Should Cadburys remain British, does it matter?

[existentialist]

In cases such as these I think HMRC should levy a tax based on turnover, to teach them a lesson!

That would be a bad thing, which would wallop small businesses a lot harder than larger ones.

They don't really have to do anything special - just stop making sweetheart deals with companies who make threats about relocating to Ruritania if they don't get their way when they stamp their foot.

 

[weltweit]

That would be a bad thing, which would wallop small businesses a lot harder than larger ones. ..

I don't see how, I didn't mention small businesses.

I am proposing that multinationals like Kraft, Google, Facebook, Costa are avoiding UK corporation tax because they use tactics only available to multinationals. This gives them a massive advantage over their UK based competitors and permits them to invest at a far higher rate.

They are manipulating their multinational status by applying overseas based costs to reduce their taxable UK profits - to avoid paying tax which should have been paid in the UK.

HMRC could take the example of company A, a UK based food manufacturer with turnover of X who pays corporation tax of Y and compare that to multinational A who makes UK sales of B but does not pay a similar rate of corporation tax (based on turnover). Apply the proportion of tax per turnover of company A and charge the Multinational that as their contribution for doing business in the UK!

 

[Smokeandsteam]

HMRC could take the example of company A, a UK based food manufacturer with turnover of X who pays corporation tax of Y and compare that to multinational A who makes UK sales of B but does not pay a similar rate of corporation tax (based on turnover). Apply the proportion of tax per turnover of company A and charge the Multinational that as their contribution for doing business in the UK!

That would quickly see massive law suits from the multinationals in question arguing the comparison is unfair and before you know it the case is dropped for prohibitive legal costs reasons.

Walking round Bournville these days you can't help being struck by the vision of paternalistic capitalism there that resulted in decent houses, sports facilities and green space and comparing it to the out and out scum who now own the factory.

 

[existentialist]

I don't see how, I didn't mention small businesses.

I am proposing that multinationals like Kraft, Google, Facebook, Costa are avoiding UK corporation tax because they use tactics only available to multinationals. This gives them a massive advantage over their UK based competitors and permits them to invest at a far higher rate.

They are manipulating their multinational status by applying overseas based costs to reduce their taxable UK profits - to avoid paying tax which should have been paid in the UK.

HMRC could take the example of company A, a UK based food manufacturer with turnover of X who pays corporation tax of Y and compare that to multinational A who makes UK sales of B but does not pay a similar rate of corporation tax (based on turnover). Apply the proportion of tax per turnover of company A and charge the Multinational that as their contribution for doing business in the UK!

I know you didn't mention small businesses, but you can't make laws which discriminate finely between one business and another (although you can implement laws in that way - usually to the benefit of the bigger ones). You always end up with unintended consequences.

The way you address this sort of problem - given the will to do so - is to make it more difficult to operate companies the way these organisations do: by operating in offshore jurisdictions where less tax is paid and then still benefiting from being able to make sales in other jurisdictions, essentially tax-free. Even that wouldn't be simple, but perfectly feasible.

But your idea of taxing company A on the basis of company B's performance is unfair, and unworkable - it has to be a system that operates independently of what individual companies do, and deals purely with the overarching systems and regimes within which those companies all operate.

The reason it is not being done is not because of some inherent flaw in the systems for taxing companies, but because there is no political will to force large, well-lawyered organisations, many of whom it is quite possible are making political donations or otherwise influencing the process, to pay "their share" of taxation.

Change that political imperative, and the process of getting companies operating in Britain to pay taxes in Britain would quickly become very straightforward. And without any finessing, special cases, or complex comparisons between individual organisations.

 

[weltweit]

That would quickly see massive law suits from the multinationals in question arguing the comparison is unfair and before you know it the case is dropped for prohibitive legal costs reasons. ..

Whatever system was used to claim back avoided taxes would have to be made law.

Incidentally I was once told that an American state had a law for foreign owned companies that after their third year they had to start paying corporation taxes because there was no logic to running a company which made losses in its fourth year. What I am arguing for is something like that, the offending companies are substantial, they couldn't continue making losses year after year so should be paying taxes on their profits.

And the article says that Cadbury itself is making some £90m profits, it is their "multinational" adopting of other overseas losses that reduces their UK corporation tax liabilities. A scandal.

 

[existentialist]

Whatever system was used to claim back avoided taxes would have to be made law.

