[url= http://www.guardian.co.uk/commentisfree/2011/feb/07/tax-city-heist-of-century ]To us, it's an obscure shift of tax law. To the City, it's the heist of the century[/url]
Dont know if this has been posted - But WTF?
I read that this morning. Scary.
Basically they're bringing our tax laws in line with Belize/the Caymen Islands. Only us'little people' will be bothered by the nastiness of contributing to society. Nothing so vulgar for the ultra-rich eh?
But the bankers, according to the news, are "absolutely furious" about the token gesture bank levy
Could you all bend over please?
Ah yes was sent the link to his actual post on his website re this... shocking tbh if it's all true.
Surely if it is this should get blown into the open and they should be pressed on it? Isn't this what the opposition govt is meant to do?
Incredibly depressing if its true...
Basically a large corporation can setup an office in a tax haven, claim the tax back on the costs of doing so, then any money routed through that offshore company will no additional tax when entering the UK??
it that right?!?
Surely if it is this should get blown into the open and they should be pressed on it? Isn't this what the opposition govt is meant to do?
Except that the only opposition also has to suck up to the City so aren't going to make too much fuss about it.
HH - that's how I read it. They could claim a tax (cashback!) reduction on money that the UK had never seen.
So how do we make a fuss about it? Seems so wrong that they can just do that and the general public dont really know about it until its done or too late.
I think Egypt has the right idea...
...by giving the city of London a competitive advantage, surely this is a good thing?
As their are two sides to every story - read this: [url= http://www.thetimes.co.uk/tto/news/politics/article2903377.ece ]Bank levy[/url] now I dont understand either & I have no paricular political allegiance.. On the face of it, it would seem hes taking with one hand & giving with the other? WTF is going on?
he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century.
🙄
Yeah because this is clearly designed to help the economy and not big business / tory cronies make money.
Lets see who thought this scheme up...
"Almost all the members of the seven committees the government set up "to provide strategic oversight of the development of corporate tax policy" are corporate executives. Among them are representatives of Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays."
Hmmm and of course they are not the type of multinational company who would benefit from this at all....
Mrlebowski - the bank levy is f-all (1/14th of a percent), just a ploy to make us think they're being tough. £800 million vs the £6 billion they will pay in bonuses!
Anyone who actually knows about this and isn't stupidly skewed towards either side care to comment? Sounds bad but I don't trust Monbiot any more than I trust Dave.
Mrlebowski - the bank levy is f-all (1/14th of a percent), just a ploy to make us think they're being tough. £800 million vs the £6 billion they will pay in bonuses
And of that £6 billion, how much income tax will it generate for the UK???
..by giving the city of London a competitive advantage, surely this is a good thing?
Did you read the article?
The new legislation [b]will create a powerful incentive to shift business out of this country[/b] and into nations with lower corporate tax rates. [b]Any UK business that doesn't outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage.[/b]
I fail to see how companies moving to other countries or avoiding paying any tax in the UK gives London a competitive advantage. The complete opposite in fact.
A lot hopefully BB (although I bet there's a loop hole to avoid a lot of tax on those bonuses too!), I was just trying to give some perspective to the amounts.
And of that £6 billion, how much income tax will it generate for the UK???
It is extremely complex issue this - anyone care to work those numbers out & then see what the balance sheet looks like or would we prefer to make knee-jerk reactions without considering all the facts?
Mrlebowski, there's a rule that you can apply here... Basically, if a government introduces a new tax or restriction on an industry, you can tell how effective it is by looking at share prices. If they don't go down, it's because the industry was expecting worse.
Well thats one way of looking at it but I would prefer something a little accurate..
The article is rubbish, exemption for branch profits is the norm in many European countries, viz: Germany, France and the Netherlands to name a few, so poorly researched scaremongering.
so poorly researched scaremongering
The whole article? I take it you are fairly knowledgable on this stuff then mefty? I don't have a clue you see which is why when I read an article like that i think WTF!! :S
The article is rubbish, exemption for branch profits is the norm in many European countries, viz: Germany, France and the Netherlands to name a few, so poorly researched scaremongering.
Do you perhaps have a personal interest in all this?
And of that £6 billion, how much income tax will it generate for the UK???
Income tax is just one form of taxation. If you look at the total tax paid, including VAT and fuel duty for instance, you'll find people with smaller salaries pay more tax.
The questions you really need to ask is something like...
1 person earning 20 million pounds vs 1000 people earning 20k - which would generate more tax overall?
