UK government to initiate tax crackdown on tech firms holding earnings offshore

Posted:
in General Discussion edited November 2017
The UK Treasury on Wednesday said it will begin cracking down on large corporations that shift British earnings overseas in a bid to avoid the country's high taxes, a move that follows a wider European Union strategy seeking much the same.




Unveiled by Chancellor Philip Hammond as part of the 2017 budget, the new initiative looks to install rules that will allow the UK to collect on revenues generated in the country, the Daily Mail reports. Importantly, the treasury will be able to recover funds not only from tax havens, but also monies that jump multiple borders to low-tax countries.

Dubbed an income tax on British royalties, the reforms are estimated to raise some 800 million pounds ($1.07 billion) in extra tax over the next five years and will become active in April 2019.

"There is a wider concern across this House and in the business community about the tax system in the digital age," Hammond said. "Along with the innovation and growth that it brings, digitalisation poses challenges for the sustainability and fairness of our tax system."

Along with big-name corporations like McDonalds, the initiative targets tech companies like Apple and Google, which use complex accounting strategies to skirt high taxes.

Apple, for example, leveraged agreements with the Irish government to achieve a tax rate of only 0.005 percent in 2014. The company funneled billions of dollars in international revenue through Irish subsidiaries to avoid paying high tax rates in countries like the UK.

In 2016, the European Commission ordered Ireland to collect $14.5 billion in back taxes from Apple, saying the country's tax agreements with the company amounted to illegal state aid. Both Apple and the Irish government are appealing the ruling.

As the appeals process is expected to take years to resolve, Ireland has set up an escrow fund to hold the massive fine.

Most recently, a report citing the so-called "Paradise Papers" claimed Apple moved a portion of its overseas cash hoard to Jersey, a U.K. crown dependency off the coast of France, as it seeks a new low-tax jurisdiction. The company refuted those claims, saying all Irish operations are still in place. In its rebuff, Apple added that it has not reduced payments to any country and maintains its status as the "largest taxpayer in the world."

Apple has accumulated more than $252 billion in overseas cash, a sum that has many countries salivating over the prospect of potential taxation. The company has repeatedly called for lower corporate taxes and floated the idea of a repatriation holiday, which would allow it to bring the funds into the U.S. without facing a high 35 percent tax rate.
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Comments

  • Reply 1 of 32
    Just bluster.

    Even if this sort of thing succeeds, they’ll all soon be fighting among themselves for the same dollar of taxes. Assuming it’s clear what it is that they’re even planning on taxing....

    radarthekatSpamSandwich
  • Reply 2 of 32
    larryalarrya Posts: 582member
    Good for them. Taxes not paid by corporations are taxes paid by the rest of us, yet they benefit disproportionately from roads, airports, labor force, government research, and the rest of the national infrastructure. 
    gatorguypropodwilliamlondonjony0
  • Reply 3 of 32
    radarthekatradarthekat Posts: 3,395moderator
    larrya said:
    Good for them. Taxes not paid by corporations are taxes paid by the rest of us, yet they benefit disproportionately from roads, airports, labor force, government research, and the rest of the national infrastructure. 
    Taxes paid by corporations are, in aggregate, paid by the populous, because the burden of taxes is typically passed along in the form of higher prices for the goods and services provided.  For example, import duties and sales taxes are factors in the cost of an iPhone in countries like the U.K., where it’s not uncommon to hear its citizens, right here on AI, complain about the relative cost of an iPhone there versus in the states.  The price is not merely the U.S. dollar price converted to pounds, after all. 
    racerhomieSpamSandwichbshankjurassicmacxpressnetmagemonstrositybeowulfschmidtjony0
  • Reply 4 of 32
    Rayz2016Rayz2016 Posts: 6,957member
    It’ll be interesting to see if this crackdown includes the Prime Minister’s husband’s company, which the Paradise Papers revealed has also been sending money abroad to avoid paying tax. 

    As was a former chancellor of the exchequer…

    As are a number of ministers and politicians who support Brexit…


    radarthekatwilliamlondonStrangeDaysnetmagejony0
  • Reply 5 of 32
    The entire continent of Europe is going down the drain.High taxes & importing terrorists are not a good thing.
    SpamSandwichlukeiwilliamlondonmonstrosity
  • Reply 6 of 32
    JanNLJanNL Posts: 310member
    To put things in perspective, UK is taking all these measures because of exiting the EU. A lot of new (tax) law is aimed at strong lower taxes, to keep and attract companies. So in most cases the opposite direction of the EU.
  • Reply 7 of 32
    A post-Brexit Britain (if those silly limeys ever move ahead on the issue instead of stalling like a bunch of spineless cowards) will need to be far more attractive as a business and investment option if they want to prevent the collapse of their economy and see a thorough loss of competitiveness. The Socialists have no answer for the way forward, Brits.
    edited November 2017 lukeiwilliamlondonbshanknetmagemonstrosity
  • Reply 8 of 32
    Rayz2016Rayz2016 Posts: 6,957member
    The entire continent of Europe is going down the drain.High taxes & importing terrorists are not a good thing.

