“A crackdown on tax breaks for banks and tax avoidance by multinational firms will raise about £5bn over five years, Chancellor George Osborne has said. Rules allowing banks to offset losses made in the financial crisis against future profits will be tightened,” BBC News reports. “And a 25% tax is being imposed on ‘profits generated by multinationals from economic activity in the UK which they then artificially shift’ abroad. Banks will pay an extra £4bn in tax, and multinationals £1bn, he said.”
“Mr Osborne’s forecast that the measure would generate £4bn over five years carries a ‘very high uncertainty rating,’ according to the Office for Budget Responsibility (OBR), which publishes an independent assessment of government forecasts alongside the Autumn Statement,” The Beeb reports. “Multinational companies must pay their ‘fair share’ of tax, Mr Osborne said, adding: ‘My message is consistent and clear. Low taxes; but taxes that will be paid. This new Diverted Profits Tax will raise over £1bn over the next five years.’ However, BBC business editor Kamal Ahmed said the chancellor’s comments lack detail, and ‘an awful lot of work will have to be done on what exactly are diverted profits.'”
“The OBR also cast doubt on Mr Osborne’s assumption that the tax change would raise £1bn,” The Beeb reports. “Predicting how multinationals would respond is difficult. ‘The behaviour change is likely to be volatile and large due to the characteristics of the companies targeted by this measure,’ the OBR said.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Lynn Weiler” for the heads up.]
Cue George Harrison’s “Taxman”
“one, two..one, two, three, four…”
Hopefully this works in the UK and can be used as a basis for similar tax reform in the US. Multinationals are stealing way too much money from actual tax payers under the current US law. Our country isn’t broke, we just need to fix the corrupt tax system that lets multinational companies rob everyone else blind.
+1 gray shader well said.
They don’t “Rob” since they are following the law. I am always amazed on how misunderstood this topic is.
I have learnt that the best thing to fix a perceived problem is to search for the root cause and in this case the root cause is the corrupt political game allowed and the recent decision by the supreme court allowing a company to fund politicians as much as they wish (i.e. the CEO and the board would be able to buy the politicians and their advisors).
The real issue is the tax laws that provide loop holes for politician’s friends in the market.
There is the letter of the law and then there is the intent. Clearly, many companies have twisted and maneuvered to incredible extremes to minimize taxes while skirting the edges of the letter of the law or slipping through holes in the laws. While I appreciate the ingenuity involved in these machinations, the end result is not great. It unfairly unbalances the balance of taxation.
A key part of the solution, in my opinion is to eliminate business taxes and personal income taxes entirely in favor of a VAT. Taxing consumption (minus food staples) would also have the benefit of encouraging saving. In addition, there would be one tax rate to argue over and adjust to balance tax revenues with spending. If you preclude special tax breaks, then you would also weaken the power of the corporate lobbyists and other special interests.
A second part of the solution is for countries to negotiate how to handle multinational corporations. Again, I submit that the elimination of complex business taxes in favor of a VAT approach would help to eliminate these concerns. The VAT rates in various countries within an economic block and, eventually, worldwide, would tend to settle out fairly evenly over time.
First, robbing is a metaphor here: multinationals are not literally holding US tax payers at gunpoint and demanding they hand over wallets, jewelry, and other valuables. I’m call it “robbery” though because the end results are the same – money is taken unfairly from victims powerless to stop it. It’s not technically a real robbery, but it’s close enough to make it just as bad.
Second, following the letter of the law, while both violating the intent of the law AND and real human suffering caused by ones actions, is completely morally depraved. Just because something is legal doesn’t make it right. From slavery to genocides, history shows us repeatedly that the worst crimes of humanity were technically legal in their time and place because laws itself can be corrupted. Being complicit in corrupt system has no merit in of itself.
These multinationals are not simply innocent bystanders – they pay billions to lobbyists and politicians to write these laws, and they’ve reached a point now where they legally don’t have to pay taxes. It’s like they’ve committed a crime, right after they changed the laws on that crime so just so they can get away with it. It’s a completely corrupted system, and every US tax payer is the victim of it.