Tax on large salaries is not a justifcation for large salaries.
poorly researched scaremongering
from George Monbiot?!!! Surely not?!!!!! Are you mad?!!! The man who keeps telling us, due to Global Warming, we'll all be underwater before tomorrow lunchtime?!!!! I can't believe such a thing!!! 😉
There's probably some truth in this. Otherwise the Grurdniap's lawyers wouldn't have let them run it
Jobs will go abroad as companies shift operations overseas to make a large tax saving, while still offsetting the expense of running those foreign offices.
My own, non-banking, company would probably be better off firing us and expanding our German offices.
I guess I have more than a reasonable knowledge having worked in the area for 25 years, I am sure there are bit and pieces that are correct but the overall conclusion is flawed. My guess, and it is very much a guess, is that this will be revenue positive, as credit systems are easier to abuse than exemptions systems.
Can you explain a bit more mefty?
(Honestly really interested not just pressing you to prove anything!)
🙂
Grauniad complaining about overseas tax deals ? Shurely shome mishtake ?
http://www.guardian.co.uk/help/insideguardian/2008/mar/06/isgoingoffshoregoingoffme
An example where it could well be revenue positive is cross border transactions can be set up so that a number of companies are regarded as paying the same tax in a foreign country thus generating a credit for tax you have not really paid, these don't work in exemption systems
similar discussion on bikeradar, (with an ounce more explanation)
[url= http://www.bikeradar.com/forum/viewtopic.php?t=12756789&postdays=0&postorder=asc&start=0 ]http://www.bikeradar.com/forum/viewtopic.php?t=12756789&postdays=0&postorder=asc&start=0[/url]
"Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays"
With the exception of Tesco and possibly RBS, none of these run a very UK-centric organisation, eg Vodafone produces about 10% of its revenues from the UK etc etc. I don't see how more of its operations and therefore jobs will go abroad, other than if they don't see further revenue potential in the UK - which is a different matter.
This issue covers re-patriation of funds earned by foreign branches (not subsidiaries) of a UK entity. I am no expert on tax law but I would struggle to see how a UK-entity could earn profits in the UK and not declare them for tax, channel them to a "tax haven" abroad and then re-patriate back again thus avoiding UK corporate tax.
George's point that activities will move offshore to a lower tax regime (or something like that) is a little bit diluted by his previous point that the UK government is progressively lowering corporation tax!
Sorry, I'm no fan of this government but that article is poorly argued. There may be something we should be concerned about, but I can't see what it is from that!
Does anyone actually know the rough amount of tax currently raised by the corporate tax catch-up proposed for abolition?
Sorry, I'm no fan of this government but that article is poorly argued. There may be something we should be concerned about, but I can't see what it is from that!
Perhaps the OP will tell us ?
The Bikeradar thread is worth a read.
Seems this is not a new idea & neither a strictly Tory idea either..
Seems this is not a new idea & neither a strictly Tory idea either..
But we won't let that stand in the way of a good Tory bashing...
An article by Moonbat! Enough said. Really the sooner people start avoiding all the labour-luvvie stuff in Guardian, the happier they will be.
The tories are crap, but even in their crappest they are no where near as inept, corrupt, self-serving or puerile as the Labour party, sadly the only other option it seems in this "democracy" of ours.
so can anyone actually say what the change will be to uk tax revenues + or -?
and
The tories are crap, but even in their crappest they are no where near as inept, corrupt, self-serving or puerile as the Labour party
id say they are just as bad as each other and just as beholden to the bankers
in what way will this help to shelter us from another global crash would be a better question
The bankers? Who are these pantomime villains? All of them, or just the ones that screwed up and we bailed out?
Considering the "bankers" pay a whole lot of the tax that us-social security junkies in UK depend on, just to exist these days.
I'd say with this in mind it's probably wise to not bite the hand that feeds you. Rich bankers/people - They aren't going away, but they can move away.
I hate to stick up for the government but after six months I think it's a tad unfair to compare that on a par with 13 years of economic and social destruction.
13 years of economic and social destruction
you make it sound like post blitz coventry
id say the bankers are the ones hooked on social welfare bail-outs
you make it sound like post blitz coventry
Well you wouldn't be too far wrong 😆
This is not an anti-rich argument.
As an aside, I'm disappointed with the lack of reform over exorbitant bonuses for investment banker. The concern voiced by the LibDems is that they cause excessive risk taking and may have contributed to credit-worthiness fiasco that's been so globally damaging. If nothing is done, what is to stop it happening again?
I'd say with this in mind it's probably wise to not bite the hand that feeds you
Who baled them out of the mess they got into?
Have you missed the last few years in the banking sector?
