying to stop tax evasion. The collective powers of the EU is one of the few entities that can stand up against the MUltis.

Unfortunately for us we have a UK government made up of individuals who are hell bent on their own self interest over anything else. Once out of the EU I dread to think how low standards might go in the race for these individuals to get the benefits from making deals on our behalf.

Amortencia. Unfortunately for us we have a UK government made up of individuals who are hell bent on their own self interest over anything else. I'm not sure this is fair. They are struggling to agree on a sensible way to leave the EU because most of them genuinely believe we should remain (rather like the majority on MN).

If you found yourself in conversation with [an executive from] Amazon what do you think you would say?

What's wrong with Bezos' eye? It looks like he has a glass eye in the Economist article last week. (but I'm a nosy parker)

I sure hope OP is right about lots of big corporations staying in UK & being made to pay their fair share of tax. When do you expect tangible benefits from this new plan to be measurable? 1 yr, 5 yrs, 20 yrs after Brexit? Give us a timeline.

trout
Bezos eye is from his car crash a few years back

I sure hope OP is right about lots of big corporations staying in UK & being made to pay their fair share of tax.
I would hope that corporation tax would be low for all businesses. Lower taxes and less avoidance means a higher tax take.
I don't actually think Brexit will happen now though. I think parliament has stymied it and will revoke.

Well I am a small business owner exporting services to multiple EU countries and in the absence of any bloody arrangements I need to decide this month whether to try and set up Vat representation in all the countries I supply service in (prohibitively expensive) or move my business to an EU country in some way possible in this time or be prepared to gamble.it all.on there not being a no deal.

I am doing nothing to prepare at all as I think the most likely scenarios now are 1) May will revoke 2) Parliament will vote for the WA and there will be sensible transition arrangements. 3) There will be an extension of some kind. I would like a "no deal" and think it could be managed okay if there was a willingness for it, but there isn't really and who can afford to spend money on arranging things that may not happen?

My friend is a lawyer and one of his company’s clients is the FSB. (if you’re a member and need free legal advice, it’ll be him for one day every month).

He has spoken to many, terrified SMEs who are already seeing their livelihoods decimated by Brexit and will be broken if we leave with no deal on March 29.
There was one family owned business that was three generations old. The current owners are smart, committed and dedicated and have done great things to modernise and repurpose.
Now they’re looking at explaining to their grandparents how they lost the company.

My friend says he dreads an afternoon of FSB clients at the moment as it feels like a Samaritans hotline but he’s got nothing for them.

I know this is anecdotal but he probably speaks to 20 smes a month and he’s saying it’s already carnage out there.

Shame the FSB pandered to its Brexit wing and did not campaign against it then.
Sorry but I cancelled my membership because the FSB stayed on the fence Corbyn style.