back to article Margaret Hodge, PAC are scaring off new biz: Treasury source

The UK's Treasury Department is said to be ticked off by the Public Accounts Committee and its vocal chair MP Margaret Hodge for scaring companies off Blighty with their investigations into multinationals' corporation taxes. Sources in the department told the BBC and the Daily Mail that senior ministers had been warned by …

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  1. Crisp

    Margaret Hodge says that like it's a bad thing

    Do we really want multinational companies taking advantage of our infrastructure without contributing to its upkeep?

    1. ratfox

      "without contributing to its upkeep"

      That is unfair. I think you'll find they do contribute by providing jobs, which contributes not only to tax revenue but also to the economy.

      1. Pen-y-gors

        Re: "without contributing to its upkeep"

        they do contribute by providing jobs, which contributes not only to tax revenue but also to the economy.

        As do thousands of small, medium and large UK businesses who also provide jobs, but also somehow manage to pay a fair share of corporation tax without going broke.

        The big companies may be legal but only through incredibly contrived and convoluted arrangements that are dreamt up by regiments of highly paid consultants. The government need to massively simplify the tax legislation so there are far fewer loopholes to exploit.

        1. bigtimehustler

          Re: "without contributing to its upkeep"

          Yes, in this country, but those large UK companies are using the same methods to get away with tax abroad.

        2. Daniel Johnson

          Re: "without contributing to its upkeep"

          UK companies do it too. For example, Tescos, Top Shop, and, hilariously, The Guardian newspaper.

        3. Alan 19

          Re: "without contributing to its upkeep"

          A dozen years ago there was a mad rush for sole traders to become owner/managers of limited companies. The accountancy profession should hang its head in shame as it contrived tax-saving schemes to push even a modest painter/ decorator nearing retirement, into become a Ltd. Co.

          Owner/ManageXXXX Managing Directors could then (a) shield their personal assets from potential liabilities and more importantly (b) draw lump sums as dividends that are PAYE/ NI free. Sure they pay a bit of Corporation Tax on profits, so then G Brown & Co tweaked the rates to ensure they paid what he called 'the right amount of tax' whatever that is.

          There remains the matter of simple tax-free dividends being used for tax-efficient reasons (not something I have a problem with, personally, as it's legal), so if Hodge is gunning for MNCs for tax efficiency then she had better shut down every owner-managed Ltd company at the same time.

          Nowhere does it say that you have to arrange your tax affairs to pay the maximum possible, and exactly the same legal tax code is used against people to extract every last penny of tax from them legitimately. Hodge can't complain when the reverse is true, organising one's affairs on a complex global scale to shelter tax, all within the law.

          Fact is, the world is much smaller and smarter than it was, corporate tax lawyers are many steps ahead of Governments and there will always be a way of sheltering profits to minimise tax. Change the laws, that's all they have to do.

      2. Anonymous Coward
        Anonymous Coward

        Re: "without contributing to its upkeep"

        " I think you'll find they do contribute by providing jobs"

        And business rates. In broad brush terms a third of corporate taxes come from each of corporation tax, employer's NI, and from rates. The proportion raised by corporation tax declines still further if you choose to take the view that the employees' taxes are only created by virtue of the company's existence and activity. You could water that down further by including VAT, but I think that would still accrue from other spending choices if (say) Amazon weren't in business.

        As ever, the problem is one of arsehole MPs doing some grandstanding for a bit of cheap publicity, when they are the root cause ot the problem (if one even exists). What Podge is forever whining on about can be summed up as "Big clever companies are adhering to the laws my party made, and the 1,000 odd pages of the companies act we rubber stamped without reading, and in doing so they're not paying what I think they ought to".

      3. PJI

        Re: "without contributing to its upkeep"

        >>That is unfair. I think you'll find they do contribute by providing jobs, which contributes not only to tax revenue but also to the economy.

        Interesting justification: so all companies should pay no tax provided they employ at least one tax-paying person. Hmm. So, can I avoid tax if I employ a cleaner or a plumber who does pay tax? How many employees are needed to pay enough tax to pay for the stable, rule-of-law society, its education, health, transport system and so on that the "multi-national" finds so attractive?

        Do you really, honestly believe that some parasite like Starbucks makes no profit and still runs a business in GB? So they are a lovely charity? Wonderful how Amazon takes all those pounds for goods without earning any money in GB. Wonder if I can try that on the Inland Revenue - yes, I know some pounds get into my bank account from a British bank account; but really, I make no money from GB, so why are you asking me for tax?