Incidentally I was once told that an American state had a law for foreign owned companies that after their third year they had to start paying corporation taxes because there was no logic to running a company which made losses in its fourth year. What I am arguing for is something like that, the offending companies are substantial, they couldn't continue making losses year after year so should be paying taxes on their profits.

And the article says that Cadbury itself is making some £90m profits, it is their "multinational" adopting of other overseas losses that reduces their UK corporation tax liabilities. A scandal.

Well, TBF, what you're asking for - which isn't unreasonable - is a bit different from what you were suggesting earlier - making companies pay tax on turnover.

I run a small (onshore) limited company. Its income is the fees I charge for my services, and its primary expense is my salary, on which I pay tax and NI just like any employee. I'd be mightily pissed off if I suddenly started to have to pay tax on my turnover on top of the taxes I already pay as an employee. The idea of corporation tax is that it is a tax on the profits a company makes, and that is perfectly reasonable in my view.

If my company were taking in a lot of fees, more than it paid me, I would be quite accepting of the fact that the retained profit at the end of the year would be taxed, but then my company isn't based in Lichtenstein or somewhere. Morally, I think that a company which does a proportion of its business in a particular state should be liable for the taxes due to that state on the profits it makes on that business. I suspect most people would agree - it's likely that the only disagreement would come from the companies themselves, and the politicians who stand to benefit by offering those companies the kind of terms we, as individuals or small companies, couldn't hope to get.

 

[Pickman's model]

Well, TBF, what you're asking for - which isn't unreasonable - is a bit different from what you were suggesting earlier - making companies pay tax on turnover.

I run a small (onshore) limited company. Its income is the fees I charge for my services, and its primary expense is my salary, on which I pay tax and NI just like any employee. I'd be mightily pissed off if I suddenly started to have to pay tax on my turnover on top of the taxes I already pay as an employee. The idea of corporation tax is that it is a tax on the profits a company makes, and that is perfectly reasonable in my view.

If my company were taking in a lot of fees, more than it paid me, I would be quite accepting of the fact that the retained profit at the end of the year would be taxed, but then my company isn't based in Lichtenstein or somewhere. Morally, I think that a company which does a proportion of its business in a particular state should be liable for the taxes due to that state on the profits it makes on that business. I suspect most people would agree - it's likely that the only disagreement would come from the companies themselves, and the politicians who stand to benefit by offering those companies the kind of terms we, as individuals or small companies, couldn't hope to get.

perhaps you should ask your accountant for advice on where to base your company for the purposes of tax, listen to his answer and take your business to a more ethical accountant.

 

[weltweit]

The way you address this sort of problem - given the will to do so - is to make it more difficult to operate companies the way these organisations do: by operating in offshore jurisdictions where less tax is paid and then still benefiting from being able to make sales in other jurisdictions, essentially tax-free. Even that wouldn't be simple, but perfectly feasible.

If that was easy to do I think we would have heard proposals along those lines, but I don't think we have.

But your idea of taxing company A on the basis of company B's performance is unfair, and unworkable - it has to be a system that operates independently of what individual companies do, and deals purely with the overarching systems and regimes within which those companies all operate.

It is about fairness. A UK coffee house chain gets taxed on their UK sales minus their UK costs and cannot feasibly run an extended loss or it would go out of business. Costa however adds overseas costs like coffee blending charges and logo and marketing support uses etc to massively bring down the profits of their UK business to such an extent that they pay no UK corporation tax. The tax they save they then use to open loads of new stores. The UK competitor is massively disadvantaged and cannot expand at such a rate.

Hence my argument if a UK coffee shop chain is paying 2% of turnover in corporation tax, so should Costa.

The reason it is not being done is not because of some inherent flaw in the systems for taxing companies, but because there is no political will to force large, well-lawyered organisations, many of whom it is quite possible are making political donations or otherwise influencing the process, to pay "their share" of taxation.

That may well be true, and if so perhaps especially with the tories and new labour. But the public respond to the argument well and do think it is wrong that these massive corporations avoid paying uk taxes.

 

[existentialist]

If that was easy to do I think we would have heard proposals along those lines, but I don't think we have.



It is about fairness. A UK coffee house chain gets taxed on their UK sales minus their UK costs and cannot feasibly run an extended loss or it would go out of business. Costa however adds overseas costs like coffee blending charges and logo and marketing support uses etc to massively bring down the profits of their UK business to such an extent that they pay no UK corporation tax. The tax they save they then use to open loads of new stores. The UK competitor is massively disadvantaged and cannot expand at such a rate.

