tax havens for FTSE 100 - I'm disgusted

[smearedinfood]

I read this in the news this morning, I find it so abhorrent, how can we have so many cuts in the public sector when we are so shit at collecting tax..!

Happy to discuss

www.independent.co.uk/news/business/news/british-firms-attacked-for-routine-use-of--tax-havens-2368753.html

We're not shit at collecting tax. Global companies operate all over the world and pay tax accordingly. When they do business in the UK, they pay tax in the UK. This Swiss Bank Tax Deal on the other hand is a significant bit of progress. Swiss banks having been very secretive about their British account holders up to now.

The key statement in the article is:

"The charity admitted its report, Addicted to tax havens: The secret life of the FTSE 100, does not in itself prove tax avoidance. But it argued that the scale of multinationals' operations in countries that provide tax advantages showed the need for greater transparency"

So in other words it's not saying companies are doing anything wrong but just that there should be greater transparency.

The FTSE 100 companies all pay UK tax on UK earnings. They do not pay UK tax on profits earned abroad because quite simply they would pay taxes in that country instead. This is not new news and it's the same all over the world. If you worked in Germany, paid your income tax there, would you expect to pay income tax again if you transfer the money back to the UK? Of course not.

UK govt is actually very good at collecting taxes. Is it perfect? Of course not. But overall it's very good at its job. Can they do better. Of course they can.

Am probably about to get educated but....Why would companies send money offshore unless there were tax benefits..

Firms only use tax havens when there are prohibitive rates of tax in their main country of business.

They have a duty to maximise shareholder return, and will use low taxation countries for manufacturing or intermediate processing.

The flip side is that in those countries, they are really benefiting from tax receipts and other trickled down that may never have happened.

Not all shareholders are British. They are not being disloyal.

Also, the Cayman Islands is often used to avoid onerous burdens by the IRS (in the US not here) so it's not like all these companies use 'tax havens' to avoid UK tax

Also, look at the Channel Islands, the Isle of Man and Ireland, they do very well out of their tax haven status.

The reason the banks base a lot out of entities in tax havens is because their clients (corporates or individuals) are based there or want the particular product based there

By reducing the corporate tax rate the UK government is making these tax havens less attractive and this should actually increase the tax take.

Sadly is anyone really surprised at this?.

I'd like the alternative report telling us what financial institutions, retail companies etc do pay UK tax so we can vote with our feet.

Look at someone like Phillip Green (Topshop etc) who had his money paid to his Monaco resident wife. Most of the big Companies will pay a lot less than you think they should. They will spend a £million with people like KPMG or Touche to save £millions

It's not that simplistic. Phillip Green's companies employ thousands in Britain. His companies pay millions in corporation taxes. His shops pay business rates. His employees are on PAYE. He's paying a few million to KPMG keeping their staff in a job and their (taxable) profits healthy. If, by legally using the Monaco connection, he saves a few £m which in turn means he can invest in more shops or employ more people, is that such a bad thing?

If people demand that these companies pay more and more tax, all that will happen is that these companies will move out of the Uk altogether then the Uk will get no tax, thousands more unemployed etc. It would be cutting off its nose to spite its face.
And tax avoidance is not illegal, it is tax evasion that is illegal.

Many FTSE100 companies are extremely good at paying very little tax in the UK through how they use accounting rules. Most of the time it will be perfectly legal to do so, whether it is moral is a totally different question. Many of these companies have offices in Guernsey/Jersey/Isle of Man not for trading/production but purely PURELY because it enables them to dramatically avoid paying tax in the UK.

It is nonsense to think that higher tax or tighter tax avoidance controls would chase these companies out of the UK. Where would they go? Guernsey? The Netherlands has very high tax rates, doesn't seem to stop companies. Yes, they scream murder, but they also can see the advantages of a highly skilled workforce, excellent infrastructure, access to European market etc etc. Companies can only blackmail governments if governments allow them to do so. I think we should call their bluff, and the same with the financial sector by the way. If they want to go elsewhere if they cannot get more tax payers money (i.e. proposed reform to separate retail from investment banking which has now been postponed) well, good riddance!

