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The article doesn't make it clear or explicit which particular methods are being used here, but the methods used by the companies mentioned to 'avoid' tax are n

The article doesn't make it clear or explicit which particular methods are being used here, but the methods used by the companies mentioned to 'avoid' tax are not 'loopholes' they are standard tax regs for providing companies with access to the EU single market. That you can (for example) register a company in a single jurisdiction and only pay tax there, and the whole transfer pricing thing are not oversights or loopholes, they are the point and purpose of the law. Now, one may in good conscience take a position that this should not be so - though that amounts to an argument for leaving the EU - but tax activists make fools of themselves by insisting that companies behaving in ways the EU explicitly intends them to behave are somehow cheating. If any of the Welsh traders sold goods or services into another EU country they would themselves automatically be using the same 'loophole' by only being taxed in the UK. This happens on purpose. Modulo VAT MOSS which is just stupid.

sofaofthedamned 11y ago
I assume they've not given the methods out as the programme is only on TV early next year - maybe it's the usual transfer pricing etc but as they're all clubbing together the costs of administering this are significantly reduced. Whether it works or not you know the Government (of any colour) will start to get scared when these tactics get down to the level of small businesses.
buserror 11y ago
Speaking of VAT, it's also fubar as far as I'm concerned. My small company is using the Simplified VAT plan, which implies I don't claim VAT on my expenses and costs, but only pay back 13.5% or so to the .gov of the 20% I charge on my invoices. So far, sounds like a good deal right? Until you try to invoice anything outside of the EU! In that case, you /can't/ add 20% to the invoice (as it doesn't apply) But you still need to pay 13.5% of that to HMRC! I'm not joking -- it's a nightmare -- it means that you can't do business oversea at all, or have to leave the scheme which implies extra overhead+costs of a full fat VAT return. When you see such a /simple/ user case being overlooked (in this case, against the tax payer), can you imagine what other holes there must be in the system?
- kspaans 11y ago
  Can't do business overseas, or would have to give your profits (and possibly more!) to HMRC after doing so?
  - buserror 11y ago
    That's exactly the case... I /almost/ been had last year, and I was only saved because the canadian company I worked for still had a remote small (nearly unrelated) office in the UK, so I had to re-invoice everything to them.
    - kspaans 11y ago
      Sorry if this is naive, but what stops you from adding a 13.5% service charge to the invoice, or just bumping your rates to make up the difference? (Apart from pissing your clients off.)
      - buserror 11y ago
        Well, I don't like to reneg on a deal, and I'm already expensive. the 'service charge' is not something I'd like to see someone do to me :-) No the only technical solution is either to do the full fat VAT, or, play the megacorp and keep the money outside of the country. In a way, it's not difficult to see why bigger companies would do that when you get into a knot like that. I'm just too honest :-)
- to3m 11y ago
  VAT Notice 741A (https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services/vat-notice-741a-place-of-supply-of-services https://www.gov.uk/government/publications/vat-notice-741a-p...) suggests such transactions, assuming they are B2B, are outside the scope of VAT - since the place of supply is outside the EC. Items outside the scope of VAT do not count towards your flat rate turnover (https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses/vat-notice-733-flat-rate-scheme-for-small-businesses#determining-your-flat-rate-turnover https://www.gov.uk/government/publications/vat-notice-733-fl...). At least, that would be my excuse ;) Perhaps I need to add that this is not professional advice?
tormeh 11y ago
VAT MOSS is the only thing that makes sense. The only thing that's really bad about it is that it doesn't apply to all goods and services, but just virtual ones. Yes, the execution is lacklustre, but the principle of paying VAT where the customer is located is spotless. I'm honestly a bit surprised, come to think of it, that all supermarket sales aren't actually accounted as online orders from a webshop hosted on the Isles of Man with express delivery from warehouse at the customer's location. Then the sale would be on the Isle of Man, and VAT would be correspondingly low. Of course it's not intended (or, if you're cynical, ideal) that companies should be allowed to shift profits to tax havens and subsequently pay no tax. It's a loophole. Duh. Yes, there are justifications for the laws as they are, but the implementation is being abused so hard that it's essentially more of a loophole than a sensible set of laws. To the EU's credit there's been some talk of solving the problem through "tax harmonization", although I think that's the wrong way to solve it and also very unrealistic.
- jjp 11y ago
  I'm honestly a bit surprised, come to think of it, that all supermarket sales aren't actually accounted as online orders from a webshop hosted on the Isles of Man with express delivery from warehouse at the customer's location. Then the sale would be on the Isle of Man, and VAT would be correspondingly low. Given majority of food types are already zero rated for VAT what is the benefit to either the supermarket or consumer?
ZenoArrow 11y ago