        Next you will tell us that the overpaid "leaders" of these firms are underpaid and can barely afford the polish on the chauffeur's shoes, working purely for love.

        Sorry, I do not find the unbridled free market, apparently available only to "multi-national", mainly USA firms is good for the host countries whose population and environment are fleeced by them, just so the government, elected and paid by the population, can enjoy sponsored freebies and retirement consultancies.

        1. Anonymous Coward
          Anonymous Coward

          Re: "without contributing to its upkeep"

          > Interesting justification: so all companies should pay no tax provided they employ at least one tax-paying person.

          I find this position rather puzzling.

          Tax is paid on all movement of money both in and out of companies already. Corporation tax is a double dipping tax anyway.

          VAT is paid on most things that the company sells.

          Tax is payable on share dividends.

          Income tax is paid on pay being given to employees and board members.

          To suggest that the money flowing through companies is not taxed to the hilt already is rather absurd, which is why I am mystified at the hysteria surrounding corporation tax.

          The governments of all the western nations tax to an extraordinary level already. My wife showed me her pay slip for the month the other day and almost half was extracted for one due or another. It's a wonder that the average joe can even survive even with a fairly well paid job these days.

          1. Anonymous Coward
            Anonymous Coward

            Re: "without contributing to its upkeep"

            If you think our taxes are high then look at the cost of health insurance and treatment in the USA. You'll soon realise what we have is a bargain in comparison.

            1. Anonymous Coward
              Anonymous Coward

              Re: "without contributing to its upkeep"

              > If you think our taxes are high then look at the cost of health insurance and treatment in the USA. You'll soon realise what we have is a bargain in comparison.

              Which is why they are in such a big load of debt shit at the moment.

              One of the main reasons that we experience such a high cost of living these days is due to high taxation.

              That we tolerate it to the extent that we do is because in recent history we have not known different.

              In the UK, we have an NHS which most people love and appreciate and despite what some ignoramuses declare, it is one of the most efficient implementations to date; far better than that abortion they call a health service in the US.

              After that though, a large part of government expenditure is overseas aid, that black hole of Calcutta that we call the EU (which we learn today is a hotbed of corruption for those that haven't been paying attention) and the benefit system. Far too much money is sucked up and pissed out. We need smaller, leaner government and more money in our bank accounts. That's how you get an economy going again.

      4. Chad H.

        Re: "without contributing to its upkeep"

        Low paid jobs that we then subsidise more in tax credits than we get in revenue?

      5. Anonymous Coward
        Anonymous Coward

        Re: "without contributing to its upkeep"

        Oh big deal, they have to pay a tax that can't be dodged. The employee loses out since their income tax has to be higher to make up for the corporation tax that is not paid.

      6. Richard Cranium

        Re: "without contributing to its upkeep"

        If Starbucks need not pay a fair share of corporation tax on UK generated profits because "they create jiobs" then why should the small business cafe owner pay his share? And of the jobs the multinationals are providing, a large percentage are at or near statutory minimum wage so generate little contribution from tax and NI.

        Any business that wants to come here to trade on equal terms with local entrepreneurs is welcome, those who just want to exploit our system and workers is basically asset stripping the UK economy and they can go hang.

    2. Amorous Cowherder
      Facepalm

      Re: Margaret Hodge says that like it's a bad thing

      "public humiliation companies like Amazon, Google and Starbucks were put through."

      Yeah but it had already been proved they were on the cadge, so therefore they got called up to explain why. If you do the right thing, no one will have any reason to ask you to visit the Headmaster's office!

  2. mhoulden
    Meh

    Nothing to hide, nothing to fear? I'd be very interested to know which companies have said "We would like to come to the UK, but that nasty Mrs Hodge might make us look silly." I have a feeling they could be counted on the fingers of one foot.

  3. K

    The staff at the Treasury et-al should grow a pair..

    Its a scare tactics...At the end of the day a companies number 1 priority is to create profit, which also includes reducing tax overheads, they will do this by any "legal" means necessary include sabre-rattling and making threats.

    It doesn't matter where a companies HQ is based, as long as they pay fair Tax. Its a very self obsessed company who withdraws from a market simply because they don't get their own way.. and to be honest, we're better off without them.

    1. Yet Another Anonymous coward Silver badge

      Re: The staff at the Treasury et-al should grow a pair..