Companies do, and should, minimise the amount of tax they pay.

Their profits will then be reinvested into the business (creating jobs and taxpayers) or paid in dividends to their shareholders, who will then pay tax to the country of their residence.

Some mumsnetters have a seriously weird view of how business should work.

Yes, some people think that businesses should behave ethically as well.

How does how they pay their taxes affect their ethics?

Tax is a legal obligation more than a moral one. Most people in receipt of a tax rebate do not head to the nearest church and ask for forgiveness. Neither do they bang on the door of HMRC demanding they take it back

If they pay their full taxes in the country where they are based (i.e. without using loopholes to artificially lower their tax bill), they will enable that country to maintain its infrastructure (education system, transport system, etc.). This is a more ethical way of conducting business, you 'take' (through using that country's infrastructure in the broadest sense of the word (skilled workforce, physical infrastructure etc.)) and you 'give' (e.g. contribute to maintaining that infrastructure). It is not a zero sum game. It is not the old fashioned economic view that 'more is always better', because it is not. Thus the object is not to be the most profitable business, highest dividends and especially the highest paid board of directors, but the objective is to be a company which is run in a sustainable manner, contributes to society and is an integral part of the community, whilst ensuring that its shareholders earn a reasonable return on their investments and its workers AND directors earn a reasonable income.

"Where would they go? Guernsey?"

Incidentally, if you've bought any DVDs or similar from Amazon recently for a good price they're likely to arrive from 'Indigostarfish'... a Jersey-based operation. You weren't far off with Guernsey...

Don't worry, companies will not be running to relocate to there. I am not saying that no companies are based offshore, some are, but they are few and far between. Nothing to worry about.

So there aren't many based offshore and we shouldn't worry or "Many of these companies have offices in Guernsey/Jersey/Isle of Man not for trading/production but purely PURELY because it enables them to dramatically avoid paying tax in the UK." ? Which is it?

If you are clever, you can work that out - I have now some mundane work to do called cooking.

If the government did not wish to provide flexibility about where companies pay tax, they would close the loopholes.

Loopholes are there for a reason, and very deliberate.

I don't understand this whole misguided furor over "tax havens". A company has a duty to its shareholders, not to the UK government.

A lot of shareholders are pension funds, foreign people, ie. not even UK joe public. What are your thoughts on paying tax to say the German government? I'm not keen. You? Increasing taxes on corporations means higher prices for you & me and ultimately a smaller pension.

As an individual do we have a problem with someone whom puts their savings in an ISA? What if they are single and claim a single person discount on their council tax? Are they tax avoiders?

What if I decide to put my savings offshore because I get a better rate of interest? Am I now being unethical and avoiding tax? Or just being financially savvy?

My best mate puts all savings in his wife's savings account because as a non-tax payer, she doesn't pay interest on her savings. Is he an unethical tax avoiding cheat? Or just being smart?

Why is it ok say for my friend but not for Sir Philip Green? Why is it ok for me to legally avoid paying tax but not for a company?

I don't think it is OK to avoid paying tax, even if it is legal.

Agree with Dikkertjedap.

No-one would complain about these global companies making huge profits if they shared them out more fairly, employed local people, invested in the local economy. etc.

We are bad at collecting tax, closing loop holes, etc. The reason that our government won't clamp down on avoiders and evaders alike, is because these huge companies have enormous power over politicians. IMO they are a direct threat to democracy - look what Donald Trump has been allowed to get away with in Aberdeen.

Companies don't employ local people???

Donald Trump got an Irish contractor in to make his hotel complex in Aberdeenshire. In spite of the fact the the local council voted against it, the SNP government of Scotland 'called in' (= overturned) their decision, and it has all gone ahead, totally destroying an area of Special Scientific Interest and great natural beauty. DT: loads of cash. Local people: nothing.

Blame the SNP, it sounds!