Reply to: Dodgy deals on wheels

[ASB]

So basically withholding tax equivalent to corp tax on such fees? Because the parent won't be tax resident in UK. I suppose it's not the same actually, better than my idea of not allowing that cost to be treated as tax deductable.

I am pretty sure if that happened such fees would magically disappear and the barstewards would just use another scheme.

In effect. Yes. But, it's all OK. They've fixed it all at G20.

He said the finance ministers had also "come together to say it is not fair if big companies avoid their taxes by shifting their profits around artificially to different countries".

So it's all completely fixed.

[d000hg]

if we did it, it would be tax evasion

That's like saying "if I drove my car to the moon, it would be a spaceship". We don't run company groups owning legally discrete subsidiary companies in many different countries.

[SantaClaus]

I remember the good old days when the BN66 was DR and me against allcomers with no mod protection. That was quite good fun.

Though a mere bagatelle compared to an average day in general. A very scary place.

Yep mate. I try not to hang around here for too long, for my own sanity

[AtW]

The effectf is different. It is who pays. I suggested the parent, which makes the profit by virtue of the fee, pays. That doesnt necessarily affect the solvency of the local entity.

So basically withholding tax equivalent to corp tax on such fees? Because the parent won't be tax resident in UK. I suppose it's not the same actually, better than my idea of not allowing that cost to be treated as tax deductable.

I am pretty sure if that happened such fees would magically disappear and the barstewards would just use another scheme.

[ASB]

Franchising models are open to market and it's commercial business of the parent company to have such franchise model (unlike what is done by Google), where as those big companies effectively set price for themselves, UK's subsidiary of Google is wholly owned by them, it makes zero sense to charge that division anything other than to reduce tax liability here.



That would have same effect as if that payment was not allowed to be offset against corp tax.

SKA Inc buys lots of servers that are necessary for operations, yet we can't write them off against tax (other than annual allowance which has been temporarily increased), it's a crazy situation that we are effectively taxed for NOT going for leasing (which is fully deductable) and instead prefer to have real balance sheet rather than shell of company that owns nothing. That's wrong, yet those artificial fees are fully tax deductable - total BS.

The effectf is different. It is who pays. I suggested the parent, which makes the profit by virtue of the fee, pays. That doesnt necessarily affect the solvency of the local entity.

licence type fees have been a bit of an issue for many years. But it will take global agreenent for anything significant to happen.

[BrilloPad]

... feels like I've just thrown a lump of raw meat dripping with blood into the lion's den

I remember the good old days when the BN66 was DR and me against allcomers with no mod protection. That was quite good fun.

Though a mere bagatelle compared to an average day in general. A very scary place.

[AtW]

Here's another one for you to chew over...

Take That members named in tax avoidance investigation | Music | theguardian.com

There's actually an article on it in today's Times, along with the Chris Moyles article.

... feels like I've just thrown a lump of raw meat dripping with blood into the lion's den

You could have achieved the same effect by just turning up in General - CUKs friendly zone

[AtW]

That wouldnt really work. It would be inappropriate for the franchising model.

Franchising models are open to market and it's commercial business of the parent company to have such franchise model (unlike what is done by Google), where as those big companies effectively set price for themselves, UK's subsidiary of Google is wholly owned by them, it makes zero sense to charge that division anything other than to reduce tax liability here.

But I do think something on those lines is appropriate. If uk operstion pays some parent somewhere x that is a legitimate expense. Perhap if it were treated as parent has made x profit in uk and be taxed accordingly.

That would have same effect as if that payment was not allowed to be offset against corp tax.

SKA Inc buys lots of servers that are necessary for operations, yet we can't write them off against tax (other than annual allowance which has been temporarily increased), it's a crazy situation that we are effectively taxed for NOT going for leasing (which is fully deductable) and instead prefer to have real balance sheet rather than shell of company that owns nothing. That's wrong, yet those artificial fees are fully tax deductable - total BS.

[SantaClaus]

Here's another one for you to chew over...

Take That members named in tax avoidance investigation | Music | theguardian.com

There's actually an article on it in today's Times, along with the Chris Moyles article.

... feels like I've just thrown a lump of raw meat dripping with blood into the lion's den

[ASB]

That wouldnt really work. It would be inappropriate for the franchising model.

But I do think something on those lines is appropriate. If uk operstion pays some parent somewhere x that is a legitimate expense. Perhap if it were treated as parent has made x profit in uk and be taxed accordingly.

transfer pricing issues have always been highly contentious.

[AtW]

That wouldn't work, because the licence fee that they're charging themselves is already ridiculously high. They could say "fine, we'll licence it to anyone, but it costs you $15 billion, the same as it costs us".

Ok, but you miss one point - if they charge $15 bln their own UK division (which makes 1.5 bln from ads sold here) then it would become insolvent!!! The whole point of those artificial fees is to charge about as much as there is profit so that they supposedly lose a bit of money to avoid paying any corp tax, but not enough to become insolvent.

My view is that such fees should be completely disallowed as in - you can still pay them if you really want, but it should not reduce taxable profit.

[Bunk]

Such big IP fees should be disallowed, they make no sense other than tax avoidance because it's the same company - unless Google is prepared to fully license same stuff to anybody else at same rates same stuff it should not be allowed as it's not real market fee.

That wouldn't work, because the licence fee that they're charging themselves is already ridiculously high. They could say "fine, we'll licence it to anyone, but it costs you $15 billion, the same as it costs us".

[BrilloPad]

Such big IP fees should be disallowed, they make no sense other than tax avoidance because it's the same company - unless Google is prepared to fully license same stuff to anybody else at same rates same stuff it should not be allowed as it's not real market fee. It's completely unreasonable to charge it in the first place because they've offset all their R&D costs against tax the first place, it's net profit for them (other than having to maintain data centers in UK which would be a fair real cost that can be taken into account).

This!

[AtW]

But as you say they don't pay tax in Ireland either. Google may as well pay CT in the UK.

Actually no - the reason they don't pay corp tax in Ireland is because of another tax avoidance loophole THERE that allowed them to take money out of EU tax free, however if they attributed profits to UK subsidiary then such thing would not be possible (at least not in the same way - artificial "IP fee" or "brand license" would probably be used like Starbucks).

Thing is, such big super successful companies should expect to pay tax - their success comes at a price with OTHER people losing money and jobs, if super financially successful companies ain't paying tax, then who should???

[AtW]

But as you say they don't pay tax in Ireland either. Google may as well pay CT in the UK. As long as they can continue to book a big fee for their IP to Bermuda as an administrative cost, it makes little difference.

Such big IP fees should be disallowed, they make no sense other than tax avoidance because it's the same company - unless Google is prepared to fully license same stuff to anybody else at same rates same stuff it should not be allowed as it's not real market fee. It's completely unreasonable to charge it in the first place because they've offset all their R&D costs against tax the first place, it's net profit for them (other than having to maintain data centers in UK which would be a fair real cost that can be taken into account).

What need to happen is for governments, the EU, the G20 or whoever to decide what sort of tax international corporations should pay, and where they should pay it, and then debate the pros and cons and the effect on business, trade, jobs, etc, of implementing such a tax. CT doesn't solve this problem, never will and was never meant to.

My view is that Govts should allow employment taxes to be offset against CT - so basically all PAYE should reduce corp tax for that amount, this would encourage employment onshore. It should not be possible to pull tulip like they do when they don't even pay tax in Ireland - something that suprised me as I thought they at least had decency to pay 12.5% corp tax (that's pretty low level that most businesses in UK would only hope to pay).