      I thought all the companies had been scared off from the UK by the equal pay act, the minimum wage, maternity leave, health and safety, banning chimney sweeps, the abolition of slavery.

      Everytime there is a law to improve the rights/pay/healthy+safety of workers for the last 200 years - the Tories have claimed it will drive companies away and destroy jobs.

      1. Peter2 Silver badge

        Re: The staff at the Treasury et-al should grow a pair..

        Our local ASDA has slowly been replacing their checkout people with self service lanes supervised by a single person over the years.

        One has to suspect that closing down half a dozen human operated checkouts has reduced the number of staff proportionally, and presumably this has meant they are employing less people so I think it is fair to say that the minimum wage has destroyed jobs. IT in general is also a huge job killer, I think that most people reading this have probably automated jobs out of existence, I have done; by automating data capture the associated data entry jobs no longer need humans.

        As the cost of the staff goes up, the benefits of automation goes up with it and when implemented automation means that there are the fewer people needed to do the job. Already, many companies have realised productivity gains (and employment reductions) of around 100% compared to the systems used a decade or so ago. This is not going to have a pretty social impact in the long term and is probably something that should be addressed by politics. It won't get addressed until there is mass unemployment among graduates who happen to be party members of one of the major political parties.

        I say that because we already have mass unemployment on a scale I suspect was last seen in the industrial revolution.

        On the main subject, I don't see the problem. The market is only so big and if a multinational won't pay tax in the UK then honestly I don't think it's any great loss if they don't come to the UK. A UK company can do the business and honestly I think that we are better off without businesses not paying tax because businesses evading tax means that the companies not evading tax are at a competitive disadvantage.

        1. K

          Re: The staff at the Treasury et-al should grow a pair..

          My g/f is a manager at ASDA, yes they are adding more of these self-service checkouts, but its mainly about foot print rather than staffing levels. In fact staffing numbers have drastically increased in recent year, this is due to most stores now operating home delivery, and click to collect etc. (Which require large numbers of pickers and delivery drivers).

  4. JimmyPage Silver badge
    WTF?

    How on earth can this happen ...

    I actually feel well-disposed towards Ms Hodge !

    One of the few bastions of democracy the UK has left - the ability of parliament* (in the form of select committees) to force people, companies, institutions - and occasionally countries - to account. In public.

    Instead of whinging, companies should trumpet their engagement with such a process. Oh, and not do anything to be embarrassed about ....

    *That's an elected parliament.

    1. Natalie Gritpants

      Re: How on earth can this happen ...

      Except she has crossed the line and lost credibility. Accusing Google of being evil is ridiculous. Accusing others of immoral behaviour shows she is grandstanding as tax is not a moral issue.

      1. Anonymous Coward
        Anonymous Coward

        Re: How on earth can this happen ...

        Google brought that on themselves by trumpeting their ridiculous corporate slogan around the place, like they're still two guys working out of a garage, while behaving in various pretty unpleasant ways. If you're going to have a corporate slogan like that, expect it to be rubbed in your face at every chance.

        What would have been crossing the line is accusing a company who didn't have such a corporate slogan of "evil".

    2. Chris Miller

      Re: How on earth can this happen ...

      I actually feel well-disposed towards Ms Hodge!

      You might want to look into the tax affairs of her family company, before falling too deeply in love.

      1. Merchman

        Re: How on earth can this happen ...

        You mean the baseless accusations that the Telegraph have already had to apologise to Margaret Hodge over this story:

        An item posted on the Telegraph website last night said: ‘Margaret Hodge MP – Contrary to our report “Hodge faces challenge over family firm’s taxes” (Nov 20), Stemcor, in which Ms Hodge has a small shareholding, has not abused transfer pricing to avoid tax. We accept that there is no inconsistency or hypocrisy in Ms Hodge criticising other companies for tax avoidance and apologise to her for any contrary impression.’

        http://www.taxjournal.com/tj/articles/telegraph-apologises-margaret-hodge-over-stemcor%E2%80%99s-tax-affairs-13122012

    3. Anonymous Coward
      Anonymous Coward

      Re: How on earth can this happen ...

      One of the few bastions of democracy the UK has left - the ability of parliament* (in the form of select committees) to force people, companies, institutions - and occasionally countries - to account. In public.