> "are not 'loopholes' they are standard tax regs for providing companies with access to the EU single market." Focusing on the legal technicalities of what constitutes tax evasion/avoidance is kind of missing the point. The rule should be that you pay tax in the country that you earned the money, based on the tax laws of that country. Any games that involve laundering earnings through foreign subsidiaries in order to avoid paying tax that would be owed based on the tax laws of the place where profits were made is tax avoidance. I do not care whether laws have been put in place to encourage tax avoidance, that does not excuse the behavior.
- moonchrome 11y ago
  >The rule should be that you pay tax in the country that you earned the money, based on the tax laws of that country. So now instead of following one tax code and dealing with one tax authority you have to deal with 28. The whole point of EU is to cut down on stuff like that and reduce the cost of doing business between members.
  - ZenoArrow 11y ago
    Yes, if you trade in 28 countries then you should have to deal with the laws chosen by 28 different governments. Trade harmonisation is one option a government can pursue, but the more you follow this path the further you give up the autonomy of the member state, in this case it's debatable whether the medicine is worse than the disease. Should also point out that despite the harmonisation goals of the EU, tax avoidance still occurs within the EU by exploiting differences that exist, such as the infamous Double Irish with a Dutch sandwich: http://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp http://www.investopedia.com/terms/d/double-irish-with-a-dutc...
    - moonchrome 11y ago
      > Yes, if you trade in 28 countries then you should have to deal with the laws chosen by 28 different governments. Except that increases the cost of doing business even further. The whole point of EU was increasing and simplifying trade and creating a open market so that Europe can be more competitive.
paglia_s 11y ago
This isn't entirely true. From what I read the problems are mainly 2: 1) Some companies move profits to very low tax cuntries outside the EU. For example Starbucks in the UK bought coffee beans in from a subsidiary in an offshore country at very high prices so they can claim very low profits in the UK, moving most of them offshore where they pay very little taxes 2) Other companies like FCA and Apple instead are accused of having stuck deals with EU governments (Luxemburg and Ireland) where in exchange of having their HQ there they would get to pay very low taxes which other than being morally questionable (in my opinion) is possibly illegal because it amounts to state aid since other companies don't get the same treatment
- ZenoArrow 11y ago
  More or less, yes. To get a fuller understanding of the tax avoidance schemes used, worth taking a look at the game Taxodus. http://taxodus.net/ http://taxodus.net/ P.S. You might want to edit line 1 of point 1. ;-)
  - sofaofthedamned 11y ago
    That really is a superb typo...
pjc50 11y ago
So everyone registers in Luxembourg and stops paying tax? Is that really the intention of the EU, to abolish corporation tax?
- avar 11y ago
  If it's not, and the governments that make up the EU and its citizens don't agree, they can change the law can't they? It's an absurd situation that the law explicitly allows something that's continually covered in the press as immoral, and to have governments complain about the status quo through the press, instead of changing the law which is what they're empowered to do. So yeah, I hope everyone does the equivalent of registering in in Luxemburg, because that'll force a resolution to the issue. Either we say that's OK and that becomes the new norm, or we fix the tax code.
  - s73v3r 11y ago
    It's not absurd. Just because the law lets you do something does not mean that you should, or that doing so is morally right.
    - marssaxman 11y ago
      Conversely, just because the law prohibits you from doing something does not mean that you shouldn't, or that doing so is morally wrong...
    - avar 11y ago
      This is not a case of there being no applicable law, and some parties doing something obviously sociopathic. I do agree that you can have situations where there's no law covering something (because of its novelty etc.) and someone exploits that to their own gain in a way that's malicious to society. The tax law is not such a law. There's few things that governments put as much effort into as their tax laws. Have you seen the sheer volume of it for most developed states? You could print it out, drop it on someone's head from a modest distance and stand a good chance of killing them. What is absurd, and what I'm objecting to, is that the government clearly knows what it's doing with tax law, and what it's getting itself into. Yes there will be unintended loopholes, but if they keep getting exploited noticeably year after year without getting closed they're not really loopholes are they? They're there by design. What various countries in the EU are doing when it comes to their tax rhetoric is absurd and disgusting. Their politicians are badmouthing individuals and specific corporations who are in full compliance with the tax code for not doing their part, while not exercising their power as legislators to actually fix the situation that they're complaining about. They're doing this because it gains them cheap political points from a certain part of the electorate, while taking money from those same individuals and corporations that are exploiting these "loopholes". So yes, it is absurd and not morally right. But the politicians are being immoral in singling out individuals in the court of public opinion while making no effort to actually fix the issue, and it's absurd that some members of the public are eating up this obvious publicity stunt of theirs. What are you supposed to do as a business owner in this climate of political sniping? Cave in to public opinion and pay higher taxes, and subsequently get replaced by a more tax optimized competitor that doesn't pay the same attention to bad press?

