Avoiding corporation tax

There’s been a lot of hot air spouted this week about tax and the self employed, but what about the big boys? You know, the big corporations who make billions and can afford to pay clever accountants and lawyers the rest of us can’t even dream about instructing…

Here’s a round up of what’s going on – and it’s by no means exhaustive :

Caffe Nero : UK sales £274 million CT nil
Vodafone : UK sales £2.7 billion CT nil
Gap : UK sales £426 million CT nil
Waterstones : UK sales £395 million CT nil
EE : UK sales £6.3 billion CT nil

And there is a whole list of other big companies who pay some CT but nowhere near anything proportionate to their sales or real profits. Companies like Apple, Boots, Starbucks, Vision Express…

The list goes on and on, so maybe it would help defuse the row over the taxation of the self employed if the Chancellor was seen to do something about fairness in taxing the big boys as well as the little man?

Fairness shouldn’t be selective…


7 responses to “Avoiding corporation tax

  1. The thing about tax is that it is not a voluntary transaction. The money that the government takes from me is my money, it belongs to me, I earned it. If I want to spend it on something, I do so voluntarily, I agree with the price that I am paying and I have a clear understanding about what I am getting for my money. If the government had a bill of fare which I could study and then decide which of the available services I wished to use, which ones I wished to acquire elsewhere and which I could decide that I didn’t need and all at a price that I had voluntarily agreed to pay, that would be fine. What we actually have is no different from theft, therefore corporations acting to prevent their profits being stolen is no more immoral than locking their premises up at night.

    • It might be nice to be able to pick and choose but it’s not really practical is it? I don’t have a use for schools so should I get a tax reduction? Should I pay by mile for roads? How do we fund the armed forces? Should we scrap the NHS and let people die if they can’t afford treatment? And how would infrastructure projects get funded like motorways or railways?

      Paying taxes isn’t theft. It’s a social necessity in a civilised society. Evading paying it is theft. Unfortunately avoiding paying isn’t illegal. It’s the rules that are wrong.

      We all want something for nothing but that’s not reality and companies should be socially responsible and pay their fair share. Every penny they don’t pay means you and I have to pay instead and that is immoral in my view…

  2. Obviously picking and choosing what you pay for isn’t practical but things could be much better than they are. Roads are a good example. I pay the government and the local council to maintain the roads and they don’t do it. The roads in my area are in an appalling state. If I paid a builder to do some building work and they didn’t do the job or did it very badly, I would have some legal redress. In the case of the government there is very little. In addition there are all the things that the government spends our money on that non of us need and non of us asked for. Incidentally, most of our railways were originally built by private investors.

  3. Peter MacFarlane

    Corporate tax is paid on profits. It’s perfectly possible that e.g. Waterstones had £395m in sales and made no profit, (I’m not suggesting they did – but it’s possible) so you can’t really connect the two. Also I doubt that any of those companies – assuming they made profits – paid no corporation tax anywhere. They probably exercised their entirely legal right to pay the tax in the EU jurisdiction of their choice, which surprise surprise turned out to be the one where the rate is lowest – maybe Ireland. If you don’t like this, blame the stupid regulators, not the clever companies. You’d do the same if you could. Yes you would.

    • There’s also a big difference between real profit and taxable profit. I gave up a long time ago reading P/L Accounts as fact – and I’m a retired accountant.

      And you’re quite right. Moving profits to lower tax regimes isn’t illegal. The rules need changing…

  4. To repeat Peter MacFarlane’s comment, you seek “fairness” but use the sales of big companies as an indication of their liability to corporation tax. As he writes, corporation tax is levied on profits not turnover. It’s not accountants being clever which enables big corporate to pay the correct – and minimal – amount of tax: it’s simply adherence to the rules created by both UK Parliament and the EU. Further, as an accountant, I’m sure you’re aware that – because of the various artificial rules of profit computation for tax purposes – although taxable profit and, what you call, “real” profit rarely coincide in any one year, over a number of years, they do – more or less – aggregate to the same (or similar) figure(s).

    You say “change the rules” but ignore the incidence of taxes. After all “big corporate” only exists as a legal construct. There is no Mr Vodaphone going round in a top-hat and frock coat kicking mud in the face of his employees. The reality of a corporation is, basically, shareholders and workers. The more you extract in corporation tax the less goes to pay dividends, investment and, particularly, salaries. Dividends, salaries and (ultimately the results of successful) investment bear tax. A large part of the tax paid by the top 1% is from those dividends which help to pay almost 30% of the total UK income tax bill.

    Rather than asking for “fairness” (which all support – much like “motherhood and apple pie”), I would suggest that what should be sought in tax affairs is simplification and clarity so we’d all know what and how we’re being taxed. As a consequence of simplification and clarity, we’d soon find out how “fair” the system actually is – or isn’t. For a start, melding NI into income tax – actually abolishing NI – would, at a stroke, reveal the reality of tax on earnings. This would demonstrate, among other things, that the incidence of the “employers’ contribution” is on the employee ie the employee pays the tax but the employer signs the cheque. Just that peek into the real world of tax would show just how high the overall tax rate is on the earnings of ordinary members of the workforce. That information is currently obscured by splitting direct tax suffered by the employed/self-employed between two taxes: income tax and NI (and splitting NI further between employers’ and employees’ contributions). As a side benefit, abolition of NI would also largely get rid of the nonsense of personal service companies since the tax they effectively avoid is not income tax but NI.

    Shifting the ground for dispute onto “fairness” masks the fact that the total tax take is much too high anyway. Bashing the self-employed or the “rich” or big corporate for not diviying up their “fair” share of the tax burden avoids the proper target which is government and its expenditure. Accordingly, forget about big corporate, what is “fair” about wages for public “servants” outpacing those working in the private sector?

    • Firstly let me explain that I wasn’t blocking your comment. It got caught in the spam filter because of its length. I released it as soon as I spotted it.

      You make some good points. There has been a project running for some years now to combine NI and Income Tax but the main obstacle has been an inability to combine the I T systems. Much money has been pissed up the wall on that!

      Accountants massage figures to shift tax between years. Sure the taxable profit is the same at the end of the day but it boosts cash flow and can reduce the amounts gathered by the Revenue.

      As regards fairness, isn’t it moral to pay tax on profits in the country where those profits are generated? Setting up a company in one country to sell stock at inflated prices to the UK arm of the same corporation might be legal it sure as hell ain’t fair!

      Nothing will change without international cooperation – and there’s precious little of that…