So the big companies have big lawyers and clever accountants who will figure out how to shift this to other more forgiving countries or offshore haven entities and the UK will end up with even less than before. Isn’t that usually how this goes – being more than one way to skin a tax cat? You can bet the reaction will be “volatile.”
yeah, the queen needs a new pair of shoes.
Botty, don’t be a fuckwit your entire life.
This is about businesses like Starbucks who don’t pay a penny in tax in the UK because they’ve cleverly set their business up to not make any profit. Their coffee is imported into one country in Europe, exported to another where it’s ground, then exported to the UK at an even higher price, all carefully configured to not make any money.
Google do the same, by having no administrative office in the UK.
This has fuck-all to do with our head-of-state.
Well, the English peoples might consider some of their more frivolous expenses and budget themselves accordingly..you wanna pay for royalty, fine. I do not care. We got rid of the parasites in late 1700’s.
In the UK..
Starbucks employs more than 8,500 people across the country – and many, many more through our licensee partners
Over the next five years, we are committed to creating an additional 5,000 new jobs in the UK by opening 300 new stores and growing our business
We recently increased our commitment to our apprenticeships scheme, offering new places to 1000 young people over the next 2 years
We proudly spend hundreds of millions of pounds every year with a number of local businesses – from farmers to sandwich and cake makers to shop fitters, and countless others in between.
fuckwit.
how many coffee shops that employ Limeys is Queen Lizard II opening, fuckwit?
Soundbite politics – pure and simple.
The tax havens like luxemburg and Ireland are going to fight this on behalf of those who divert their tax for a small percentage of a very big sum.
As part of the EU the UK has little power over its own tax policy for multinationals because its supposed to be a market without internal borders- this is never going to happen before the Election in May 15 so they can promise the world , and if they get back in power, blame the EU when they are told hat they are not allowed to double tax companies.
The politicians are starting to have to drink second-tier champagnes and whiskys at their get-togethers. They definitely need this additional money.
Politicians are idiots. They somehow think that by passing a new law, like the Diverted Profits Tax, they can get more money out of big corporations. Wake up government dolts, you are simply outgunned. The corporations pay lots of high-powered tax accountants and tax attorneys to insure they pay the lowest possible taxes and these hired guns are a lot smarter than 99% of the folks in government.
This is a sad state of affairs, but it is reality.
Apple’s market cap is approx. 1/4 the GDP of the UK… kind of apples to oranges, but… Apple’s “output” (as measured by market cap) is up 50% for the year while UK GDP is up only 3%.
You can’t really blame a sovereign nation for wanting some easy money. But the reaction from Apple might not be to bend over.
Regulators. Do nothing want more money
This is largely posturing to get the public to think they are actually doing something.
But we know better.
“Pay their fair share”, that comment is such BS. Why, when a company or individual pays exactly what the law requires they then are paying their fair share.
The law allows the off shoring of money giving companies the ability to lower their taxes. An important point is the officers of a company have a fiduciary duty to do all they can keeping expenses down. That includes all legitimate use of tax avoidance are acceptable.
The issue here is not the companies in question practices, it is the tax laws companies are bound to uphold and follow. If you do not like the way the companies are behaving then change the laws they must follow.
For all you folks saying loopholes are helpful for companies remember as a private citizen we have them as well. The list is quite huge actually and not only for the rich. Each time we pay our taxes we hope to find as many deductions as possible. Our obligation to our family is not to overpay, to keep as much money for us as possible.
Right. But in the EU the laws are written in Brussels not Westminster and therefore the UK needs to get 26 other countries to agree – including the ones currently benefitting from offshoring – so there is little chance of catching any of the big fish
“I do say…” (fogs monocle with breath, polishes with kerchief) “these Apple chaps do appeeyah to be gawthering a fair pence, and as those Yanks ah so given to dooo, seem quite intent on ignawing the propah tribute! Dare say!”
Political nonsense …. A general election in the UK in May 2015 is the reason, nothing more or less; large multinationals have the politicians in their pockets
Any gov’t has the ability to change the tax laws. Let’s see if they really do. As Scooter Mike said above it could be just posturing for votes ahead of the election next year.
Corporations pay ZERO taxes…. Individuals pay the taxes….
As a right leaning Canadian citizen, I want to lower my taxes by 50%.
That’s not going to happen either.