Great post by seriously red until the phrase 'exciting shopping mall environment', whenever I go to Bluewater, or Bromley, or up town I hate it after about 20 minutes. Not in the least bit exciting for me, simply depressing.
HMRC is not fit for purpose. A lot of people use it as a stepping stone to go into tax and regulation in the private sector, where they are paid so, so much more.
If you pay peanuts, you get monkeys.
When it comes to regulation and taxation, whether you like it or not, in a global economy you need a harmonisation of standards to stop a company funneling billions of pounds through a hairdresser above a corner shop in Luxembourg.
Although the current head of the EU is a bit rich, trying to crackdown on tax in Europe when he was leader of Luxembourg and helped it become a tax haven.
Quite right. Excellent example, the HMRC boss who let Vodafone off £6.75 billion, now works for Deloitte, one of whose clients is Starbucks.
Nothing illegal. but to me it stinks. What we need to do is increase the salaries - and capabilities - of top people in HMRC so that they can be recruited from the likes of Deloitte, not nicked by them. We could partly pay for this by reducing the number of useless little people at HMRC who pursue a million people for £300 each in arrears. (see my post above)
As for the PM of Luxembourg, again quite right, but he is now under a lot of pressure. If the EU didn't exist then each country could do what it likes. As it is, not just Luxembourg but also Ireland and the Netherlands have some questions to answer.
Don't understand the concept of tax reduction as a race to the bottom. Seeing tax reduction as a race to the bottom, when it would in fact be a race to reduce State control over expenditure, is mixing up different issues. We need to be clear what we are trying to achieve. Creating more wealth for re-distribution under the current system or increasing tax revenue regardless of impact on GDP. Increasing tax on ideological grounds that reduces GDP is a race to the bottom.
Tax is merely the process by which private wealth is taken away by the State to spend as the State decides rather than individuals. It has nothing to do with creating wealth, it can only re-distribute what wealth creators create, HMRC is not a wealth creator, the State is not a wealth creator regardless of how much it taxes people or corporates.
Corporates are just legal entities that distribute wealth to individuals. So why have income tax and corporate tax at different rates. If you had one simple tax rate system on individuals and corporates we wouldn't have so many corporates set up, which apart from legal liability issues, are mainly set up to benefit from the ability to reduce the tax levied on the way out. The loopholes in corporate tax are caused by easements intended to cater for "unfairness" if applied to transactions they were not intended to catch. Why not just make the whole system fair for everyone and no need for easements which are the pathway to loopholes.
The HMRC definition of avoidance is laughable. How can Parliament have designed legislation which has considered every conceivable variant of a commercial transaction and it's impact on changing accounting laws throughout the World. It's an impossible system to manage, it has too little precision and too much subjectivity in interpretation in trying to reflect political ideology. Where does parliament define a "fair" tax that everyone is screaming corporates should pay?
I stick by my suggested solution of a turnover tax rather than a tax on profits. Thus for every £1 of sales amazon/starbucks etc have TO UK CUSTOMERS, they are charged say 1% in turnover tax which can be offset against their UK corpration tax liability, if any. Thus it makes no difference where their company is registered, it's a cost of making sales in the UK. I don't see how this cannot be easily implemented and enforced, say for all businesses with a turnover in excess of £100m.
I stick by my suggested solution of a turnover tax rather than a tax on profits. Thus for every £1 of sales amazon/starbucks etc have TO UK CUSTOMERS, they are charged say 1% in turnover tax which can be offset against their UK corpration tax liability, if any. Thus it makes no difference where their company is registered, it's a cost of making sales in the UK. I don't see how this cannot be easily implemented and enforced, say for all businesses with a turnover in excess of £100m.
This might be a stupid question but what about companies that have the required turnover but still make a loss?
We already have a turnover tax - it's called VAT and was very effective until the Internet went mainstream. If my company makes a loss I still have to pay VAT liabilities every quarter as it is collecting VAT on every invoice on behalf of the exchequer. I've had a variety of people advising me to go offshore and I've told them where to get off.
I'm not a lawyer let alone a tax lawyer but perhaps someone can explain why if a purchase is made in my house, that an entity can divert that transaction to Luxembourg to charge only 3%?
Solutions might include an EU wide interpretation of consumer Internet contracts and purchases, a minimum or standard EU wide vat rate or even (just to send len glover over the edge) an EU wide sales tax.
One would have to know a lot more about how US federal and state taxes work to explore this but my point is simple: the population of the five big EU economies (Germany, UK, France, Italy and Spain) are consuming a lot of goodies through the web and in shopping malls, football stadia etc. Our future lies in finding equitable solutions and not simply pointing the finger of blame.