      Whereas I see a body intent on damaging Britain by using ridiculous arguments about 'moral duty'. As far as I know tax has never been a 'moral duty' only a legal one. So having MPs make out that companies which comply with the laws are 'evil' isn't on, and can only be about damaging investment into the UK. After all it's the MPs who set the legal rules about what taxes must be paid, so they of all people know it has nothing to do with 'moral duty'. Ergo their attempts to publicly humiliate companies who comply with the laws they make, must have a purpose which isn't actually about raising tax income levels.

      1. sabroni Silver badge

        Re: and can only be about damaging investment into the UK.

        You sound paranoid and delusional, you really think this is about frightening off investors? You genuinely believe that Amazon and Google will pass up on millions of pounds of profits because Margaret Hodge was mean to them? Bizarre.....

        1. John Smith 19 Gold badge
          Meh

          Re: and can only be about damaging investment into the UK.

          "You genuinely believe that Amazon and Google will pass up on millions of pounds of profits "

          In the UK I think you'll find that's billions of £ of profits.

    4. Anonymous Coward
      Facepalm

      Re: How on earth can this happen ...

      > One of the few bastions of democracy the UK has left - the ability of parliament* (in the form of select committees) to force people, companies, institutions - and occasionally countries - to account. In public.

      Erm, I think that you'll find that's what the laws and courts are for.

      The government should not be targeting specific companies or individuals under any circumstances. That is an abuse of power and a sign of a corrupt government.

      If the government of the day feels that there is a social injustice, the proper means is to change the law and let the courts sort out the details. The reason why we have an independent judiciary is to stop just this kind of thing.

  5. Anonymous Coward
    Anonymous Coward

    Bollards!

    The idea that multinatinals will move their European HQs here, instead of Ireland or Luxembourg, is absolute twaddle.

    1. Anonymous Coward
      Anonymous Coward

      Re: Bollards!

      IMO, Luxembourg has to leave the EU - or at least, exit the EEA.

  6. Anonymous Coward
    Anonymous Coward

    Margaret Hodge is wrong!

    The Google motto is not "Do no evil".

    It is "Don't be evil".

  7. Mark #255

    The Bible in a tweet

    OK, here goes:

    "Creation myths, rules and stories which we say are from our God"

    1. HarshKarma

      Re: The Bible in a tweet

      "Creation myths, rules and stories which we say are from our God"

      How about:

      "The Bible: A fictitious document declaring love for all but ultimately used as an excuse to start wars"

  8. Warm Braw

    How about...

    ... taxing companies on the business they do in the country rather than on where their fictional HQ happens to be?

    Every other option is going to be riddled with loopholes and unnecessary enforcement costs and result in relocation blackmail.

    1. Pen-y-gors

      Re: How about...

      I agree, but t's not quite that simple. You have to allow companies to offset legitimate expenses against income, and that opens the loopholes. Salaries - obviously okay. Materials purchased to make the product - okay again. Software licences e.g. Windows desktops? Yep. How about using software and computer services at a 'partner company' overseas? Reasonable, but who sets the charges? Ditto with intellectual and trademark rights - who decides how much Starbucks UK pays to use the Starbucks name?

      1. Anonymous Coward
        Anonymous Coward

        Re: How about...

        You have to allow companies to offset legitimate expenses against income ... Materials purchased to make the product

        Yes, but what Starbucks do is totally artificial. The UK operation buys ridiculously expensive coffee beans from the Swiss operation, since that means they can offset that against UK tax and pay virtually nothing in Switzerland (not a country noted for its coffee plantations).

        As for paying to use the Starbucks name, what the f*ck? Starbucks UK is not a franchise, so any payment for using the name is another artificial tax dodge to offset against profits.

        1. Anonymous Coward
          Anonymous Coward

          Re: How about...

          > Yes, but what Starbucks do is totally artificial.

          Well that entirely your opinion though.

          On what legal grounds do you assert this?

          > Starbucks UK is not a franchise, so any payment for using the name is another artificial tax dodge to offset against profits.

          One man's tax dodge is another man's tax efficiency. Your righteous indignation is colouring your perception. In virtually any other field we applaud people for doing clever things for the purposes of efficiency....unless they are business people, where we apparently call them crooks.

          1. Anonymous Coward
            Anonymous Coward

            Re: How about...

            It's bull crap.

            They make the UK operations lease the brand from the tax haven as a way of moving the money to the tax haven.

            Does it really cost millions to rent your own company brand?

        2. Tim Worstal

          Re: How about...

