This is winding me up now. I am relieved to see a few people who are seeing my point but lots of people that do not. I am seeing lots of emotive arguments which, when looked at in detail, fall apart.
Companies are meant to be selfish - do not be surprised when they do what they should do!
If you don't like what the law allows, get the law changed!
The latest was that starbucks are "robbing the UK taxpayer". Well, it is not robbing if you just pay less! To rob someone you have to take. The word "steal" was used as well, which is equally wrong. Also, both robbing and stealing imply illegality, not simply something people find morally wrong somehow. If the moral wrong is simply reducing the tax paid then anyone making use of an ISA is "robbing the UK taxpayer", and even McVitie's are because they argued the VAT decision on jaffa cakes, and had they not then more tax would get to the UK tax system. They are daft examples, but if reducing the tax you pay (by legal, common and expected means) is morally wrong, then all of those things fall in to the same category.
As I raised here in another blog - some times it is hard to step back and work out why something is right or wrong. I agree, it somehow seems wrong that starbucks have paid no corporation tax in the UK. As a simple and shallow consideration of that fact it feels wrong. But can you articulate a "principle" here - can any of the protestors pin down why it is wrong, and what aspect of what they did is wrong exactly. Every attempt I see has wider reach and covers things that people do themselves and don't think wrong. The issue seems to be "big bad corporation stealing from us" and that is hard to pin down.
People really have to understand (and should already understand) that companies are selfish. The whole idea of a company is to do what is best for its members (shareholders). That means the company is selfish. It has to be. It does have to act within the law, and what is "best" can be swayed by what is needed to ensure customers buy products, which could mean not using pesticides on crops, or not charging too much, or ensuring high quality in a product, even though those things cost. But when it comes to financial practices that are legal ways to reduce tax bills, it seems obvious that any company should (and arguably, is legally required to) use whatever means it can to do that.
Lots of companies of all sizes do a variety of things that help reduce taxes. Some are "clever" and involve things that are not obviously legal. SOme things lead to changes in the law to stop them, but until the law charges are quite legal and valid. For some reason starbucks have been attacked for doing this while loads of other companies have not been. Their old mistake is being "found out" and somehow failing to explain how "normal" this is.
It is also worth remembering that a multi national company will pay a lot of in-country taxes by lots of means, whether rates, VAT, fuel duty, employer NI, or whatever. In my businesses these are way more than corporation tax. The fact they can move some part of that taxation, the corporation tax, to the country with the best rates, is an obvious move and not a surprise. At the end of the day, if we had lower corp tax in the UK we would get that in the UK (depriving some other countries of tax?). Bear in mind the dividends are then going to be taxed personally by the shareholders, and that will happen in whatever country they are based, even if the profits are made from sales in another country and even if the corp tax is paid there too. So even if they picked UK for all their corp tax, there would be plenty of tax that the UK loses out on compared to a purely UK company operating in the UK with UK shareholders.
So, I am puzzled at the reaction of so many on this. I wonder if starbucks were to give the organisers some shares, what would happen then?
In my company, as it happens, having spent well over half a million on R&D and probably a hell of a lot more, we are finally trying to reclaim some R&D tax relief. Sadly it is only two years we can claim (we have been doing R&D for 15 years), and not even the full rate for those years. It will be handy though, and help justify more R&D in future. But this is something that many companies do not claim (through ignorance and bad advice, as we had). Doing it "robs the UK taxpayer" as it reduces our tax. It is valid, legal, and even encouraged, but will we have people campaigning against A&A because of that? A&A are a bit unusual as acting in best interests of shareholders is a lot easier when there are only two of us. It allows me as director to do things on principle (like joining ORG, and fighting new snooping laws and so on) because they are in my interests. But even so, if we can do legal things to reduce our tax bill, of course we will. If we did not we would have to charge customers more money for the services.
Maybe more people need to have a few shares. Indirectly many do via their pension schemes and savings. Yet somehow people forget that they are themselves the "fat cat shareholders" when getting annoyed at big nasty corporations.
Another way of looking at this is that there are local taxes (VAT, rates, emp NI, fuel tax, etc) which even starbucks pay in the UK. There are some taxes which end up at the other end - e.g. where the shareholders spend their money and pay VAT. Somewhere between the two there is a line. Some things are in the country that the earnings are logically made. Some are where the company and shareholders are and decide. That line is drawn in law. It allows corp tax and shareholders personal tax and so on, to move away from the original earnings. If the line is in the wrong place then the law needs changing, so target anger at the law, not starbucks!
More: Somehow this is still not getting through to some people.
OK, imagine you are MD of starbucks. Your CFO comes in and says "we have a choice". He says you can choose in which country to declare profits. He explains that doing so is completely normal established practice, common in multinational companies, and completely legal. Picking country A rather than country B will mean lowest tax paid and hence highest dividend for shareholders.
Which do you pick any why?
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