Greg Wise's Dispatches on Channel 4 last night showed that the tax avoidance industry is alive and well and exploiting tax loopholes.
Afterwards HMRC issued a tweet saying:
This, though, is not true. Google is living testimony to that.
And last night the Independent carried this story:
Health service rules that prevent tax-avoiding private companies from securing NHS contracts are being scrapped - for fear they “discriminate” against firms with Google-style arrangements.
In recent years many Clinical Commissioning Groups (CCGs) — the bodies which issue contracts for local NHS services — have tried to block companies from bidding for work if they use convoluted tax structures.
But Bristol CCG is now in the process of striking out the rule, after it was questioned during the recent tender to supply children's community services. Lawyers feared that the rule discriminates against healthcare companies who are legally avoiding tax - allowing them to sue the NHS if they do not win the contract.
This is despite the fact that only last year the Government issued what is called Procurement policy note 03/14: promoting tax compliance that says:
A new policy was announced in the March 2013 Budget on the use of the procurement process to promote tax compliance. This applies with effect from 1 April 2013 to all central government contracts of more than £5 million. Suppliers bidding for these government contracts must self-certify their tax compliance.
Quite explicitly it permitted tax avoidance to be taken into account.
So, we end up in the situation that the government says tax avoidance does not work, when it clearly does for those with clout.
And that it will stop tax avoiders getting contracts. Except that does not work for those with the ability to threaten legal action.
Or to put it another way, tax compliance is just for little people.
And that it not good enough.
Especially when HMRC are party to not just saying it, but actually buys from Google.
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The problem is that you conflate two entirely different senses of “tax avoidance”.
The sort of tax avoidance HMRC is talking about is simply taking a tax position that doesn’t reflect the underlying economic situation. Chris Moyles and his second-hand car trade, for example.
Google arranges its operations such that the tax attaching is lower than it might have been had it arranged them differently. The tax reduction is the consequence of an economic difference – often a relatively slight one, of course, but it does exist.
It’s not a matter of clout, it’s a matter of breadth of operations. Someone whose sole source of income is a UK job is never going to have the opportunities available to Google, with a choice of 200 jurisdictions to operate in.
Tax avoidance is not paying tax in the wY the law intended
End of
One day oh might get something right Andrew
One day
My understanding of the law here is that it is intended that if you do not have a permanent establishment in a jurisdiction, then you do not pay tax there.
That is the law and that is how the law is intended to work.
You may want it changed, but at the moment tax is being paid in exactly the way the law currently intends.
Andrew Jackson is right here.
Unless you can show us how the law is not being followed in the case of Google?
I do not think the law is being followed in the case of Google
I thnk they do gave a PE
I think HMRC have a duty to litigate
Just what exactly is not permanent about this particular £1 billion London establishment? And how on earth can they claim their sales into this country are not generated by a company in this country?
They are running hula hoops around HMRC and UK law like a group of giggling school children who have just learned the art of answering their teachers question with another question!
Time they all had their botties smacked and sent to sit at the back of the class with the dunces hat on me thinks.
http://www.theguardian.com/technology/2013/nov/01/google-new-london-headquarters
“Tax avoidance is not paying tax in the wY (sic) the law intended”
Exactly.
And UK tax law is quite clear about several issues:
1) Businesses are taxable on profits attributable to PEs
2) What constitutes a PE
3) How claims not to have a PE should be challenged
Basically, you are back to your recurring complaint that the law as it stands is not the law you would like to have in place. That is a perfectly reasonable stance to take, but it does not entitle you to say that complying with the law as it stands is “tax avoidance”.
I note that you are of the opinion that they do have a PE in the UK. This is presumably based on publically-available information, but I fail to see how your conclusion based on limited data is better than HMRC’s opinion based on more detailed information.
I think we both agree that the definition of PE should be wider than it is, and maybe Google would have one if it were; but at the moment it isn’t.
And you think that existing law does preclude a PEcargument?
At the very least I think HMRC should litigate
“I do not think the law is being followed in the case of Google
I thnk they do gave a PE
I think HMRC have a duty to litigate”
What proof do you have of this? If you have proof, have you given it to HMRC?
The law is very clear. If the contracts are finalised outside of the UK then that is what prevents there being a UK PE. This is the law as it stands. If you wish the law to be changed, that is an argument. But under the current law you seem to have no proof at all. Just baseless accusations.
If you have proof and have not handed it over, shame on you. If you have no proof and are making baseless accusations, shame on you!
