George is reported in this morning Times as having started to build an international consesus on mutli-national tax avoidance. Something Labour weren't interested in doing in 17 years.

May I suggest that the international approach starts by removing tax deductions for:

Royalties paid to entities outside the border of each country;
Likewise for interest to lenders based outside a country;
Likewise management charges, etc.

Don't get too excited, as was pointed out yesterday by our eminent journalist admin, the soundbite that was reported yesterday did not reflect in the content of the press release, in other words it had a great title but nothing of substance to back it up.

You'd be forgiven for thinking that it was a diversion tactic from some other, worse news.

Thing is though, those three suggested removals can all be valid expenses to a business and therefore valid for tax deductions. How much should be the question, not if or if not.

But, the issue is that multi-nationals are not paying adequate tax in certain jurisdictions in which they operate (and no way proprtionate to the revenues they earn in those jurisdictions). These are some of the main devices they use to avoid paying their "fair share" along with flow-through companies in tax havens.

So you think the solution is to make all multi-nationals pay more than their fair share?

Paying their 'fair share' – ie what companies that do pay tax pay – would be a start.

I'm not aware of anyone saying it wouldn't be.

I can't wait until someone asks Osborne whether he's checked the legality of any Anglo-German bilateral tax treaty under EU competition laws.

Given the actual issue he's attempting to address, wouldn't it have made sense to first look to strike an agreement with the likes of Ireland or Leichtenstein?

I just thought I'd make sure.

Well, it may we just a matter of detail, but I think the Starbucks spokesman said they were sure paying nothing in the last two or three years was their fair share.

So yes, Starbucks are not saying they shouldn't pay their fair share. Presumably as long as that share is nil.

I think we've also had people on this forum conflating the tax that employees pay with what companies pay, so as to claim that they are actually paying lashings of tax already.

So, what should their "fair share" be?

Tax law needs to catch up with the financial implications multinational business. Until it does, relying on what's effectively an honesty box, or barring perfectly fair tax avoidances isn't the answer.

Tragic that honesty seems to be so out-of-fashion these days.

I feel there is a validity to that. I work for a major multinational, andl, I've never written a cheque to HMRC for either my income tax, my NI contributions or my employers NI contributions. How much I get in my pocket is affected by those three taxes along with the corporation tax the company has to pay. So whilst technically I pay income tax.....do I really? Or is it just a corporate tax on a business paying employees in the same way corporation tax is a corporate tax on a business earning a profit?

What makes you think the fashionable status of honesty has changed?

[iYou[/i pay the tax in just the same way that I pay my tax and NI even though, as a freelance, I have to sort it out myself. The fact that yours is done through PAYE doesn't change the fact that it is you paying the tax etc.

I'm not saying it's your argument, but it's a nasty argument from some, as it effectively says that individuals on a payroll do not have the same financial relationship/commitment with the state as a company, when tax is partly about citizenship.

Corporation tax at standard rate on the profits they actually make, as opposed to no tax based on legal and accounting fictions dreamed up precisely for the purpose of making it falsely if legally appear on paper that Starbucks in the Uk is not making any profit. While at the same time senior Starbucks executives shamelessly tell the world what great business they do in the UK.


You and I seemingly have contrasting definitions of "perfectly fair". In my opinion, me personally paying more tax than the whole Starbucks UK operation is not perfectly fair. You are unlikely to persuade me that it is.

What about genuine factors?
On "royalties" for example it does seem fair to me that Starbucks UK should pay a royalty to the Starbucks corporation. Do you feel differently?



I haven't tried to claim the amount of avoidance is "perfectly fair" only that the criteria given for avoidance are valid, and how much they can be used is the question, not if they can be used or not. Disagree?
Have I given any indication that I would try to convince you that you paying more tax than Starbucks UK would be fair?

I could be entirely wrong, but I don't have the [iimpression[/i that what seems to be a currently rather fashionable approach to corporate tax was the same as recently as a generation or two ago.

In much the same way as the relationship between customer and company has changed from one where the former could fairly expect to be honestly treated by the latter, to one where service has ceased to be something to be valued and the customer is simply there to be milked as much as possible.

As we have seen from several posters relating their own experiences of changing attitudes in companies over the same sort of time span.

Yes, the UK operation is not a franchise or separate company but a wholly owned subsidiary.
All they are doing is moving money around to evade tax.

So, in the example of Starbucks, you don't feel the US brand brings any value or helps the UK operation in any way at all?

Look into "flags of convenience" to see how far back tax avoidance has been going for international businesses.

I have quite the opposite view of the customer care experience. I would say there is more variety in it, and the likes of Easyjet quite openly basing their business on the price value they can give by not prioritising customer care.
Either way, I wouldn't say I had seen much in the way of dishonesty, which would be quite different from "milking" a customer.

I'm getting the strong feeling you are on the wind-up now. You can't surely be doing anything there but a bit of devil's advocacy?

Can you?

I'm sure Starbucks' name does help Starbucks make money in the UK as they do everywhere else. But if Starbucks pays money to Starbucks - as they are perfectly free to do - that should NOT be tax deductible. Royalties my arrse. The "royalties" are a neat legal convenience.

Do you think if royalties paid to a parent company were first taxed at 50% Starbucks UK would be paying any royalties to the parent company? If not, why not? I mean, that would surely just be Starbucks UK's problem, nothing at all to do with the parent company, right?

As far as I am concerned, the nature of the royalties is that it is unearned income going to a foreign corporation, and as it arises from business transacted in the UK, tax should be deducted and only the net sum paid across. That tax should be at the same rate as the corporation tax that would apply to the money if no royalties were paid, so whether royalties change hands or not would be tax neutral.

If Starbucks UK pays they royalty you agree they are entitled to do so to Starbucks US, then it's a cost incurred by Starbucks UK. Why wouldn't that be considered a valid cost to Starbucks UK in the same way as any other cost?

The US parent company, as you admit, generates value in terms of the profile of the name, why do you then want to class payment for that as "unearned" income?

And they get the profits of the UK arm, after tax.
It's a tax evasion scam, moving money around to avoid taxation of profits.