Tuesday, November 20, 2012

Now STFU about Amazon, Starbucks et al

I'm not usually one for quoting people verbatim, but I make an exception in this case because the original is behind the paywall at the Times, and because Tim Worstall makes his point crystal clear:

How can you accuse a company of tax avoidance when it is doing exactly what the law tells it to do?
Logic or common sense does not usually stop the bleatings of politicians but this all-party outrage about big corporations dodging taxes is absolutely ludicrous. The EU, under the single-market rules, positively encourages the business behaviour that is being criticised.
Yes, it is true that Amazon pays a lower rate of corporation tax by basing itself in Luxembourg, and Google and Facebook in Ireland. But doing this is not a sign of corporate chicanery or crafty lawyers exploiting loopholes; rather it is the very point of the Single Market (articles 26, 28, 49, 54 and 56 of the basic European Union Treaty). A company that wants to sell to all 27 EU countries needs to have its European headquarters in only one EU state. VAT is charged (except, oddly, on digital goods) where the delivery is made to, and corporation tax is levied on where that single brass plate is. As HMRC has recently pointed out, this is not avoidance, this is just the way corporation tax works.
It is true that Amazon has warehouses in the UK but we also have a double taxation treaty with Luxembourg — as we have with many other countries — which states that tax is not chargeable on the profits made from sales from warehouses and logistics chains.
It is true that Starbucks pays royalties to a Dutch company, thus apparently dodging UK tax. But EU law (council directive 2003/49/EC ) states that such royalty payments within the EU are not only allowed — it forbids the taxation of the payments in the country sending them.
These companies are not making a mockery of our tax laws: they are obeying the rules and regulations in each and every particular. They are not even avoiding tax, as these companies are doing specifically what the law intends, even to the point that we have laws that forbid national governments from stopping these multinationals doing what they have been doing.
All of which leads to a much more important question: why do we now have such an incompetence of politicians whining about the laws that they have spent the past four decades enacting? They could claim simple ignorance of what they have done but that is hardly a strong defence, is it?
Yet it is still true: they have deliberately built a tax system in which all the things they are complaining about are not actually tax evasion nor even avoidance. They are simply tax compliance — obeying the law of the land as it was intended and written.

Now, will the BBC, the Guardian, the Mail and the rest STFU? If you don't like what's going on then campaign to leave the EU, otherwise live with the fact that these companies are doing exactly what they've been told to do.

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