Why the British Government is Screwed and Tax Reciepts are Falling

Discussion in 'Economics' started by geezer466, Jan 20, 2013.

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  1. This week there was a report in the press on how Google has bought a sizeable bit of land in Kings Cross and intends to build it's UK HQ on the plot.... Once completed this will have a value in excess of £1 Billion.

    Google buys $1 billion plot of land for new central London HQ | The Verge

    Much will be trumpeted on how google in investing in the UK and bringing jobs to our shores and it would be churlish to deny this. But let's examine how one of the wealthiest company's in the World might achieve this purchase.

    Google do not need to move a single cent into the UK. Buy the place with a loan from a UK bank (actually, do not even do that if you want to - any bank will do). Straight away, BONUS as the daily interest comes straight off profits on which corp tax would be assessed.

    Next, set up the repayments to go to a subsidiary of that bank in another jurisdiction. Pay the repayments from your Google UK offshore account somewhere nice. BONUS actually get another one of your Google subsidiary to handle the payments and charge 1% for the service to your Google UK business - further push corp tax down. If you want to, build a currency fix in there that again gains the bank a few cents in the dollar and protects google from a collapsing pound/dollar/whatever.

    BONUS for the bank that made the loan - their receiving offshore subsidiary can charge to repatriate the loan repayments monies to the UK business, reducing corp tax for the UK bank.

    So - without Google moving a penny across the UK borders, it gains a major piece of real estate in the UK, reduces it's tax bill, and can claim the high ground in bringing jobs to the UK.

    Rinse and repeat for all major Corps!!

    And you can see why the UK Government is so screwed?
  2. 123

    123 LE

    This sounds similar to what Starbucks were doing - but that has been put paid to - I think your fears may be a little premature. Lets wait and see.
  3. How have they changed things?

    I have heard of no primary legislation going through the House?

    Starbucks may be making some noises on 'how they might change their ways' in the future but there is nothing illegal in following this course. In fact the opposite is true. Company Directors have an obligation to seek ever higher earnings for the bottom line. Reducing the tax bill is part of that and any Directors who voluntary paid tax when the rules and the law says they don't have too (thereby reducing Company earnings and the bottom line) would be a dead man walking come the next AGM.

    Starbucks may have made some public assurances as they needed to protect their custom flow which was falling away with the negative publicity....

    What they say and what they do however are two very different things.
    • Like Like x 2
  4. Grumblegrunt

    Grumblegrunt LE Book Reviewer

    its still a legal loophole and a total con unless they find a way of cracking down but a few expensive dinners will leave joe taxpayer losing out as usual.

    we could do with a bigger outrage bus
  5. 123

    123 LE

    Well lets not jump the gun. Starbucks have had a public light shone on their unethical, if still legitimate, practises. It wouldn't behoove a corporation like Google to tread that path so closely in their stead.
  6. What of it, it's not illegal. How much tax have you paid for which you are not liable?

    Everyone demands that these companies do something for which they have no liability but I bet you'd all scream the house down if they wanted you to do the same.
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  7. Its the balance between getting companies to invest in UK PLC and not making the tax rates so unreasonable that they decide to base themselves elsewhere. The Starbucks thing is a bit of a misnomer as they only decided to stump up a minimal sum as an image ploy. The big problem is the complexity of our tax system. The tax rules increased ten fold under the previous glorious administration and are now so complex and unwieldy that glaring holes in the system end up only being discovered after teams of accountants pour over books for weeks. Plus, as a multi national corporation you have to deal with a similar situation in each country you operate, so really you have to ask the question of who is at fault, the organisation for using perfectly legal holes in the tax system, or the system itself?

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  8. True enough but Globalisation which has brought practices like this about is clearly reducing potential tax revenues.

    If the Government cannot get it from the big corporations where else do you think they will turn?
  9. 123

    123 LE

    Indeed. It is thesystem itself, undoubtedly. But there's a moral component too. But you can't legislate morality, just enforce it with new laws.
  10. Really?? How many people will actually remember, or more importantly give a monkeys about Starbucks tax situation, as long as they can still get a choca mocha lotto? Starbucks publicity stunt to pay a lump into the UK coffers was nothing more than that, a stunt. Google wouldn't will pay what the law requires of them, nothing more. Want to change that? Then you need to change the law

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    • Like Like x 1
  11. 123

    123 LE

  12. We don't need new laws, we need less. The tax regime in this country is far too complex, even the Inland Revenue don't understand it. Simplify and loopholes vanish.
    • Like Like x 3
  13. 123

    123 LE

    I agree fully, but if you strip away from current laws, you are left with outdated foundations. If you scrap and rewrite, voila!
  14. Thats what got us into this mess in the first place. Under the last Government, the tax rule book went from something like 150 pages to over 4000 ( rough estimate from what I remember listening to Radio 5 wake up to money on the way to work ). As CQMS has already said, the tax system has too much legislature and is too unwieldy. You need to simplify it, not make it more complex

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