sofaofthedamned 11y ago

I assume they've not given the methods out as the programme is only on TV early next year - maybe it's the usual transfer pricing etc but as they're all clubbing together the costs of administering this are significantly reduced. Whether it works or not you know the Government (of any colour) will start to get scared when these tactics get down to the level of small businesses.

buserror 11y ago

Speaking of VAT, it's also fubar as far as I'm concerned. My small company is using the Simplified VAT plan, which implies I don't claim VAT on my expenses and costs, but only pay back 13.5% or so to the .gov of the 20% I charge on my invoices. So far, sounds like a good deal right? Until you try to invoice anything outside of the EU! In that case, you /can't/ add 20% to the invoice (as it doesn't apply) But you still need to pay 13.5% of that to HMRC! I'm not joking -- it's a nightmare -- it means that you can't do business oversea at all, or have to leave the scheme which implies extra overhead+costs of a full fat VAT return. When you see such a /simple/ user case being overlooked (in this case, against the tax payer), can you imagine what other holes there must be in the system?

kspaans 11y ago
Can't do business overseas, or would have to give your profits (and possibly more!) to HMRC after doing so?
- buserror 11y ago
  That's exactly the case... I /almost/ been had last year, and I was only saved because the canadian company I worked for still had a remote small (nearly unrelated) office in the UK, so I had to re-invoice everything to them.
  - kspaans 11y ago
    Sorry if this is naive, but what stops you from adding a 13.5% service charge to the invoice, or just bumping your rates to make up the difference? (Apart from pissing your clients off.)
    - buserror 11y ago
      Well, I don't like to reneg on a deal, and I'm already expensive. the 'service charge' is not something I'd like to see someone do to me :-) No the only technical solution is either to do the full fat VAT, or, play the megacorp and keep the money outside of the country. In a way, it's not difficult to see why bigger companies would do that when you get into a knot like that. I'm just too honest :-)
to3m 11y ago
VAT Notice 741A (https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services/vat-notice-741a-place-of-supply-of-services https://www.gov.uk/government/publications/vat-notice-741a-p...) suggests such transactions, assuming they are B2B, are outside the scope of VAT - since the place of supply is outside the EC. Items outside the scope of VAT do not count towards your flat rate turnover (https://www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses/vat-notice-733-flat-rate-scheme-for-small-businesses#determining-your-flat-rate-turnover https://www.gov.uk/government/publications/vat-notice-733-fl...). At least, that would be my excuse ;) Perhaps I need to add that this is not professional advice?

tormeh 11y ago

VAT MOSS is the only thing that makes sense. The only thing that's really bad about it is that it doesn't apply to all goods and services, but just virtual ones. Yes, the execution is lacklustre, but the principle of paying VAT where the customer is located is spotless. I'm honestly a bit surprised, come to think of it, that all supermarket sales aren't actually accounted as online orders from a webshop hosted on the Isles of Man with express delivery from warehouse at the customer's location. Then the sale would be on the Isle of Man, and VAT would be correspondingly low. Of course it's not intended (or, if you're cynical, ideal) that companies should be allowed to shift profits to tax havens and subsequently pay no tax. It's a loophole. Duh. Yes, there are justifications for the laws as they are, but the implementation is being abused so hard that it's essentially more of a loophole than a sensible set of laws. To the EU's credit there's been some talk of solving the problem through "tax harmonization", although I think that's the wrong way to solve it and also very unrealistic.

jjp 11y ago
I'm honestly a bit surprised, come to think of it, that all supermarket sales aren't actually accounted as online orders from a webshop hosted on the Isles of Man with express delivery from warehouse at the customer's location. Then the sale would be on the Isle of Man, and VAT would be correspondingly low. Given majority of food types are already zero rated for VAT what is the benefit to either the supermarket or consumer?

