TJN and the Murph are complaining again:
The UK government is coming under mounting pressure to stop dragging its feet on reforming international tax rules in the wake of revelations that Starbucks and other large companies are shifting profits around the world and paying small tax bills.
The calls come after a string of controversies over the low levels of tax paid by US companies operating in Britain, while analysis by the Guardian shows that four of America\’s best known businesses – Amazon, Facebook, Google UK and Starbucks – have paid just £30m in tax over the past four years despite generating more than £3.1bn in sales.
Entirely missing the point that within the EU this is exactly how the system is supposed to work. That Single Market thing. You have one base, one company, anywhere in the EU and you get to sell to anywhere else in the 27 nation block. And you\’re taxed in wherever that one unit is. And that\’s it. This isn\’t an anomaly, it\’s not a perversion, it\’s not avoidance even. It\’s how the system was specfically set up to work. That\’s the aim of it.
And then there\’s this:
John Christensen, a director of TJN, also said pressure was mounting on Europe and US to overhaul what he said were increasingly abused and discredited rules governing how multinational companies can apportion profits around the world. Speaking outside the annual meeting of the UN committee of experts on international tax co-operation in Geneva, Christensen said current guidelines from the OECD were under attack from increasingly powerful countries, led by India, China and Brazil. \”The emerging countries say they don\’t want the OECD model any more. There is widespread recognition these rules are no longer fit for purpose. But until there is agreement abusing will continue – costs will be piled up artificially in some countries or profits are shipped out to low tax countries.\”
Emerging economies want the rules to be overhauled so that multinational companies are required to apportion their taxable profits according to factors such as where in the world sales are made, where the workforce is located and where capital is invested. Such tight rules are already well-established within the US, but they do not affect how American groups behave internationally. Moves toward tighter apportionment rules are most fiercely resisted in Europe by countries with the most aggressively competitive corporate tax arrangements, among them Ireland, Britain and the Netherlands.
That\’s unitary taxation. And places like California do indeed have it. But the joy here is that such a system entirely obviates the need to have Ritchie\’s beloved country by country reporting. Because under unitary taxation you don\’t care where the profits are made at all. You simply allocate them dependent upon sales and or workforce. If 20% of sales are in the UK then 20% of global profits should be taxed in the UK. Therefore, of course, you don\’t need to know where the profits are being made at all. You just look at the group accounts in aggregate and there you are.
So Ritchie\’s proposed solution destroys the need for Ritchie\’s proposed solution.