Postby Harri78 » Mon Oct 22, 2012 11:14 am
The debate regarding the payment of tax by multinational companies is an interesting one, particularly in light of the media coverage and heightened public interest in times where taxes are high and income is frozen. Yes - it does seem unfair that mutlinationals such as Starbucks etc are able to structure their corporate structures in such a way to mitigate large tax bilss and even, in some cases and for a period of time, pay no tax. Corporation tax liability, much like personal tax liability is determined based on net profits (i.e. profits after deducting all allowable expenses related to the business, current year trading losses and even losses from previous years or losses within the UK group). Therefore, in some tax years, a tax bill comes in at a low amount. It is entirely legal for multinationals operating in the UK to do this. Whether or not it is "moral" to do so is a different question. Of course, UK tax legislation DOES include many tax avoidance rules which seek to prevent reduction of tax liabilities where there is for example no economic substance to the transactions and structures in place which allow for this to happen. In fact, these rules become more and more complicated every year and broader and broader in scope. However, if the UK tax regime did not allow for companies to mitigate their UK tax liability, then they would simply take their business elsewhere and that would have a knock-on impact on the UK economy and not to mention the job market and who would then ultimately lose in such a scenario. Indeed, some multintionals have already moved their HQ away from the UK for this reason. It should be noted that in at least Starbucks case, they are headquartered in the US which has one of highest corporate tax rates in the world. I'm not trying to defend multinationals that mitigate their tax liabilities, I'm simply saying that they, like everyone else, are entitled to do so, and trying the explain a bit more about how the UK tax regime operates. Personally, I don't like chains and would much rather visit an independent coffee shop, those that have a greater need for custom in these tough times and will be doing so. I would also like to finish by saying that regardless of how multinationals conduct themselves tax-wise, there are people who are involved in genuine tax avoidance, for example, those who pay their nannies in cash or by cheque and therefore avoid paying their share of National Insurance contributions. That is not tax mitigation. I would rather focus my energy on petitioning the government to change the tax rules to allow for working parents to deduct the cost of their childcare from their own personal tax bill, like in other European countries and try to level the playing field of tax mitigation for individuals with that of companies.