We baled them out , economy goes pear shaped, spending is cut, jobs are lost taxpayers own the banks ah sod it let them keep the bonuses and you suggest to tax them is biting the hand that feeds you. You are Geroge Osbourne and I claim My £5
Except that we're talking here about a tax that also affects banks that didn't fail and didn't cause these problems, remember?
scoialism for the banks, capitalism for the rest of us innit
Who baled them out of the mess they got into?
Have you missed the last few years in the banking sector?
We baled them out , economy goes pear shaped, spending is cut, jobs are lost taxpayers own the banks ah sod it let them keep the bonuses and you suggest to tax them is biting the hand that feeds you. You are Geroge Osbourne and I claim My £5
What if your bank went breasts vertical tomorrow and the government stepped in to bail YOU out by giving you the money back you had deposited with your bank.
Would you be complaining then?
You are comparing savings with investments - surely the reward for the investment risk is profit the risk is loosing your money or have I misuderstood the capitalist banking PR BS?
If they did not guarantee my money was still there I would just not put it in a bank after al it is my money noth theirs.
Saving your money and investing it are not the same.
Can you name another industry baled out by the govt in the last 30 years ?
It's all skirmishing, when the report comes out recommending separation of retail banking then the real fight starts
If you believe what your read in such a hugely left wing biased rag, you must need your head seeing to!
Did the Guardian have much to say about Margaret Hodge slating the way Labour wasted a billion pounds on the M25 widening scheme? I doubt it, but sure enough, we tax payers will have to foot the bill.
I can't believe an intelligent person can take socialism seriously after the last government's 13 year charade! WAKE UP GUYS!
Easing corporation tax will make UK businesses more competitive and will attract investment. Global companies will choose to base themselves here too.
Financial institutions will be more successful and so in turn will be the investors. Investors such as local authorities, pension providers etc etc.
Increased business for these firms will generate opportunities for the legion of companies that provide services right down the foodchain.
Increased business will mean higher tax receipts too.
I guess a muppet with their judgement on the economy clouded by a fog of left wing ideology would just not get that!
Can you name another industry baled out by the govt in the last 30 years ?
[url= http://news.bbc.co.uk/1/hi/uk_politics/7853149.stm ]Not a bailout, no, absolutely definitely not, Mandy said so.[/url]
Spongebob - Member
"I can't believe an intelligent person can take socialism seriously after the last government's 13 year charade!"
I can't believe an intelligent person can take seriously the suggestion that we had a socialist government 😆
[i]Easing corporation tax will make UK businesses more competitive and will attract investment. Global companies will choose to base themselves here too.[/i]
worked out really well for ireland 😉
The UK’s financial services sector contributed an estimated £67.8bn to UK government taxes in the financial year ending 31 March 2007, 13.9% of the total UK tax take a report by PricewaterhouseCoopers LLP (PwC) for the City of London Corporation has found.
In 2009 the ONS said that it planned to incorporate the debts and liabilities of the Royal Bank of Scotland (RBS) and Lloyds Banking Group into the public finance balance sheet.
It said this could add between £1tn and £1.5tn to public sector debt.
Who's doing the biting and who's doing the feeding?
duntmatter - since you obviously seem to well versed in the mechanics, perhaps you can tell everyone what happens on the other side of the balance sheet at the same time that those debts and liabilities are added ❓ and what the net position might be.
Evil Condem Bastards!
I don't respond well to bad manners.
thread flounce ?
I don't respond well to bad manners.
well you're the one that started insulting the intelligence.
When a corporation is nationalised and it is not permitted to be an off-balance sheet holding (which it was until they agree a different accounting approach) is classified as a public sector corporation. When it goes on the government books they initially enter the gross liabilities of the corporation - they cant recognise the assets until dis-investment. When (not if) UK plc sells it's stake in RBS and Lloyds it will realise the 84% holding in RBS and 41% holding in Lloyds Banking group which curently have a market value of (84% x £26bn + 41% x £45bn = £40bn.
IIRC correctly UK plc stuck about £37bn into the recapitalisation of the three banks HBOS, RBS and Lloyds.
EDIT: And anyway, I'm sorry if my curt reply came over as rude, but if you will only quote the Guardian side of the facts it grates and perpetuates ill-informed opinions. If more people spent a bit longer trying to understand what goes on behind the headline numbers that the media feeds them then there might possibly be a little less fear and also probably "banking and it's bonuses" wouldnt be able to hide behind an aura of "black magic" and be better held to account. So Im sorry.