Difference between VAT and a true turnover tax is that the turnover tax is treated as a kind of advance payment against CT. You can argue that VAT is actually paid by the consumer and not by the business, which also reclaims the VAT they have paid to their own suppliers. (I know you know this, but everyone might not). The idea behind the turnover tax is to level the playing field between resident businesses who pay CT and non-resident businesses who do not. VAT treatment is generally the same for both, but the turnover tax mitigates the advantage of those such as Google pretending to be in Dublin, or those such as Starbuck who artificially depress their profits by paying royalties or inflated goods prices to offshore companies holding their IP. If Google as stated elsewhere are going to have £3bn of UK advertising sales in 2015 (and that number seems low to me) then there's £30m right off. And why not 2% instead of 1? £60m.
It's a while since I worked for an international group, but I am pretty sure France already has such a thing in place, and for much lower turnover figures than the one I suggest. I remember having to deal with it when I was at Kelkoo.
I always thought the difficulty the government has re: corporation tax is balancing attracting companies for job creation vs money for the public purse. Notably it's become more of an issue recently given how companies like google are utilising the legislation to pay less etc. I just think it's another example of those in big business yielding unaccountable power.
My mrs is soon to be leaving WPP, Sorrell's group. They were one of the companies that moved their company registration to Ireland to pay a lower tax rate. She's soon to be leaving because what they pay her for her role is well below market rate. They know that when filling her role they'll be plenty of willing applicants even though the rate of pay isn't as much as others. I imagine they take a similarly cavalier approach with how they protect themselves from paying too much corporation tax
Glad you have raised WPP, since it allows me to bring in Google. I do a lot of work for WPP, and have discussed the tax issue with local directors. They tell me that individual units of WPP do pay local corporation tax in each jurisdiction they operate in. So in Prague I think WPP has about ten different units all filing and paying CIT. One of them is Group M. They buy media, e.g. TV ad. time.
Now 20 years ago in London Group M (or its equivalent) would be spending most of its clients' money with various TV stations going to make up ITV. Each of those ITV companies was UK based and pays UK CIT. Group M top people would meet with top sales people from say Thames (in those days) and thrash out deals worth millions.
That is still what they do, but nowadays, they also meet with a new and powerful player. Google. Google likes to tell you that it is a "technology company". This is bullshit. It is a media sales company. Just like ITV, it sells advertising around its content. Tomorrow, people at Group M will doubtless meet with people from ITV and people from Google. Those Google people will be UK (probably London) based employees. They will discuss advertising requirements of UK based companies to address consumers based in the UK. They will sign deals worth millions, just as the ITV boys and girls have done.
But there is one difference. Only one, as far as I can see. When the invoice for millions from Google arrives in the Group M accounts dept, it will have a Dublin address. Google claim that "the deal has been concluded" in Ireland and therefore any and all applicable CIT is payable in Ireland.
This is nonsense. While it is true that Google have a tech centre in Dublin, I have been assured many times by the agencies that their sales people are UK based , and working on the UK market. When an advertising sales deal is concluded, no executive management time is expended in Ireland. Nobody flies to or from Dublin to cut the deal.
The reason why they get away with it? Well Erich Schmidt's mendacious excuse is that our tax laws are at fault; if we changed them, he'd cough up. Bullshit. The problem is that HMRC don't understand Google's real business in advertising sales. Imagine if this went to a UK court. The judge would ask himself where "the reasonable man" would think the business between Google and Group M was conducted. There could be only one reasonable answer. And it isn't Dublin.
Prague, how about this example.
I used to work for a small company that relied heavily on Google for leads. We had a couple of Google Adwords accounts and paid for placements on certain keywords.
Our Account Manager was in Dublin. If we wanted to speak to someone in Google, it would have been a call to Dublin or a flight there. This was despite the fact that we were in the UK and we were only buying ads for UK display/clicks. From our perspective, Google was a company with local HQ in Dublin, no different to if it had been an Irish company.
Where did those transactions take place?
On the other hand, a lot of our customers were in Ireland. They found us because they went out of their way to search for cheaper UK suppliers - we didn't target the Irish market. Because we had a 'local market' of 55m, we were able to beat Irish competitors on price. I think the Euro exchange rate was also favourable at the time. When Irish customers ordered, we collected UK VAT on their orders, regardless of whether or not the goods actually arrived into the UK at any stage. Again, at the time, the rate of VAT in Ireland was 23% or 24% whereas the UK rate was 20%, so that presented an advantage to us and to HMRC.
Where did those transactions take place? Should we have been adding Irish VAT and paying that over to Irish authorities, even though we weren't an Irish company, and we had no presence or marketing in Ireland?