Hence my argument if a UK coffee shop chain is paying 2% of turnover in corporation tax, so should Costa.

The only place "fairness" (in the sense you're describing it) has in legislation is in determining if a particular law is reasonable or not. You cannot start applying "fairness" to specific criteria, or individual businesses. Indeed, "fairness" often becomes - as we often see with government department pronouncements that say "it is not fair that..." - a political weasel word used in order to promote something that is more about public prejudice than any real notion of fairness.

That may well be true, and if so perhaps especially with the tories and new labour. But the public respond to the argument well and do think it is wrong that these massive corporations avoid paying uk taxes.

I think we're both saying the same thing - yes, the general public view would be that these corporations should pay their way. But there's a reason why simplistic solutions, like the one you propose, aren't the answer: it's because they're simplistic, rather than simple.

And anyway, making policy on something as complex as corporate taxation on the basis of public opinion - less than 1% of whom will have any grasp whatsoever on what the existing system is in any case - is a recipe for disaster. You'd end up with policy based more on whether people thought a company was "good" or not than any kind of equality.

 

[weltweit]

.. I think we're both saying the same thing - yes, the general public view would be that these corporations should pay their way. But there's a reason why simplistic solutions, like the one you propose, aren't the answer: it's because they're simplistic, rather than simple. ..

It is because it could be simple that it is elegant. I don't see you complaining about income tax, which is a tax on total revenue, rather than profit. Ireland had a revenue tax from 1963 to 1972 when it was replaced by VAT. I am only proposing it for multinational companies that are, by use of things like transfer pricing and international tax havens, avoiding UK corporation tax.

And BTW it is not "my idea", it was proposed by an economist and if I can remember or google out who that was I will post it to the thread.

 

[existentialist]

It is because it could be simple that it is elegant. I don't see you complaining about income tax, which is a tax on total revenue, rather than profit. Ireland had a revenue tax from 1963 to 1972 when it was replaced by VAT. I am only proposing it for multinational companies that are, by use of things like transfer pricing and international tax havens, avoiding UK corporation tax.

And BTW it is not "my idea", it was proposed by an economist and if I can remember or google out who that was I will post it to the thread.

I think we're disagreeing on such fundamental aspects of the issue that it's probably not terribly helpful to just keep batting our viewpoints back and forth. So I'll leave it there...

 

[BigTom]

If that was easy to do I think we would have heard proposals along those lines, but I don't think we have.



It is about fairness. A UK coffee house chain gets taxed on their UK sales minus their UK costs and cannot feasibly run an extended loss or it would go out of business. Costa however adds overseas costs like coffee blending charges and logo and marketing support uses etc to massively bring down the profits of their UK business to such an extent that they pay no UK corporation tax. The tax they save they then use to open loads of new stores. The UK competitor is massively disadvantaged and cannot expand at such a rate.

Hence my argument if a UK coffee shop chain is paying 2% of turnover in corporation tax, so should Costa.



That may well be true, and if so perhaps especially with the tories and new labour. But the public respond to the argument well and do think it is wrong that these massive corporations avoid paying uk taxes.

Richard Murphy suggests country by country reporting which I understand as meaning that multi nationals report their profit on a global basis, and then the turnovers of each country they operate in. The profit is apportioned to each country by the turnover accounts and taxed accordingly by each country.

Seems like a reasonable idea, not perfect as one country's operation can be more profitable than another's, but it would certainly stop companies just dropping all their profits into a non existent operation in Luxembourg or wherever, and is still a tax on profit but based on turnover.

 

[hash tag]

I've experience of creme eggs that doesn't involve eating them, they are disgusting things, that have evidently got worse. The public has voted with their cash and cost the new owners over £6 million in lost sales. Can't say I am bothered.

Cadbury loses more than £6m in Creme Egg sales after changing recipe

 

[Poi E]

Richard Murphy suggests country by country reporting which I understand as meaning that multi nationals report their profit on a global basis, and then the turnovers of each country they operate in. The profit is apportioned to each country by the turnover accounts and taxed accordingly by each country.

Seems like a reasonable idea, not perfect as one country's operation can be more profitable than another's, but it would certainly stop companies just dropping all their profits into a non existent operation in Luxembourg or wherever, and is still a tax on profit but based on turnover.

