Shop free world, do we care?

Ah not to worry – enjoy the New Year!;)

Not a general disenchantment with the economic or tax system, only with some (small) aspects of it. Anyway ‘disenchantment’ is quite normal but that is not really enough; some level of understanding is essential, and before any serious criticism is levelled, a viable alternative is necccassary…

…I’m still working on the understanding, as for an alternative…..I’ve got nothing!

That’s rather what I thought too but I inferred a disenchantment with the system from your remarks. I am relieved I was wrong.;)

Or is it back to the good old Soviet model for you?

There is no ‘good old Soviet model’…

…we have a sort of ‘modified capitalism’ that seems to work pretty well…..most of the time.

No CD, simply trying to clarify some lack of understanding, that’s all.

Well that is to coin the phrase ” a no brainer”. How else would you run a business?? Or is it back to the good old Soviet model for you?

Ah, I see you’ve been to the Starbucks school of business…

…but when a company does pay Corporation Tax it does so with money it takes, in profit, from its customers.

CD – if the company is not making any profit it does not pay Corporation Tax. The tax is levied on pre-tax profits on a sliding scale above the set minimum.

You pay the VAT rate of the country you reside in…

For most products, yes, but not for e-books, or game or software downloads; hence the EU efforts to close this particular tax loophole from 1st January 2015 (see my earlier post).

You are right about ‘re-engineering the entire western business sector’, well, at least from a tax perspective; this is indeed being done by most western governments. Lowering the Corporation Tax rate in the United Kingdom was an early initiative of the coalition government and an agreement is being negotiated to lower the Corportion Tax rate in Northern Ireland to compete with the low rates in the Republic of Ireland.

My only real concern with the likes of Amazon, for example, is that despite the buyer being in the UK and the item being despatched from the UK, because the on-line ‘transaction’ takes place in Luxembourg (where VAT is lower) all the tax goes to the Luxembourg government!

Um no.

You pay the VAT rate of the country you reside in.

I live in Lux and regularly purchase items from amazon.de as they ship for free to Lux, Amazon.co.uk no longer does.

The price quoted on the de website, depending on the nature of the item, will typically drop when i come to check out as the Lux TVA (VAT) rate is less than the German one.

Same for co.uk, same for .fr etc.

So if you are in the UK you will be paying a UK VAT rate.

co.uk may ultimately be owned by a Lux based company, Amazon SARL for example, and the revenue from the co.uk site passed to that SARL entity whcih will indeed pay a lower rate of corporation type tax than an equivalent entity in the UK. That’s why amazon and other companies set up their corporate structures in this fashion.

The outrage bus then gets started that this is “unfair,” well no not really. All countries offer tax deals to attract investment and tax reveune. The UK is one of the most prolific in doing this in recent times.

In addition most of the companies are publically owned and floated on various stock exchanges. When the share price rises investors will take profit and sell those shares, the capital gain aspect of which is then taxed, not in Luxembourg but in the country of the investor.
The same happens when a company that is performing well distributes a dividend, the country of the investor takes a capital gain tax on that payment not Luxembourg.

Simplistic media fanned outrage at tax deals is not justified unless one is prepared to address all tax deals, with the implications that may have for companies resident in your country and would also probably require a re-assessement and re-engineering of the entire western business sector…

Well, assuming a company is making a profit (or at least breaking-even) the company is not putting any money into the business, yet VAT, employee wages (including National Insurance and Income Tax) and Corportion Tax is all being paid; since the only people paying money into the company are its customers then it stands to reason that the customers pay the Corporation Tax.

It is interesting in view of the, often stated, benefit of foreign investment ‘providing jobs’ and the consequential ‘need’ for government subsidies or tax-breaks.

How is Corporation Tax paid by the consumer?

And with respect CD, the answer is obvious isn’t it? Lower VAT rates mean lower prices to the consumer….now that Amazon is forced to increase the VAT by 17% we can expect prices to customers to be increased unless they choose to absorb all or part of the increase by reducing the net cost.

I thought the thread was about the changing nature if our high streets; don’t coffee shops count?

I understand the difference between VAT and corporation tax but they are both taxes that are ultimately paid by the consumer; I know we cannot avoid paying any tax but if tax has to be paid by the British consumer then I think it should at least be paid to HMRC!

If corporations do not gain from low VAT why do they go to such efforts to pay VAT where it is lower?

Actually I thought we were discussing Amazon and the VAT loophole, which has now been closed anyway.

The two taxes are entirely different as I have already tried to explain. Wherever Starbucks trades it will apply the VAT rates on the products it sells at the applicable rates. It then pays that amount to the treasuries of the countries where the VAT is levied. Corporations do not gain from low VAT rates, but their customers – you and I do.

No confusion, but ask yourself this: if you don’t pay VAT on a Starbucks coffee and Starbucks don’t pay any (or very little corporation tax) where do Starbucks pay tax exactly?

The local coffee shops will have all been paying Corporation Tax, of course, until Starbucks made them unprofitable.

http://www.bbc.co.uk/news/uk-politics-23019514

“Starbucks has only reported taxable profit once in 15 years in the UK.”

Clearly the confusion between VAT and Corporation Tax persists……

Just because something is legal does not make it RIGHT!!! They are ARE tax dodging, they use armies of lawyers to acheive this. The government are weak and ineffective, unwilling to take on the dodgers.

I think the government does need to take-on serious big business tax avoidance; the problem is that the United Kingdom also needs to be looked upon favourably by big business as somewhere to invest…

…and by ‘invest’ we mean, of course, extract money from British consumers!

Yes, we know this is why anybody goes into business but some of these international businesses are taking the ****; does anybody really believe that Starbucks has never made a profit from all its coffee shops in the United Kingdom?

I don’t think it’s so much a high moral tone as the reality that HMRC need the revenue, anyone managing to dodge paying by any means (legal or otherwise) merely transfers the problem on to other shoulders…

Exactly! The truth is we pay once in Luxembourg…

…and then again, via various taxes, to make-up the tax that was lost to HMRC!

No, Taxes are being paid, just not in the UK.

I pay my ebay fees every month, but pay Luxembourg rates, not English. Now, I don’t mind that too much, as it makes it a bit cheaper for me, but if you add up the lost revenue, it makes a fair difference.

Good point…..I’d forgotten about my eBay Luxembourg tax bill!

Your first point of course begs the whole question of revenue and expenditure, which we could no doubt debate until the end of time but somewhere else!

Indeed your last point is true and I might find it carried more weight if those objecting to the principle boycotted the sellers benefitting from the loophole. But in reality are any of us as high principled as that? We will all buy where the best value for money is and usually without too much in depth questioning.

The high moral tone some have adopted here amuses me. People are actually upset that HMRC is not getting its “fair share” as they would have it.

The upshot of the case is that all of us will pay more but will any of us see the benefit from the increased tax received? Not a chance.

I also sense that there is some confusion between the VAT corporations pay and the Corporation Tax they pay. VAT is a tax added to the value of what we all buy – like the old pre-EU purchase tax. In the case of VAT the seller collects the tax from the buyer and transfers it to the Treasury. Whether the seller levies the tax at 3% or 20% it is of no benefit to the seller.

I don’t think it’s so much a high moral tone as the reality that HMRC need the revenue, anyone managing to dodge paying by any means (legal or otherwise) merely transfers the problem on to other shoulders.

As to whether we will benefit, must admit my cynical head tends to agree with yours.

It does allow the seller to sell at a lower price against those purely British based, that’s the sellers advantage.