None of that is to say that Google aren't avoiding tax, just to say that where a transaction takes place may not be as black and white as you say.
Tax is merely the process by which private wealth is taken away by the State to spend as the State decides rather than individuals.
I have sectioned this bit from your interesting post.
Brings to mind the beginnings of the Fire Brigade/Fire Service. As far as I know in the old days insurance companies would fit a metal plate to your house if you, as an individual, decided to pay the premium. If your house caught fire the firefighters would attend, but only work on the places with metal plates on the wall.
This is from Wikipedia:
'Following a multitude of ad-hoc firefighting arrangements and the Great Fire of London, various insurance companies established firefighting units to fight fires that occurred in buildings that their respective companies insured. As demands grew on the primitive firefighting units they began to co-operate with each other until, on 1 January 1833, the London Fire Engine Establishment was formed under the leadership of James Braidwood. With 80 firefighters and 13 fire stations, the unit was still a private enterprise, funded by the insurance companies and as such was responsible mainly for saving material goods from fire.
Several large fires, most notably at the Palace of Westminster in 1834 and warehouses on Tooley Street in 1861, spurred the insurance companies to lobby the British government to provide the brigade at public expense and management. After due consideration, in 1865 the Metropolitan Fire Brigade Act was passed'
Should an individual decide whether to have fire cover or not, rather than paying tax to the State to do it? If you believe (as I do) that there must be a number of joint enterprises to fashion a society, the argument is about the amounts, what for, the methodology and so on. I suppose a really rich person could have their own fire brigade (as airport companies do) so they are personally sorted as individuals, but it was tried in the past, and it didn't work.
I am not saying you're saying it, but there will always be people who say this or that is a waste of taxpayers money. However a zero tax rate would lead to a lot of conflict, especially if the fire on the roof of the zillionaire's house next door spread to my place!
I stick by my suggested solution of a turnover tax rather than a tax on profits. Thus for every £1 of sales amazon/starbucks etc have TO UK CUSTOMERS, they are charged say 1% in turnover tax which can be offset against their UK corpration tax liability, if any. Thus it makes no difference where their company is registered, it's a cost of making sales in the UK. I don't see how this cannot be easily implemented and enforced, say for all businesses with a turnover in excess of £100m.
This might be a stupid question but what about companies that have the required turnover but still make a loss?
Exactly. And a turnover tax would simply mean an adjustment to pricing to take account of the impact on profits. If my business is less profitable selling to UK customers I will look to develop a market in other countries. That doesn't improve our tax revenue and reduces the number of jobs and services supporting the business.
I am aware of businesses that turn over tens of millions with a 1% margin to cover profits. The impact on this sort of company compared to a finance related business with a 30% margin will not allow a turnover tax to be "easily implemented". Whatever, the tax actually ends up being paid by the consumer, not the corporation, just like VAT as has already been mentioned, and it would impact every business regardless of whether they were paying a "fair" level of tax or not.
I always thought the difficulty the government has re: corporation tax is balancing attracting companies for job creation vs money for the public purse. Notably it's become more of an issue recently given how companies like google are utilising the legislation to pay less etc. I just think it's another example of those in big business yielding unaccountable power.
My mrs is soon to be leaving WPP, Sorrell's group. They were one of the companies that moved their company registration to Ireland to pay a lower tax rate. She's soon to be leaving because what they pay her for her role is well below market rate. They know that when filling her role they'll be plenty of willing applicants even though the rate of pay isn't as much as others. I imagine they take a similarly cavalier approach with how they protect themselves from paying too much corporation tax
Glad you have raised WPP, since it allows me to bring in Google. I do a lot of work for WPP, and have discussed the tax issue with local directors. They tell me that individual units of WPP do pay local corporation tax in each jurisdiction they operate in. So in Prague I think WPP has about ten different units all filing and paying CIT. One of them is Group M. They buy media, e.g. TV ad. time.
Now 20 years ago in London Group M (or its equivalent) would be spending most of its clients' money with various TV stations going to make up ITV. Each of those ITV companies was UK based and pays UK CIT. Group M top people would meet with top sales people from say Thames (in those days) and thrash out deals worth millions.
That is still what they do, but nowadays, they also meet with a new and powerful player. Google. Google likes to tell you that it is a "technology company". This is bullshit. It is a media sales company. Just like ITV, it sells advertising around its content. Tomorrow, people at Group M will doubtless meet with people from ITV and people from Google. Those Google people will be UK (probably London) based employees. They will discuss advertising requirements of UK based companies to address consumers based in the UK. They will sign deals worth millions, just as the ITV boys and girls have done.