I think the PAC found clear evidence contracts are agreed in the UK
Whatever arguments it is possible to have about what the law is or is not the attempt by Andrew and Pardeep here to hang their hat on the law whilst pointedly ignoring the context in which a particular law exists represents the worst form of sophistry.
The fact is that current tax law, along with other law and regulation such as trade, exists as it is in a context in which not only are politicians who make law subject to the constant lobbying by well paid corporate lobbyists – which is not available in anywhere near the same scale for PAYE and indegenous SME taxpayers – to enact law to their advantage over everyone else; but also much of this law is drafted by people either seconded from such entities or senior civil servants and politicians who already have or subsequently move into, a well paid position in the sections of those corporations dealing with the laws they have drafted, complete with the known loopholes.
Consequently, the arguments used here by Andrew and Pardeep, because they ignore the context, are not just weak they are disingenuous.
When ordinary PAYE and SME taxpayers get the same level of consideration afforded the Corporate entities who are gaming the system in this way, hitting us with the double whammy of effectively being taxed twice – paying more and losing our services from the resulting austerity – from such posters is the day they deserve to be taken with any degree of seriousness rather than the scorn and contempt their current argument deserves.
Agreed
Dave Hansell: I am not at all ignoring the context of the law – that is what Richard is doing.
Richard has decided, on little evidence, that he knows the facts to which the law should apply better than HMRC do. That is his privilege, but it’s not a compelling argument.
I have argued many times that the law is out of date and should be reviewed. However, unless and until it is changed, it does set the rules. It is no more abusive of Google to abide by these rules than it is for me to drive a fuel-efficient car with the explicit intention of paying less money over to garages (and to HMRC, incidentally).
However, a review of the law should not be a simple one, designed to bring Google profits into the UK. That risks cutting both ways, and leaving the UK with *less* taxable profit that it currently has. Richard has previously complained, for example, that Rolls Royce should be taxed on more of its profit in the UK than it currently is, and attributing profit to the location of sales (a significant proportion of which are abroad) would risk reducing the UK tax paid.
I don’t know how much you are actively trying to obtain a fair deal for smaller taxpayers, but I personally am pushing hard to do so in connection with matters such as the balance of tax and national insurance, the question of employment status, and (especially) on the issue of quarterly reporting.
Simply dismissing my viewpoint, apparently on the assumption that I am some sort of corporate stooge, does you no credit at all. Ditto the repetition of crude and inaccurate caricatures of how tax law is produced and operated.
Andrew
Given current territorial taxation this is very inlikely to cut both ways – the evidence is compelling that the profit that can leave the UK already has and new CFCS rules have encouraged that
I also find your belief that all jaw is statue and not changed by legal precedent – which HMRC seem curiously unwilling to establish when I believe they have a duty to seek to do so as other nations are – rather naive
There is evidence and it demands testing
You ignore the contextual reason as to why that does not happen. As ever
Richard
Candidly, Richard, what I find naïve is your belief that your view of Google’s tax affairs is going to be more accurate than theirs.
You seem to think that Google has acquired a structure, a review of it would give the result you would like, but that no review of it is being undertaken because Google have queered the pitch.
You completely ignore the fact that, rather than having simply acquired an operating structure which may or may not be over the line, Google will have carefully designed the structure, armed with exactly the same statute and case law that a court would use to analyse it. It would therefore be rather surprising (not impossible, but surprising) if they turn out to have stepped over the line that they can see as well as anyone else (and better than most).
THAT is the contextual reason why HMRC have not taken Google to court – it is simply that they are unlikely to win.
Incidentally, naivity is to skepticism what fantasy is to insight. It is common for people to see deeper structures than other people do: the trick is to know whether you have a valuable insight, an unsupported hypothesis, or are just indulging in some fantasy. It is very easy to dismiss those who do not accept your analysis as naïve – seeing only the surface structure and not the depths – but it is well to consider whether they are being naïve about your insights, or skeptical of your hypothesis/fantasy. The person who never doubts that they are correct is a person who cannot sensibly judge the worth of their thinking.
What I find naive is your belief that Google are right and tax authorities never win when it is very clear that they can and do if they wish to do so
And as for the value of my insight: as the first person to seriously write about Google and its tax I think there might be some weight attached to it
Have I ever claimed to be universally right? No of course not. But am I right to say that Google’s tax structures create an injustice. Yes, I think I am. Am I right to say on the basis of PAC evidence that Google may have a PE in the UK? I think it arguable. Am I right to say better outcomes are possible? Undoubtedly.
You appear to doubt all three
I think the balance on my side
“…the attempt by Andrew and Pardeep here to hang their hat on the law whilst pointedly ignoring the context in which a particular law exists represents the worst form of sophistry.”