    The US growing and nurturing its own domestic terrorists is way better?


    muthuk_vanalingamarthargwilliamlondonjony0
  • Reply 9 of 32
    Rayz2016Rayz2016 Posts: 6,957member

    JanNL said:
    To put things in perspective, UK is taking all these measures because of exiting the EU. A lot of new (tax) law is aimed at strong lower taxes, to keep and attract companies. So in most cases the opposite direction of the EU.
    Actually, these measures are being taken because of the massive £40billion it’s going to cost to leave the EU, along with the extra cost of having to pay to have access to the market the country has decided to leave. 

    We will also need to spend millions on border controls – the same border controls that other EU countries have (try moving to Belgium), but the U.K. didn’t implement because EU migrants paying into the taxation system was something they were happy about, until they weren’t. 

    And I doubt that getting foreign companies to pay their fair share of tax is going to attract them to the U.K.  

    Hell, most of the biggest companies in this country have their “headquarters” next door to each other, on the same shopping street on the Isle of Mann. 
    williamlondon
  • Reply 10 of 32
    JanNLJanNL Posts: 310member
    Rayz2016 said:

    JanNL said:
    To put things in perspective, UK is taking all these measures because of exiting the EU. A lot of new (tax) law is aimed at strong lower taxes, to keep and attract companies. So in most cases the opposite direction of the EU.
    Actually, these measures are being taken because of the massive £40billion it’s going to cost to leave the EU, along with the extra cost of having to pay to have access to the market the country has decided to leave. 

    We will also need to spend millions on border controls – the same border controls that other EU countries have (try moving to Belgium), but the U.K. didn’t implement because EU migrants paying into the taxation system was something they were happy about, until they weren’t. 

    And I doubt that getting foreign companies to pay their fair share of tax is going to attract them to the U.K.  

    Hell, most of the biggest companies in this country have their “headquarters” next door to each other, on the same shopping street on the Isle of Mann. 
    I don't know Rayz, it's a bit how you look at it...

    - Is it going to cost £40 billion? That's what the EU asks...
    - Paying to have access to the EU? UK is for many EU countries their biggest market, so they are eager to get treaties in place to continue to sell in the UK.

    - Are there border controls? Structural border controls are forbidden by EU law within the EU zone. Crossing the border with Belgium a few times a week for the past 15 years, never had a control... I even moved to Belgium years ago and it was only a formality.

    - Aren't there a lot of proposals to lower the taxes for businesses in the UK? Genuine question.

    - But there are also a lot of real HQ's, think about the City/financial centre in London.
    williamlondonnetmage
  • Reply 11 of 32
    “Let me tell you how it will be: It’s one for you, nineteen for me...”