ZenoArrow 11y ago

> "are not 'loopholes' they are standard tax regs for providing companies with access to the EU single market." Focusing on the legal technicalities of what constitutes tax evasion/avoidance is kind of missing the point. The rule should be that you pay tax in the country that you earned the money, based on the tax laws of that country. Any games that involve laundering earnings through foreign subsidiaries in order to avoid paying tax that would be owed based on the tax laws of the place where profits were made is tax avoidance. I do not care whether laws have been put in place to encourage tax avoidance, that does not excuse the behavior.

moonchrome 11y ago
>The rule should be that you pay tax in the country that you earned the money, based on the tax laws of that country. So now instead of following one tax code and dealing with one tax authority you have to deal with 28. The whole point of EU is to cut down on stuff like that and reduce the cost of doing business between members.
- ZenoArrow 11y ago
  Yes, if you trade in 28 countries then you should have to deal with the laws chosen by 28 different governments. Trade harmonisation is one option a government can pursue, but the more you follow this path the further you give up the autonomy of the member state, in this case it's debatable whether the medicine is worse than the disease. Should also point out that despite the harmonisation goals of the EU, tax avoidance still occurs within the EU by exploiting differences that exist, such as the infamous Double Irish with a Dutch sandwich: http://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp http://www.investopedia.com/terms/d/double-irish-with-a-dutc...
  - moonchrome 11y ago
    > Yes, if you trade in 28 countries then you should have to deal with the laws chosen by 28 different governments. Except that increases the cost of doing business even further. The whole point of EU was increasing and simplifying trade and creating a open market so that Europe can be more competitive.

paglia_s 11y ago

This isn't entirely true. From what I read the problems are mainly 2: 1) Some companies move profits to very low tax cuntries outside the EU. For example Starbucks in the UK bought coffee beans in from a subsidiary in an offshore country at very high prices so they can claim very low profits in the UK, moving most of them offshore where they pay very little taxes 2) Other companies like FCA and Apple instead are accused of having stuck deals with EU governments (Luxemburg and Ireland) where in exchange of having their HQ there they would get to pay very low taxes which other than being morally questionable (in my opinion) is possibly illegal because it amounts to state aid since other companies don't get the same treatment

ZenoArrow 11y ago
More or less, yes. To get a fuller understanding of the tax avoidance schemes used, worth taking a look at the game Taxodus. http://taxodus.net/ http://taxodus.net/ P.S. You might want to edit line 1 of point 1. ;-)
- sofaofthedamned 11y ago
  That really is a superb typo...

pjc50 11y ago

So everyone registers in Luxembourg and stops paying tax? Is that really the intention of the EU, to abolish corporation tax?

avar 11y ago
If it's not, and the governments that make up the EU and its citizens don't agree, they can change the law can't they? It's an absurd situation that the law explicitly allows something that's continually covered in the press as immoral, and to have governments complain about the status quo through the press, instead of changing the law which is what they're empowered to do. So yeah, I hope everyone does the equivalent of registering in in Luxemburg, because that'll force a resolution to the issue. Either we say that's OK and that becomes the new norm, or we fix the tax code.
- s73v3r 11y ago
  It's not absurd. Just because the law lets you do something does not mean that you should, or that doing so is morally right.
  - marssaxman 11y ago
    Conversely, just because the law prohibits you from doing something does not mean that you shouldn't, or that doing so is morally wrong...
  - avar 11y ago
    This is not a case of there being no applicable law, and some parties doing something obviously sociopathic. I do agree that you can have situations where there's no law covering something (because of its novelty etc.) and someone exploits that to their own gain in a way that's malicious to society. The tax law is not such a law. There's few things that governments put as much effort into as their tax laws. Have you seen the sheer volume of it for most developed states? You could print it out, drop it on someone's head from a modest distance and stand a good chance of killing them. What is absurd, and what I'm objecting to, is that the government clearly knows what it's doing with tax law, and what it's getting itself into. Yes there will be unintended loopholes, but if they keep getting exploited noticeably year after year without getting closed they're not really loopholes are they? They're there by design. What various countries in the EU are doing when it comes to their tax rhetoric is absurd and disgusting. Their politicians are badmouthing individuals and specific corporations who are in full compliance with the tax code for not doing their part, while not exercising their power as legislators to actually fix the situation that they're complaining about. They're doing this because it gains them cheap political points from a certain part of the electorate, while taking money from those same individuals and corporations that are exploiting these "loopholes". So yes, it is absurd and not morally right. But the politicians are being immoral in singling out individuals in the court of public opinion while making no effort to actually fix the issue, and it's absurd that some members of the public are eating up this obvious publicity stunt of theirs. What are you supposed to do as a business owner in this climate of political sniping? Cave in to public opinion and pay higher taxes, and subsequently get replaced by a more tax optimized competitor that doesn't pay the same attention to bad press?