I have worked in tax for many years, in a number of different jurisdictions. I find that the tax authorities ALWAYS ‘hang their hats’ on what the law says. Mr Hansell, have you ever tried to argue with the tax authorities that while the law says one thing, your client’s ‘context’ meant that what they did should be treated in a different way? How did you get on if you did try such an argument?
The law is the law. It may be good or bad. But it is what we all must work under. As someone else said, driving at 29 mph in a 30 mph zone is not ‘speeding fine avoidance’.
Oh dear: you really do need to go and away and do a lot of learning
About tax, law, interpretation and much more
PS And driving at 29mph in a 30 limit can be dangerous driving, and many other things besides. You so badly miss the point
Fortunately, in every society (no matter how authoritarian) there is one final check and balance over both politicians and the law courts – the court of public opinion.
This has always in my experience been a more reliable gauge of right and wrong, which eventually in a democracy the politicians and lawyers finally have to accept if they want to retain power.
So it is only a matter of time – as the court of public opinion seems to be firmly against all the multinationals and wealthy private tax avoiders (no matter what the professional arguments may be in their favour).
I am very well aware that HMRC can and do win in the courts, when they have the facts on their side.
I am also well aware that HMRC can and do win when they don’t have the facts on their side, but can find some way to argue a technicality. In fact I am in the process of taking such a case to Tribunal at the moment.
Candidly, I suspect that I have rather more practical experience of these matters than you do. But you ignore that.
Of the minutiae I susoect you have more experience
That may why you continually miss the big picture
The skills are very different
That’s why I do what I am best at
You have it the wrong way around Pardeep and therefoe again miss the point, deliberately in my view..
The law does not suddenly appear by spontaneous combustion. It is not magiced into existence.
The context of the law in this case, that it is being drafted and written at the behest and for the advantage of one particular group of taxpayers, means that the context itself is being set by one specific set of clients. Arguing that the law is the law and ignoring the context in which it has come into existence and that therefore no one has the right to criticise this on the grounds of its just their personal opinion, which is effectively what you and Andrew have done here, is merely resorting to an ad hominen approach.
If as you both claim you know a little about the law, you will be familier with the term “implied term.” This concept is also applicable when considering argument. Consequently, an implied term of the argument you are essentially making is that if I as a PAYE taxpayer, or my milkman as an SME taxpayer, were to come under the scrutiny of HMRC we would be able to achieve the same result as Google et al – ie no prosecution, sweetheart deal etc, because, in your terms, the law being the law, all entities are equal before the law and therefore receive the same treatment.
This is the same legal fiction and fantasy thinking that you find in employment contract law which says that an employer with massive comparable resources, money, access to specialists, property etc, is equal to an individual employee on a wage with no other resources- that the contract is between two equal individuals. In reality that law, it’s context, does not match reality. Which is why you needed trades unions.
Similarly, the context in which tax, among other laws like trade (see TTP, TTIP etc) has been brought into existence through lobbying, seconding people from self interested parties through the revolving door, and through regulatory capture, actually undermines the basic tenants of the rule of law which is equality before the law. Others, not privy to the same access and resources, are disadvantaged as a result.
That is, in essence, a situation you are both arguing in favour of with this fantasy delusion of an argument that the law is the law as though it exists as a separate entity with no no context and no input from those with resources and power to frame it to their advantage. That is the context. Start dealing with real world rather than this fictional one you have hung your hats on.
There is one thing I know about the law, of any jurisdiction, which is that it should always be questioned and challenged to ensure that if nothing else it is socially fair.
Because if it is not socially fair it is not socially legitimate in the eyes of the public (no matter what the politicians and lawyers may think). It is the public that pays (directly or indirectly) for the creation and administration of the law, and so the public has the right to continually question and challenge it.
The law courts are one of the places that the fairness and legitimacy of the law can and should be challenged. The UK government spends a small fortune challenging judgments of the courts that it does not like (at the public expense) so it should provide the HMRC with a much larger budget to put regular test cases of the current tax laws to the courts (and accpet that it is going to lose a few along the way so be it).
This is one way to instigate legal change if parliament is reluctant or unable to act, and it forces the multinationals hand to produce the EVIDENCE that they are so unwilling to share about their true financial structures and operations.
“Richard Murphy says: February 10 2016 at 9:27 am Oh dear: you really do need to go and away and do a lot of learning About tax, law, interpretation and much more”
I do not know about Pardeep’s tax experience but I have over 25 years having done nothing but tax….in the real world.