[url= http://www.guardian.co.uk/politics/2011/feb/08/tory-funds-half-city-banks-financial-sector ]cough[/url]
That article is total horseshit, as you might expect from Monbiot and the Guardian.
Branch exemption is part of a package of tax reform designed to ensure that UK companies pay tax on their UK profits but don't pay UK tax on profits that have nothing to do with the UK. Branch exemption is common in developed economies, so it's about competitiveness and keeping our large, successful multinationals. It will have very little impact on companies with a largely UK business, and should help keep companies like HSBC from moving their head office out of the UK. (This has started to happen - Shire Pharmaceutical and WPP have done this already, and there are plenty of others considering it.
The whole thing is very much a project started under the last government that is finally being completed under this one.
Companies usually have branches (rather than subsidiaries) for practical, historic or regulatory reasons that are nothing to do with tax, but obviously that is not a concern of Monbiot.
Some background to the whole thing, if anyone cares.
1) Dividend exemption
Since 1 July 2009, dividends from foreign subsidiaries paid to a UK parent company have been exempt from UK tax. This is partly driven by EU law and free movement of capital - until the dividend exemption, if a UK company owned a UK subsidiary then dividends were exempt, but if it owned a subsidiary in another EU country then that was a taxable dividend.
That meant there was discrimination against investment in another EU country and that is against EU law. Why the last government went so far as to exempt any dividend, who knows, but that's what they did.
2) CFC rules and anti-avoidance
The UK, like most countries, has controlled foreign company rules, or CFC rules for short. These are anti-avoidance rules that are designed to stop companies setting up shop in tax havens when their real activities are elsewhere. The rules are horrendous in detail but in principle, if you have a company in a low tax jurisdiction it must be a genuine business operating there rather than a nameplate for a UK business. You couldn't, for example, set up a business in the Cayman Islands that runs shops in the UK, or provides services to your UK business in such a way that the profit comes out in the Cayman islands. Two main ways this is stopped. First, if you had a UK parent it would get nobbed with a CFC charge (i.e. the Cayman Islands company profits would be deemed to arise in the UK parent and taxed here - this is a bad thing as you don't get a lot of the reliefs and allowances that a UK company would get). Second, if you had no UK companies, you would have a Permanent Establishment (or branch) in the UK and it would be taxed as if it was a UK company. Either way, you can't generally route profits earned in the UK through a tax haven and dodge UK tax. Obviously the system ain't perfect, but in general it works reasonably well.
3) Branch exemption
All that leaves us with a bit of a discontinuity. Say UK company has a subsidiary in France, then the profits earned in France are taxed there (as that company is tax resident in France) and the dividend paid up to the UK parent is exempt.
Same company has a branch in Germany - profits earned in Germany are taxed in Germany, but also included in the UK taxable profit. This gives you double taxation, so double tax relief was invented. You basically get credit for tax paid in Germany against your UK tax charge. Problem solved? Not always.
One example, say your UK business has had a bad year and you make a loss of £2m. Your small German branch has done well and makes a profit of £0.5m, on which it pays tax of £0.2m in Germany.
So in the UK your tax calculation gives you a loss of £1.5m (+0.5 in Germany, -2 in the UK), but you've suffered £0.2m of tax in Germany. Suddenly your German branch profits reduce your UK loss you can carry forward and you have no UK tax so you don't get double tax relief. You end up with a UK tax loss of £1.5m but economically you've got a loss after tax of £1.7m
If you had a German subsidiary then you'd have had a £2m loss in the UK and a net profit of £0.3m, which is your economic position.
So along comes branch exemption. Again horribly complex in practice, but in principle it puts branches and subs in the same position. So probably a good thing.
Stu - great post, thanks for taking the time to type that all out. I found that very informative.
Well, I could unpick the article line by line, but frankly I can't be arsed. It is so uttetly factually flawed from start to finish that the conclusion is built on sand.
Things is when you explain it, defuse it, no-one seems to take it in and think twice before the next headline.
I wonder what odds you could get on the NHS finally going under due to the sudden massive upsurge in demand for rectal prolapse repair surgery.
so what's the difference between a subsidiary and a branch, then - something to do with protection of assets when things go tits-up for part of a business ?
a subsidiary, Im guessing (Stu will correct me) is a locally incorporated entity. branch will be simply a local representation of an overseas incorporated entity.
asset protection (UK anyway) is based on FSA registration so you have to watch out for group companies and brands which might appear to be separate entities but actually all come under a single registration so you only get one £50k (or is it more?) cover on your deposits.
no-one seems to take it in and think twice before the next headline
are you accusing journalists of sensationalising stories now and him in particular
actually Im thinking a little closer to home JY 😉
Monbiot is paid to be a nitwit. In here Im assuming they do it for free 🙂
a subsidiary, Im guessing (Stu will correct me) is a locally incorporated entity. branch will be simply a local representation of an overseas incorporated entity.asset protection (UK anyway) is based on FSA registration so you have to watch out for group companies and brands which might appear to be separate entities but actually all come under a single registration so you only get one £50k (or is it more?) cover on your deposits.
