Corporation tax, the media and the public.

[SpeedFreak]

After listening to 5Live this morning and hearing Thomson having to justify their tax position I am a little bemused as to why the media have such difficulty in clarifying retained losses.

I concede that taxation is complex but I though that most people understood that you can carry forward losses to offset the tax liability incurred by future profit.

Is this purely down to the media trying to fire up the mob along with the public being too stupid to understand a basic concept?

In the Independent yesterday a similar article in relation to football clubs made the same point. An MP was also commenting about the wrongs of the situation in the article. Personally I'm a bit fed up with legitimate business practices being painted as if they are "morally" wrong when they are just plain sensible.

 

[Morba]

Its the media being stupid and trying to show up companies in front of the general masses who have no idea about this thing.

Most of what is going on is legal, the media make it out to be illegal to stir **** as normal.

 

[Russinating]

Is this purely down to the media trying to fire up the mob along with the public being too stupid to understand a basic concept?

Yes. No blonde children have gone missing for a while, what else are they supposed to write about?

99% of people, although complaining as a member of the public, would do the exact same thing as Starbucks/Carr etc to save paying as much tax as possible if they were in their situation.

 

[scorza]

I dunno, there's a lot of people who need educating about aggressive tax avoidance, why it's a bad thing and what needs to change. Too many people for example still repeat the tired old line of "if it's legal, it's fine" without understanding the complexities of tax collection. Haven't heard about the Thomson case however.

 

[SB118]

I still don't get how football teams can run up unpaid tax bill of millions of pounds and nothing happens.

 

[SpeedFreak]

Thomson isn't even a case really. It was simply that they have around £390m in profits and no tax paid in the year due to carried forward losses.

Certainly I'd like to see illegitimate transfer pricing and licensing fees reviewed but normal and more importantly fair practices should be protected.

 

[doofer]

As Tax avoidance is a moral issue rather than a legal issue I'm surprised the Church hasn't spoken out about it...oh wait.

 

[estebanrey]

Its the media being stupid and trying to show up companies in front of the general masses who have no idea about this thing.

Most of what is going on is legal, the media make it out to be illegal to stir **** as normal.

Yes. No blonde children have gone missing for a while, what else are they supposed to write about?

99% of people, although complaining as a member of the public, would do the exact same thing as Starbucks/Carr etc to save paying as much tax as possible if they were in their situation.

I don't think you quote agrees with the one above it exactly. Morba was talking about this Thompson case, which by the sounds of it is something out of nothing. It is legitimate and purposely encouraged that companies can offset losses against future profit, that rules ties in with the spirit of the tax.

What Jimmy Carr and Starbucks did though aren’t the same. They are/were setting up highly convoluted systems for the sole purpose of avoiding tax and not using any of those systems for the ultimate intention they exist for.

There’s the following of the tax rules as they are intended so you don’t over pay like with Thompsons and then there’s circumventing the rules to pay as little as possible like with other companies. Both are legal but the latter is immoral in my book.

 

[Russinating]

Almost all tax avoidance uses systems in a way that wasn't their ultimate intention though.

Shares don't exist to avoid tax, but I get paid in dividends so I pay less national insurance. It's not exactly complex, but why wouldn't I do that? It's one of the benefits of working for yourself.

All I'm saying is I would do what Jimmy Carr did, and I still would do it until made illegal. And if 99% of people sat down with their account and were told they could save £100,000 in tax, I'm sure most people would say yes as well.

 

[csmager]

Shares don't exist to avoid tax, but I get paid in dividends so I pay less national insurance. It's not exactly complex, but why wouldn't I do that? It's one of the benefits of working for yourself.

Swings and roundabouts. You avoid national insurance, but your dividend income is part of company profits that have already been subject to corporation tax at over 20%. Not much different to EE+ER NI.

 

[Von Smallhausen]

Exactly right Russ. Many if not all of those complaining about it wouldn't pay a penny more in tax than legally required.

 

[estebanrey]

Almost all tax avoidance uses systems in a way that wasn't their ultimate intention though.

I disagree. The Thompson example in the OP sounds like a company using the rules exactly as they were intended.

A simple example, someone buying their duty free allowance when coming back from holiday is again using a tax avoidance measure in the way it was intended (assuming they are for personal use of course ).

Shares don't exist to avoid tax, but I get paid in dividends so I pay less national insurance. It's not exactly complex, but why wouldn't I do that? It's one of the benefits of working for yourself.

Shares have a purpose, it sounds like you are using them for a different purpose (to avoid paying income tax) which in my book is immoral.

Legality and morality are mutually exclusive in my book, the excuse 'well it's legal' doesn't make it acceptable. Farting in a crowded lift isn't illegal afterall.

All I'm saying is I would do what Jimmy Carr did, and I still would do it until made illegal. And if 99% of people sat down with their account and were told they could save £100,000 in tax, I'm sure most people would say yes as well.

Well I wouldn't. I'm grounded enough to know that if I was earning millions a pounds a year (as Carr does), paying my fair share in tax wouldn't bother me.

I don't agree with your 99% figure. There are plenty of philanthropists out there who give away their money so I don't agree that we are all hard wired to be selfish money grabbers that sees our bank account balance as some kind of scoreboard.

 

[antijoke]

I find it hilarious how MP's are saying they will be going after companies for not paying enough tax.

I think someone needs to remind that lot about the expenses scandal.

 

[shine]

Shares have a purpose, it sounds like you are using them for a different purpose (to avoid paying income tax) which in my book is immoral.

It's not as straightforward as that. He'll be paying himself a salary on which he pays all applicable taxes. As he is self employed he takes his profit via dividends on which he pays a different tax. Dividends isn't a magically get out of tax scheme. But it does allow him a flexible way of rewarding himself when he does well in business.

 

[SpeedFreak]

http://www.bbc.co.uk/programmes/b01p444v

From 1:44

 

[FARGO]

Surely the fair share you should pay is the legal minimum? Of course, feel free to pay more than the law requires if you wish.

 

[estebanrey]

It's not as straightforward as that. He'll be paying himself a salary on which he pays all applicable taxes. As he is self employed he takes his profit via dividends on which he pays a different tax. Dividends isn't a magically get out of tax scheme. But it does allow him a flexible way of rewarding himself when he does well in business.

I never claimed it was a 'magically way of getting out of paying any tax'. I'd bet the tax of dividends is lower than it is on a large salary though.

 

[shine]

As the amount of dividends rises so does the tax - if you actually looked into you'll be surprised on the difference.

 

[csmager]

As the amount of dividends rises so does the tax - if you actually looked into you'll be surprised on the difference.

Effective rate for 40% payers is 25%, and 36.11% for 50% payers.

This is on top of the double taxation caused by the profits having been subject to corporation tax of > 20%.

You can use a combination of dividends and salary to get the most tax efficient remuneration, but the difference between the end result to the exchequer on the two aren't that dissimilar.

 

[shine]

You can use a combination of dividends and salary to get the most tax efficient remuneration, but the difference between the end result to the exchequer on the two aren't that dissimilar.

This is something most people don't realise. It's why I actually closed down my business earlier this year and returned to normal employment - I wasn't making enough for it to be worth the risk of potentially being out of work for half the year - another point that is forgotten by those who assume anything other than PAYE is automatically evil.