Oh Dearie Me: Polly tries to explain tax

The same revolving door happened over the contentious controlled foreign companies rules (CFC), concerning the way companies can claim their business is in a tax haven, although the goods appear to be sold here. Challenged on Amazon, one of the accountants explained that though Amazon seemed to sell goods here, trundling delivery vans along tax-financed roads, in fact a warehouse is not a \”permanent establishment\” in tax law. It doesn\’t exist.

No, Amazon is nothing at all to do with the CFC rules. Those apply to a corporation that is domiciled in the UK and has overseas subsidiaries. As most will know Amazon is a US domiciled corporation. The CFC rulse just aren\’t relevant.

What is relevant for Amazon is the Luxembourg UK double taxation treaty:

(3) The term `permanent establishment` shall not be deemed to include:

(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

There is nothing at all unusual about this. That double taxation treaty is based upon the standard OECD one, is the same as we have with some 150 other countries and the same that those 150 countries have with each other.

Oh, and it dates from 1967 or so. It ain\’t anything new at all.

The 30 companies called in to help write the new CFC rules have some 3,000 subsidiaries themselves in tax havens. Would they give the government advice against its self-interest? This is the wheeze that Starbucks made famous. By claiming it needs to buy coffee beans at high price from its Swiss subsidiary, most of what should have been UK profits went to the Swiss low-tax regime, with virtually nothing paid here. HMRC plods after all this transfer pricing, but it has just 65 people in that department, while these accountancy firms each admitted to having some 50 people in their transfer pricing departments: that\’s 200 high-paid dodgers pursued by 65 overworked lower-paid HMRC staff.

Starbucks and coffee: it was a 20% margin that they paid Switzerland. And they did have to pay Switzerland some margin. For they were indeed buying all the coffee: not paying a margin over the basic cost would have meant breaching the transfer pricing rules, see? It does indeed cost something to have people buying coffee for you, something over and above the base cost of the coffee.

Oh, and even when you add back in that coffee margin Starbucks was still making a loss in the UK. That 20% margin on the coffee was about £4 million. Less than the recorded loss.

And if any journalist would like to ask Margaret Hodge a real question, how about this? Which firm of accountants did you use to shelter your holding in Stemcor from inheritance tax?

You ghastly, hypocritical cow you?

7 thoughts on “Oh Dearie Me: Polly tries to explain tax”

  1. “And if any journalist would like to ask Margaret Hodge a real question, how about this? Which firm of accountants did you use to shelter your holding in Stemcor from inheritance tax?

    You ghastly, hypocritical cow you?”

    She was on ‘The One Show’ last night (along with Ritchie) and, strangely, that didn’t crop up…

  2. Witchsmeller Pursuivant

    >i>trundling delivery vans along tax-financed roads

    This one comes out every time someone wants to knock amazon. Could I just point out that amazon don’t have their own delivery vans, they use British courier firms (DPD, HDNY etc) who presumably pay British vehicle and fuel duty – the very taxes which are supposed to finance British roads.

  3. “She was on ‘The One Show’ last night (along with Ritchie) and, strangely, that didn’t crop up…”

    Thankfully, I don’t watch any of it at all..:)

    The Conservatives came to office promising to simplify the tax code. They continue to do anything but. Until they at least attempt to do that, all of this from politicians (of whatever hue) with regard to avoidance, evasion, morality, fairness, etc, will continue to be simply just more hot air, bluster and fluff (at least materially so).

    Tim – You might want to indent the “The 30 companies” paragraph above?

  4. It’s interesting how two people can watch the same thing and come away with opposite opinions.


    Again and again it’s the moral view vs. the legal view. Hodge & co. were aghast that a company would take into account the taxes in a nation when considering where to put their businesses. The Big Four say, “this is what happens and why,” and PAC say that’s extraordinary and A Bad Thing. The Big Four say that it’s down to the OECD (or whatever) to change – and some of them say the OECD should change it – and Hodge scoffs and says “that will take ten years to change and you’ll profit from it in the meantime”. OK – thanks for that, really helpful.

    Hodge really should learn to shut up and stop interrupting, she’s just venting – nothing insightful. Yeah great it makes Polly feel sexy but is it constructive? She unwittingly says interesting things. E.g. MPs don’t understand tax legislation so they pass things that end up being used for purposes unintended! Apparently that’s the Big Four’s fault! Again there is no insight – maybe the legislation is too complicated and/or the MPs are too incompetent? And, apparently, MPs don’t understand the way the modern world works.

    The weird thing is that the representatives of the Big Four urge change and call for a simpler tax system while Hodge berates them for being evil. They are berated for helping to draft legislation and then asked for advice on what should be done.

    Far from Polly’s “walloping” I think it exposed the MPs’ incompetence (not all of them).

    Bill Dodwell is Chris Morris and I claim my five pounds.

  5. Despicable woman.

    She structures her affairs to avoid tax and threatens to sue anyone who refers to her own tax arrangements while slandering companies obey the law.

    Fairly typical communist behaviour then.

  6. She has a legion of fans that believe Der Polly can do no wrong and that every word is gospel. And anyone pointing out the obvious (or not so obvious) problems must be a troll of some kind…. rather than someone able to reason or read a book/website.

  7. #4

    Perfect summary. Just watched it all & Hodge the dodge is all bluster to avoid both a reasonable response to questions & her own hypocracy.
    I thought select committees were supposed to take evidence & not as a platform for their views.

Leave a Reply

Your email address will not be published. Required fields are marked *