Sorry, no idea what that (para 1) meant stoner 😯
I really meant what difference to a business, and following on, if they are different commercially then why should they be taxed identically ?
A subsidiary is a company in its own right. It just might be partially or wholly owned by a group company that's domiciled somewhere else, in a different tax jurisdiction. Stu's post explains how tax is paid under different business structures and there's nothing I can add to his post.
The different holdings aren't taxed identically, its just that the group holding company then doesn't get penalised by being over taxed. A company will chose to undertake it's business in different companies/tax jurisdictions using different corporate structures not necessarily for tax reasons but also for risk/ownership/regulatory reasons. Tax shouldnt penalise that.
sorry, yeh, I see the def of subsidiary vs branch
What's in it for Scaredycorp though ?
If I minimise my corporate risk using one of these means when expanding abroad or even within a market (my guess would be as a subsidiary) that would imply to me that somebody else (the new host country or new "market") is shouldering a bigger risk somehow. My feeling would be that I might expect Scaredycorp to have to pay more by some means or other to that bearer of risk
(I am inherently distrustful of subsidiaries - largely driven by ignorance, maybe, but I just don't see an obvious value and this says "loophole" to me)
My suspicion is that this "equalisation" will eventually show us where the benefit lies, as UK companies will set up far more of one than the other in future
Subsidiaries might simply be that you set up a branded local operation in joint venture with a local company with local know-how and capital. Its a way of buying into a market.
Some markets might require local ownership (top of head: Zimbabwe Crap illustration but you get the point) as a regulatory requirement.
Some markets might require local ownership (top of head: Zimbabwe Crap illustration but you get the point) as a regulatory requirement.
I imagine that's to ensure some tax rev stays local rather than being "misplaced" in internal accounting ? (ie localisation of responsibility, financial and otherwise). I can imagine I'd want that if I was a smallish country (top of head - doesn't switzerland require similar)?
I also suspect that maybe the big co. can avoid any massive liability by distancing itself from actions of this spinoff? Would that also be in the interest of the big company's home nation - avoiding losses or collapse of one of it's industrial pillars at slight cost of lost tax revenue ? Struggling here, as I haven't found a loser yet and it can't be that simple
BP in Azerbaijan/Russia is a good example of the ball ache that is JV's in freaky jurisdictions with rights ownerships and regulatory restrictions.
I imagine that's to ensure some tax rev stays local
In most countries you cant just absolve your local tax liability by being a foreign owned company. You still pay tax at the local corporate rate on your locally generated [s]revenue[/s] taxable profit. What this is all about is how much tax you pay on repatriated income.
[i]anyway, off to bed[/i]
Most multinationals use subsidiaries for a variety of commercial reasons, such as limiting risk (limited liability in the coutry of operation), their customers want to deal with a locally constituted company for ease (they understand how their local company law works) etc etc. The main users of branches are predominately banks so they don't have to meet capital requirements in multiple jurisdictions. The aim of many tax systems (OECD especially) is broadly to ensure that there is little difference in treatment no matter which form is chosen for tax purposes.
yet more incentive to hate the tories (as if it was needed).
actually Im thinking a little closer to home JYMonbiot is paid to be a nitwit. In here Im assuming they do it for free
There's the money shot 😆
They work for the people who fund their parties, run the banks and own the newspapers, shielding them from their obligations to society, insulating them from democratic challenge.
Good point well made, very few people are wealthy enough to be true tories.
Excellent post Stu N - thanks.
On a wider point, it really does bug me when journalists in general know nothing about a subject and then try to pass off a load of regurgitated mixed-up points and create a sensational conclusion based on no fact. The worrying thing is then Joe Public believes it. A lot of hysteria is generated around a non-issue and the real issues pass through un-noticed. It's lazy and dangerous and stupid. Journalists really should stick to what they are expert in rather than re-hashing and passing themselves off as experts. The article that triggered this off is a great example but by no means the only one.
On reading Moonbat's article I was mildly outraged because I have no idea if he is correct or not, borne largely of a disinterest in international corporate law and an ignorance of the status quo. Stu_n's post is one of the reasons I love STW. Cheers.