The issue would be accurate determination of global revenue. It would require a system of revenue recognition that is the same in each country the corporation operates in. Good luck with that. Arguments about where services were delivered would be interesting. Amazon could argue that buying and purchasing occurred on their servers located in [insert 'tax efficient' country].

 

[Mogden]

I've experience of creme eggs that doesn't involve eating them, they are disgusting things, that have evidently got worse. The public has voted with their cash and cost the new owners over £6 million in lost sales. Can't say I am bothered.

Cadbury loses more than £6m in Creme Egg sales after changing recipe

Fucking hell. How many of the bloody things do they sell if they lost 6 million. They're actually on my teeny tiny list of things I do not eat.

 

[weltweit]

Fucking hell. How many of the bloody things do they sell if they lost 6 million. They're actually on my teeny tiny list of things I do not eat.

I usually am tempted to eat one, just one, each easter. One is enough to remind me how I don't like them!

 

[Mogden]

I usually am tempted to eat one, just one, each easter. One is enough to remind me how I don't like them!

Just thinking about it is making my teeth itch. Naaggahaaauggg.

 

[hash tag]

I'm not sure if it's pure sales lost or actual profit lost. Having lost that many sales, how many do they actually sell?

 

[BigTom]

The issue would be accurate determination of global revenue. It would require a system of revenue recognition that is the same in each country the corporation operates in. Good luck with that. Arguments about where services were delivered would be interesting. Amazon could argue that buying and purchasing occurred on their servers located in [insert 'tax efficient' country].

I'm not going to pretend to understand the technical side of this well enough to argue the first point.

The second, yes, I'm sure they will find ways to shift some of the profits, but eg Amazon has to have operations in the uk, staff, properties etc, all of which cost money and therefore require turnover, this can't be avoided as far as I can see and would generate taxable profit, unlike now where they can show no profit. It would, I think, make it harder to shift profit, I don't think it would be perfect.

 

[hash tag]

Well, we shall psooibly learn more on Monday; Dispatches on C4 at 20.00 "Secrets of Cadburys".

 

[Pingu]

I'm not going to pretend to understand the technical side of this well enough to argue the first point.

The second, yes, I'm sure they will find ways to shift some of the profits, but eg Amazon has to have operations in the uk, staff, properties etc, all of which cost money and therefore require turnover, this can't be avoided as far as I can see and would generate taxable profit, unlike now where they can show no profit. It would, I think, make it harder to shift profit, I don't think it would be perfect.

this is where a global coprp can box clever. yes they could have distribution centres, staff etc etc in the UK. but have all its servers in say Madagascar (no idea what the tax regime is there but i am guessing lemurs dont charge that much). the orders are purchased via the servers the currency transactyiosn are carried out there too (for the ease of argument). so the UK incurrs loads of costs and madagascar gets all the revenue. the UK operates at a loss and so doesnt pay any tax. its is heavily subsidised by madagascar but makes no profit...

 

[hash tag]

No shocks there then. Promise one thing, do the opposite and no negotiation. BTW. We comply with in the tax laws in the countries we operate in. Not that the average chocolate/cadbury buyer will give a toss.
Preaching to the converted. The people who complain about all the immigrants coming here taking our jobs should have watched it to. I'm trying to cut down on my chocolate anyway.

 

[skyscraper101]

I didn't realise that sultanas are now occupying raisins, which traditionally were the only 'fruit' in the fruit and nut bar.

Load of bollocks isn't it. Everything just gets progressively more crap until all chocolate is reduced to the standards of the USA.

 

[hash tag]

Soon , all that will be left will be Hersey bars

 

[NoXion]

Seems like it's a good thing I hardly eat chocolate nowadays, on account of the agony it gives my teeth.

 

[gosub]

Cadbury accused of fudge as it pulls out of Fairtrade

 

[hash tag]

It's not cadburys anymore and I was never convinced they bought into fair-trade anyway. There are plenty of readily available brands which are fairtrade and British.

 

[Pickman's model]

Soon , all that will be left will be Hersey bars

Knockoffs of hershey's

 

[Pickman's model]

It's not cadburys anymore and I was never convinced they bought into fair-trade anyway. There are plenty of readily available brands which are fairtrade and British.

Go on, name half a dozen

 

[skyscraper101]

I really hope chocolate in this country doesn't go the way of American chocolate. i.e. bland, tasteless, horrid.