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Corporate Tax

Discussion in 'Off-Topic' started by really, May 27, 2013.

  1. really

    really Deity

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    Google's Eric Schmidt 'perplexed' over UK tax debate
    I'm not sure if the good burghers of CFC have been following the populist focus on the tax paid on the profits of multinationals.

    In the UK Google was brought before the Public Accounts Committee essentially accused of recording British sales outside of the UK and thus avoiding British corporate income taxes.

    In the US Apple was brought before a Senate committee to answer questions on their taxes.
    http://www.nytimes.com/2013/05/22/technology/ceo-denies-that-apple-is-avoiding-taxes.html?ref=business

    The mechanics of each case are a bit different but it boils down to profits from non US operations being recorded in Ireland and then transferred via the Netherlands to Bermuda or the Bahamas.

    The income was not subject to US corporate income tax as it was not repatriated to the US. It was not subject to UK corporate income tax as the sale was judged to be in Ireland. Much of the income was not subject to Irish income tax as the management and control was outside of Ireland.

    So what say you CFC?

    Should the US and the EU reform tax rules to force companies to pay more tax?
    Should these companies voluntarily declare income in the UK or the US for example?

    Personally I think it is within the power of each country to collect more tax if it so wishes. Companies acting within the law should not be dragged over the coals for complying with the law.

    The UK is being hypocritical demanding on the one hand that Google declare income in the UK on sales to UK residents while on the other hand opposing proposals (along with Ireland and the Netherlands) at a European level to create a common consolidated tax base which would achieve the same.
     
  2. Cutlass

    Cutlass The Man Who Wasn't There.

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    In one sense what the companies are saying is right. The law, as written, doesn't actually require them to pay more in taxes.

    That said, the debate needs to be about how much we actually want companies to pay. And who pays the difference if they don't. Some people make the argument that less corporate tax will mean more business investment, and so will pay for itself. But they are actually not really paying much of any tax now, and it is not resulting in extra business investment.

    Now tax simplification is definitely an idea with merit. The complexity of the system is a dead weight loss to everyone. But, that aside, you can't lower taxes on one group without raising them on another group.
     
  3. Traitorfish

    Traitorfish The Tighnahulish Kid

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    It's hypocritical if you think the British government's aim is actually to collect the taxes in question, and not just make a lot of base-pleasing noise about "national sovereignty". If the latter, their position makes perfect sense, because they're standing up to (or, more reasonably, giving the appearance of standing up to) both the rootless cosmopolitans in California and the Asiatic socialists in Brussels.
     
  4. Quackers

    Quackers The Frog

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    This whole thing does seem to be dragging on a bit.
    Unfortunately as long as there is one jurisdiction in the world which offers a tax rate which is so far under that of the developed world; tax avoidance will happen. You need international cooperation to create a uniform tax rate or the lesser option of a minimum rate, but if 50% of your tax revenues derive from these multinationals declaring their profits in your country you are not going to change.
     
  5. El_Machinae

    El_Machinae Colour vision since 2018 Retired Moderator

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    Haven't the externalities of Google brought way, way more than 10m to the UK?
     
  6. Silurian

    Silurian Deity

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    So multinationals should pay less tax than national companies.
     
  7. El_Machinae

    El_Machinae Colour vision since 2018 Retired Moderator

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    Golly, no. It's just a question of how to tax transactions that leave the UK shores, I guess.
     
  8. really

    really Deity

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    http://ec.europa.eu/taxation_customs/taxation/company_tax/common_tax_base/#ccctb
    http://en.wikipedia.org/wiki/Common_Consolidated_Corporate_Tax_Base
    Reading into the CCCTB further taxable profits would be calculated using a formula considering labour, sales and capital.

    The problem of profits ending up in islands that get more sunshine than here would remain however.
     
  9. Tahuti

    Tahuti Writing Deity

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    Corporate Income Taxes are increasingly difficult to levy really. Since publicly traded corporations come very close to the hypothetical homo economicus, as shareholders will pressure companies to be as profitable as possible, it might be much better to scrap the corporate income tax and increase taxes on investors instead. Unlike corporations, investors actually are people (sorry Mitt) who have a number of irrational reasons to stay in the country (i.e. culture, family, lifestyle). Corporations don't.
     
  10. Silurian

    Silurian Deity

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    Or US shores. The UK also provides tax advantages to relocate functions to the UK as well so it is an international problem. It is an international problem and needs to be sorted internationally.


    From The Houses of Parliament

    http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/716/71605.htm

    The charges of unethical behaviour are damaging the Starbucks, Amazon, Google etc brands but it remains to be seen how that will affect their market share long term.

    As Margaret Hodge MP said "I'm not going to buy Starbucks tomorrow, I think everybody should go and buy Costa,"


    http://www.guardian.co.uk/business/2013/apr/30/costa-coffee-sales-tax-starbucks
     
  11. Terxpahseyton

    Terxpahseyton King, Warrior, Prophet, Magician, Lover

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    Another example is Starbucks. Coffee shops pay a "license fee" to the company which reduces their profits and hence effective tax rates, while the fees end up in a place where there are small tax rates to begin with.
    I severely lack knowledge on the subject to have a really informed stance, but yes, something ideally should be done to change the various methods of tax avoidance and yes, it is a sort of hot topic in Germany as well (though there is none of "Justify yourself in front of the parliament"-stuff going on you mention, for the reason you mention - that laws are not actually broken, "merely" bend in their intend).
    The principle seems easy - profits have to be taxed where they were created. The practice seems sort of complicated.
     
  12. warpus

    warpus In pork I trust

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    Could we make companies adhere to the spirit of the law rather than the letter of the law? Seems like that would make it harder for their lawyers to find loopholes, and loopholes seems to be the reason why they pay so litt.e
     
  13. Birdjaguar

    Birdjaguar Hanafubuki Retired Moderator Supporter

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    The Hollywood movie industry has been operating at a loss for years:

    http://en.wikipedia.org/wiki/Hollywood_accounting
     
  14. JollyRoger

    JollyRoger Slippin' Jimmy Supporter

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    I guess Hollywood Acconting explains why that former Hollywood union thug that became President was considered a fiscal conservative.
     
  15. Mise

    Mise isle of lucy

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    Google should be paying more than 0.1% tax. They should voluntarily pay the tax they owe, because doing otherwise would be immoral. However, we can't rely on corporations to act morally (duh); therefore, the UK government should change its laws to stop this loophole. Ideally it would be done EU-wide.

    It's strange that people accept the notion that companies act immorally as if it were perfectly natural, even right. Companies are run by people and people should act morally.
     
  16. El_Machinae

    El_Machinae Colour vision since 2018 Retired Moderator

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    Well, I don't know if "morally" is the right word, but the corporation should only be allowed to exist if it provides people a net benefit. The entire system is supposed to benefit us, not vis versa
     
  17. JollyRoger

    JollyRoger Slippin' Jimmy Supporter

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    Corporations are welfare queens too, my friend.
     
  18. Lord Baal

    Lord Baal Deity

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    Just thought that one deserved some special mention. Wow. how do you lose $20 million on a film that cost less than one-third of that? It's not like they mortgaged it.
     
  19. Birdjaguar

    Birdjaguar Hanafubuki Retired Moderator Supporter

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    Creative accounting at its best.
     
  20. Lord Baal

    Lord Baal Deity

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    Is there any chance we could hire these people to do our taxes? The government alerady owes me some money, I feel I should somehow inflate that to several million.
     

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