I find it strange, Richard, that when you are challenged to explain WHY you hold a particular view you never can give facts or examples. I have worked in HMRC, They are skilled. knowledgeable and ferocious in chasing down tax that is due. They are also not stupid in trying to chase down tax that is not due.
I think you are talking nonsense. If you had evidence that Google had a PE, you would be presenting it. But you do not. Why not admit it?
I have noted the evidence
#The context of the law in this case, that it is being drafted and written at the behest and for the advantage of one particular group of taxpayers’
The law on PE was drafted over 50 years ago to help international trade. The idea that a company making one sale in a foreign country would have to file a tax return there, pay tax there, was thought absurd. I think that thought quite right,
If I am a book shop in the UK and sell one book to a customer in France do you really think I should pay tax, file a return, employ French accountants?
Good bye small business doing overseas trade!
Andrew
Respectfully, you should know that around the world no one thinks trade works as it did 50 years ago
And that tax authorities ate expending consider an,e effort on this issue
You pretend the world is not as it is
You are the person with the credibility problem
Stop wasting my time
Richard
“Because if it is not socially fair it is not socially legitimate in the eyes of the public (no matter what the politicians and lawyers may think.”
Following the equal rights approach and not discriminating against anyone by omission it would seem reasonable to include barrack room lawyers in that sentence.
Breadth of operations, not to mention the ability to cut sweetheart deals with the revenue not available to the rest of us PAYE and SME taxpayers, doesn’t represent clout?
Pull the other one pal.
Some people seem to have no understanding (or probably more accuratrly they don’t want to understand) that the basis of the rule of law is equality before the law. Having tax laws and practices which discriminate between different categories of tax payer, disadvantaging some groups for the sole benefit of another, only undermines the necessary confidence in the rule of law. As such, support for these kinds of arrangements and situations along with blatant denial of their true nature is nothing less than an attack on the foundations of civil society.
I know we have just had the Superbowl but the number of cheerleaders milling about with nothing better to do than display their ignorance, mendacity and mental servitude on behalf of blatant parasitism is a sad and pathetic site to witness.
Souldn’t they be sewing sequins on their ra-ra skirts or something?
Andrew, to pretend that the issue being discussed here is not about “clout” but solely about “breadth of operations” is absurd. It is a product of both, the one being causally related to the other. Indeed, I’d argue that in terms of clout Google and other large tech companies enjoy far more than simply equates to the scale of their operations. For decades now UK government ministers have fallen over themselves to accommodate the interests and wishes of high tech (mainly IT related) companies and, as importantly, individuals. This is frequently to the detriment of many established “old” tech (e.g. engineering) companies, except more recently if they are multi-nationals involved in so called strategic civil engineering projects. So Google and its execs enjoy an elevated status in and around government, which explains why they enjoyed so much access to ministers and mandarins through 2015.
So let’s not pretend that size doesn’t matter, it does. As does what form of economic activity a company is involved in. And in the process let’s also put to bed the myth that tax avoidance for major corporations and others is solely a technical issue. That’s one aspect, but it cannot be divorced from ethics and influence.
Precisely
With reference to Google and the purchase of its services by HMRC, exactly the same situation with respect to the European Commission and its use of various “insultants” such as PwC etc who also have tax dodging factories in Luxembourg (ex- prop Mr Juncker – now head of … the EC). It would thus seem to be common to use (& thus reward) organisations that cause many of the tax problems we now see.
The programme was regrettably devoid of technical analysis. The Belize scheme for example, a U.K. Company which would clearly close ends up with all the cash. How do you get the cash out of it exactly without triggering a tax charge?
I accept that was not clear
The contempt that Google holds for the the U.K.government is amply displayed in The Timmes today where it is reported that the company has given its chief executive a share package of £140 million.
This is £10 million more than its tax commitment to the 60 million people of the U.K. who fund its profits.
Tom Hutchinson, a finance VP of Google Inc made an interesting comment today at the PAC regarding their overall tax rate of 19% which they pay globally. He said something along the lines of “we end up paying the amount of corporation tax that we feel is a reasonable amount” and “even without our complicated structure we would still be paying the same amount of corporation tax”
Interesting because what it seems he is saying is that global financial capital has decided what rate of corporation tax it should pay globally all by itself, irrespective of what national governments may deem is appropriate to support their societies.
Just shows that democracy has been entirely sidestepped by financial capital, who now believe they can dictate the rules of the game not democratically elected parliaments.
http://www.parliamentlive.tv/Event/Index/522e0b2e-d6e4-458e-9120-db967f8c37f1