Timmy elsewhere

The Thunderer in The Times:

How can you accuse a company of tax avoidance when it is doing exactly what the law tells it to do?

Logic or common sense does not usually stop the bleatings of politicians but this all-party outrage about big corporations dodging taxes is absolutely ludicrous. The EU, under the single-market rules, positively encourages the business behaviour that is being criticised.

Yes, it is true that Amazon pays a lower rate of corporation tax by basing itself in Luxembourg, and Google and Facebook in Ireland. But doing this is not a sign of corporate chicanery or crafty lawyers exploiting loopholes; rather it is the very point of the Single Market (articles 26, 28, 49, 54 and 56 of the basic European Union Treaty). A company that wants to sell to all 27 EU countries needs to have its European headquarters in only one EU state. VAT is charged (except, oddly, on digital goods) where the delivery is made to, and corporation tax is levied on where that single brass plate is. As HMRC has recently pointed out, this is not avoidance, this is just the way corporation tax works.

It is true that Amazon has warehouses in the UK but we also have a double taxation treaty with Luxembourg — as we have with many other countries — which states that tax is not chargeable on the profits made from sales from warehouses and logistics chains.

It is true that Starbucks pays royalties to a Dutch company, thus apparently dodging UK tax. But EU law (council directive 2003/49/EC ) states that such royalty payments within the EU are not only allowed — it forbids the taxation of the payments in the country sending them.

These companies are not making a mockery of our tax laws: they are obeying the rules and regulations in each and every particular. They are not even avoiding tax, as these companies are doing specifically what the law intends, even to the point that we have laws that forbid national governments from stopping these multinationals doing what they have been doing.

All of which leads to a much more important question: why do we now have such an incompetence of politicians whining about the laws that they have spent the past four decades enacting? They could claim simple ignorance of what they have done but that is hardly a strong defence, is it?

Yet it is still true: they have deliberately built a tax system in which all the things they are complaining about are not actually tax evasion nor even avoidance. They are simply tax compliance — obeying the law of the land as it was intended and written.

11 comments on “Timmy elsewhere

  1. The logical conclusion being that everywhere cuts its corporation tax to the lowest prevailing level and consumption taxes rise to fill the gap.

    My my, isn’t the EU rather capitalist, red in tooth and claw? And haven’t we now found a rather useful ratchet to stop us ever going back to the abominably high tax rates of the not too distant past (now having at least for income tax in certain countries rates that are merely disgracefully high)?

  2. @JamesV – this was always the very left wing’s argument against the EU; if you implement the common market then companies might find it easy to trade and then they’ll *gasp* do business and make higher profits, the wretched capitalist bastards

  3. @JamesV, apologies if I misunderstand but where is the ratchet stopping high rates on income tax. This appears to be based on an assumption that governments have all the money they need and will not want more just because they can.

  4. Hey has anyone noticed companies basing themselves here are avoiding taxes? They are avoiding taxes in places such as France and Italy who have high corporation taxes by basing themselves in a lower corporation tax area like Britain.
    So when are the British press going to have a go at all these companies in Britain?

  5. From the article that morpork links to:
    “The solution, of course, is to tear up EU rules and ensure that all companies of this kind must run all their UK operations through UK subsidiaries. ”
    So easy-peasy, we just need to leave the EU!

  6. So when are the British press going to have a go at all these companies in Britain?

    Such as Seadrill, the world’s largest drilling company. Just moved it’s HQ from Stavanger to London to avoid Norwegian taxes.

  7. No matter how stupid we may be, we can always take comfort from that fact that Arnald defines the bottom end of the stupid scale.

  8. Pingback: Like shooting runaway trains with a BB gun « The Monday Books Blog

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