    Four Brits over 50 years ago. No Brexit to
    pin it on in those days, just other excuses. Nothing new under the sun. 
  • Reply 12 of 32
    larrya said:
    Good for them. Taxes not paid by corporations are taxes paid by the rest of us, yet they benefit disproportionately from roads, airports, labor force, government research, and the rest of the national infrastructure. 
    Taxes paid by corporations are, in aggregate, paid by the populous, because the burden of taxes is typically passed along in the form of higher prices for the goods and services provided.  For example, import duties and sales taxes are factors in the cost of an iPhone in countries like the U.K., where it’s not uncommon to hear its citizens, right here on AI, complain about the relative cost of an iPhone there versus in the states.  The price is not merely the U.S. dollar price converted to pounds, after all. 
    The population doesn't pay! Just consumers of Apple products and they don't really pay because taxes are on profits they are not costs. So while the comment "sounds good" to is actually 100% rubbish!
    gatorguy
  • Reply 13 of 32
    d_2d_2 Posts: 98member
    larrya said:
    Good for them. Taxes not paid by corporations are taxes paid by the rest of us, yet they benefit disproportionately from roads, airports, labor force, government research, and the rest of the national infrastructure. 
    Taxes paid by corporations are, in aggregate, paid by the populous, because the burden of taxes is typically passed along in the form of higher prices for the goods and services provided.  For example, import duties and sales taxes are factors in the cost of an iPhone in countries like the U.K., where it’s not uncommon to hear its citizens, right here on AI, complain about the relative cost of an iPhone there versus in the states.  The price is not merely the U.S. dollar price converted to pounds, after all. 
    The population doesn't pay! Just consumers of Apple products and they don't really pay because taxes are on profits they are not costs. So while the comment "sounds good" to is actually 100% rubbish!
    Yes (consumers pay) and No (rubbish)... if an iDevice sold at $100 made Apple $10 in profit and with new taxes makes them just $5 in profit, then Apple simply raises the price to $110
    radarthekatnetmage
  • Reply 14 of 32
    radarthekatradarthekat Posts: 3,395moderator
    larrya said:
    Good for them. Taxes not paid by corporations are taxes paid by the rest of us, yet they benefit disproportionately from roads, airports, labor force, government research, and the rest of the national infrastructure. 
    Taxes paid by corporations are, in aggregate, paid by the populous, because the burden of taxes is typically passed along in the form of higher prices for the goods and services provided.  For example, import duties and sales taxes are factors in the cost of an iPhone in countries like the U.K., where it’s not uncommon to hear its citizens, right here on AI, complain about the relative cost of an iPhone there versus in the states.  The price is not merely the U.S. dollar price converted to pounds, after all. 
    The population doesn't pay! Just consumers of Apple products and they don't really pay because taxes are on profits they are not costs. So while the comment "sounds good" to is actually 100% rubbish!
    Consumers of all products that are taxed pay.  That’s why I said “in aggregate” and “the populous” because pretty much everyone has to consume something they didn’t make or grow themselves.  If a company ends up with any Bottom line, after tax profits at the end of a year that means, by definition, all costs have been covered.  And whose money went to cover those costs, including taxes?  The business’ customers.  
    edited November 2017 bshanknetmagebeowulfschmidt
  • Reply 15 of 32
    The entire continent of Europe is going down the drain.High taxes & importing terrorists are not a good thing.
    Yeah, telling your citizens to take care of themselves individually (even when they can't) and growing your own terrorists is so much better.
  • Reply 16 of 32
    A post-Brexit Britain (if those silly limeys ever move ahead on the issue instead of stalling like a bunch of spineless cowards)[snip]
    Unfortunately for the limeys, whether there will be a post-Brexit Britain is not up to them anymore. They've handed in their notice and they will be out 30 March 2019. The British can now only choose between a crash landing or a running one. Or they can choose to withdraw their notice, but according to popular wisdom that would result in scary monsters rising from the deep to tear asunder the entire island using their clawed tentacles and ferocious beaks and tear it to the bottom of the sea. So that option is out, I'm afraid.
    singularity
  • Reply 17 of 32
    bshankbshank Posts: 221member
    larrya said:
    Good for them. Taxes not paid by corporations are taxes paid by the rest of us, yet they benefit disproportionately from roads, airports, labor force, government research, and the rest of the national infrastructure. 
    Taxes not paid by corporations are lower prices on the products we buy. I hope you live in Europe or the UK and you see prices on Apple products skyrocket 
    netmageSpamSandwich
  • Reply 18 of 32
    The entire continent of Europe is going down the drain.High taxes & importing terrorists are not a good thing.
    This reads like someone who has never visited Europe, doesn't live there and knows nothing about it, but instead reads Donald Trump's twitter account as a daily news digest and believes every word.
    franklinjackconmobiuspropodavon b7singularitymacky the macky
  • Reply 19 of 32
    xbitxbit Posts: 303member
    JanNL said:

    - Are there border controls? Structural border controls are forbidden by EU law within the EU zone. Crossing the border with Belgium a few times a week for the past 15 years, never had a control... I even moved to Belgium years ago and it was only a formality.
    The UK has never been part of the Schengen zone. The UK has border controls with other EU nations and has the powers to deny EU citizens entry (e.g. criminals or those without realistic prospects for finding a job).
    - But there are also a lot of real HQ's, think about the City/financial centre in London.
    Unfortunately a lot of these large multinational finance organisations have signalled plans to leave London. Even Lloyds of London (est. 1686) is looking at moving away. :(
  • Reply 20 of 32
    I love when politicians claim businesses are illegally avoiding paying their fair share of taxes to these jurisdictions, when, in fact, their tax laws were written expressly to allow themselves, their rich buddies, and corporations to legally avoid paying taxes. 

    Tax havens exist because the laws of the jurisdictions allowed them. What can I say but governments seem to exist for only the purpose of enriching their leaders and their friends.

    What’s happening now is the shell game is changing, but the illusion will remain, with perhaps less favored entities required to defend their legal actions to make it seem those in power have the public interest as their chief concern.

    Nothing will come of this. Sound and fury constituting nothing. In most jurisdictions, ex post facto laws are illegal. These jurisdictions can pass new laws which collects taxes on new income, but they can’t reach back to collect taxes when the avoidance was legal when made. 
    williamlondonnetmage
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