          "The UK operation buys ridiculously expensive coffee beans from the Swiss operation"

          Hmm. 20% above cost actually. And the cost of beans is a terribly minor one for a coffee shop. Even when you add this 20% back in it doesn't make Starbucks UK make a profit.

          And there should be some margin paid to the Swiss trading operation, shouldn't there? They are buying the coffee for all Starbucks across Europe. It is right that there should be a margin on such work? Y/N?

          "As for paying to use the Starbucks name, what the f*ck? Starbucks UK is not a franchise,"

          Starbucks does have franchises though. And they are charged the same rate that Starbucks UK is charged. And there is a value to being able to use the name, no? We would expect a shop called Starbucks to attract more custom than one called Fred's?

          It's also worth noting that EU law actually bans the UK from charging tax on royalty streams going to another company based in the EU. Actually bans it. What's more, HMRC did have a look at the royalty rate and Starbucks lowered it (from 6% or so to 4.5% or so from memory). So it really has been looked at and everyone agrees that the practice is, at least now, just peachy.

          Finally, even if you add all of these supposed dodges back in Starbucks UK *still* wasn't making a profit. We've even had Vince Cable stating this (as well as FT Alphaville and a number of accountants of my acquaintance).

          1. PJI

            Re: How about...

            No profit? But still expanding and not closing this loss making market? Are they a charity?

            How gullible are you?

          2. Anonymous Coward
            Anonymous Coward

            Re: How about...

            OK Mr Worstal and others, try this for size:

            Starbucks corporate officially tells their shareholders that Starbucks UK makes plenty of money and therefore the UK expansion will continue to be funded. Check it out, it's on their official records, stuff like this has to be.

            Starbucks UK HQ tells HMG UK that they don't make much money therefore don't pay much tax. Check it out. it's on the House of Commons records, stuff like this has to be.

            Spot the inconsistency?

            NB it's very very bad form for a US company to lie to its shareholders.

            1. Squander Two

              Re: How about...

              You're conflating revenues with profits. Which, ultimately, is what nearly all the outrage over Amazon et al has boiled down to.

      2. dajames
        Windows

        Re: How about...

        ...who decides how much Starbucks UK pays to use the Starbucks name?

        I would have thought that Starbucks UK should be demanding compensation from the parent company for having to trade under a name that is synonymous around the world with watery, bitter, unpleasant beveages bearing little or no resemblance to coffee!

        Jus de chaussette as the Belgians call it.

        The guy in the icon probably enjoys his drink more!

    2. Natalie Gritpants

      Re: How about...

      We already do that. It's called VAT.

      1. Warm Braw

        Re: How about...

        >We already do that. It's called VAT

        Not quite.

        VAT is charged once the nominal price of the goods or service has been established and only really affects non-business consumers.

        A VAT-like tax applied on total business receipts rather than its individual transactions would encourage suppliers to trade margin for more competitive prices, particularly in the B2B market. Otherwise, as you rightly imply, you'd end up taxing the consumer rather than the supplier.

        And no, you don't *have* to make allowances for "legitimate expenses" - employers' NI, rates (and indeed income tax) don't have such a provision, they're just a cost of doing business (or of existing).

  9. Anonymous Coward
    Anonymous Coward

    Hodge told Google that it was "immoral"

    Does anyone else here have to choke back a little bit of mouth vomit when they hear a politician get sanctimonious about morality, or is it just me?

    (Message to politicians, if you don't like the results do your jobs and change the tax rules).

    1. PJI

      Re: Hodge told Google that it was "immoral"

      We, including you I presume, choose and elect them. We have full access via their MP surgeries, letters, email and the next election. I suggest you stop voting for them because of their party membership and start voting for the individual.

      Be grateful for those who have the nous to question and push, even for UKIP (much as I abhor their isolationism and ignorance).

      1. Anonymous Coward
        Anonymous Coward

        @PJI

        You misunderstood my comment, It's the thought of POLITICIANS criticising morals that pisses me off, they are all scum to me.

        I'm all in favour of sticking it to the large US companies, but a few has been Pols whining about rules THEY set up isn't a solution.

    2. P0l0nium

      Re: Hodge told Google that it was "immoral"

      Too right! ... the "Businessmen" should agree on a stock response as follows:

      You (Hodge et all) are the "Lawmakers" ...

      If you don't like what we're doing then MAKE SOME NEW LAWS!

      And then speak about how if they don't minimise their tax bill they're not doing their duty to their shareholders and they're at a competitive disadvantage to their competitors.

      And then get up and leave!!

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