Anorak News | Google, Facebook, Starbucks: The Guardian on how much UK tax corporates pay

Google, Facebook, Starbucks: The Guardian on how much UK tax corporates pay

by | 17th, October 2012

THIS is obviously part of a coordinated effort to get something or other changed. The constant drip drip of stories about how much tax multi-national companies are paying in the UK. There are however two basic faults with the whole idea that is being pursued. The first is clear and evident in this Guardian piece:

We got the data via Duedil, which has made getting hold of financial information from company reports an art. The group of companies – and you can download and explore the data below – have a combined turnover between 2008 and 2011 of £116.4bn. They declared total profits before tax of £5bn – and paid taxes of £1.5bn.

Many of the famous names have declared losses: Starbucks says it lost £32m in 2011, Google lost £20.7m and Facebook lost £13.9m. Explore the data below – we’ve included total turnover, the profit declared before tax and the actual tax paid, for every year from 2008 to 2011.

Turnover is simply irrelevant because corporation tax isn’t due or paid on turnover. It’s due on profits. And if a company doesn’t make a profit then no tax is due. It really is that simple.

The other problem is when people start looking at Google and Facebook selling from Ireland. Or Amazon and Apple from Luxembourg. There’s the claim that if they sell into the UK then they should pay tax in the UK. Which is, I’m afraid, just nonsense.

Everyone agrees that what these companies are doing is legal. So it’s definitely not tax evasion. The claim is however that this is tax avoidance. The companies are using the law in ways which those who made the laws didn’t want them or expect them to do. But that’s, as I say, entirely nonsense. For these laws about which corporate profits get taxed where are a result of EU laws on the freedom of establishment. They’re part of the Single Market laws. And this is the very point of these laws: that a company only needs to have one base in one EU country to be able to sell to all 27 EU countries. And it pays tax where that one single base is. Not where the sales are.

Now, you can say that the system should not be this way. You could even say that we should leave the EU to stop it being this way. But what you cannot say is that this is tax avoidance. For it isn’t the companies are doing exactly and precisely what the law makers wanted and expected them to do. It just isn’t tax avoidance, not even by the standards or definition that the tax campaigners themselves use. This is simple and straight tax compliance.

Photo: The coffee giant reportedly paid just £8.6 million in corporation tax in 14 years of trading in Britain – and nothing in the last three years. The American coffee firm – valued at £25 billion – has generated more than £3 billion of sales in the UK since 1998 but has paid less than 1\% in corporation tax. 

Posted: 17th, October 2012 | In: Money Comments (3) | TrackBack | Permalink