But there is one difference. Only one, as far as I can see. When the invoice for millions from Google arrives in the Group M accounts dept, it will have a Dublin address. Google claim that "the deal has been concluded" in Ireland and therefore any and all applicable CIT is payable in Ireland.
This is nonsense. While it is true that Google have a tech centre in Dublin, I have been assured many times by the agencies that their sales people are UK based , and working on the UK market. When an advertising sales deal is concluded, no executive management time is expended in Ireland. Nobody flies to or from Dublin to cut the deal.
The reason why they get away with it? Well Erich Schmidt's mendacious excuse is that our tax laws are at fault; if we changed them, he'd cough up. Bullshit. The problem is that HMRC don't understand Google's real business in advertising sales. Imagine if this went to a UK court. The judge would ask himself where "the reasonable man" would think the business between Google and Group M was conducted. There could be only one reasonable answer. And it isn't Dublin.
Prague, how about this example.
I used to work for a small company that relied heavily on Google for leads. We had a couple of Google Adwords accounts and paid for placements on certain keywords.
Our Account Manager was in Dublin. If we wanted to speak to someone in Google, it would have been a call to Dublin or a flight there. This was despite the fact that we were in the UK and we were only buying ads for UK display/clicks. From our perspective, Google was a company with local HQ in Dublin, no different to if it had been an Irish company.
Where did those transactions take place?
On the other hand, a lot of our customers were in Ireland. They found us because they went out of their way to search for cheaper UK suppliers - we didn't target the Irish market. Because we had a 'local market' of 55m, we were able to beat Irish competitors on price. I think the Euro exchange rate was also favourable at the time. When Irish customers ordered, we collected UK VAT on their orders, regardless of whether or not the goods actually arrived into the UK at any stage. Again, at the time, the rate of VAT in Ireland was 23% or 24% whereas the UK rate was 20%, so that presented an advantage to us and to HMRC.
Where did those transactions take place? Should we have been adding Irish VAT and paying that over to Irish authorities, even though we weren't an Irish company, and we had no presence or marketing in Ireland?
None of that is to say that Google aren't avoiding tax, just to say that where a transaction takes place may not be as black and white as you say.
I accept you final point, sure. Regarding your VAT point I think there is an answer which others here will know better, but on the rare occasion my company has invoiced to another EU country we have not added Czech VAT at all. I forget what you call it but it is a widely used EU harmonisation device (not some tax dodge!)
The thing with Google and the UK is that we are talking about their big volume deals with the ad agencies. They realised they need to have top sales people, and based in the UK. Your account manager in Dublin is I guess the equivalent of your account manager in your bank branch, whereas the people I am talking about will be heavy duty managers earning six figure sums and agreeing single transactions worth millions. I think Google have chosen to put the account managers for small companies in Dublin to help shore up their case for dodging taxes in other countries. It is not convenient for their UK customers that's for sure, and they didn't do it because of the huge domestic Irish market.
Google actually has a small team in Prague. As far as I know they concentrate on domestic sales. They are certainly not technical wizards developing self-delivering beer for Czech pubs or anything like that. I will ask some friends in the agencies what is on a Google invoice they receive....
Edit: CONFIRMED...from an ad agency boss..
Yes, quite regular relationship on local level. And, re. charges, can't check the core invoices as we are managing search and display through xx, our digital arm. But, I'm quite confident that they are stil getting invoices from Dublin. We are paying admin fees (DoubleClick) to Dublin, that's what I know for sure.
I stick by my suggested solution of a turnover tax rather than a tax on profits. Thus for every £1 of sales amazon/starbucks etc have TO UK CUSTOMERS, they are charged say 1% in turnover tax which can be offset against their UK corpration tax liability, if any. Thus it makes no difference where their company is registered, it's a cost of making sales in the UK. I don't see how this cannot be easily implemented and enforced, say for all businesses with a turnover in excess of £100m.
This might be a stupid question but what about companies that have the required turnover but still make a loss?
It would amount to an additional (quite small) loss to them. Amazon would fall into this category. They don't care that they have never turned a profit because they are seeking to destroy all competitors.
“It is a popular delusion that the government wastes vast amounts of money through inefficiency and sloth. Enormous effort and elaborate planning are required to waste this much money.” ― P.J. O'Rourke
Corporates are just legal entities that distribute wealth to individuals. So why have income tax and corporate tax at different rates. If you had one simple tax rate system on individuals and corporates we wouldn't have so many corporates set up, which apart from legal liability issues, are mainly set up to benefit from the ability to reduce the tax levied on the way out. The loopholes in corporate tax are caused by easements intended to cater for "unfairness" if applied to transactions they were not intended to catch. Why not just make the whole system fair for everyone and no need for easements which are the pathway to loopholes.
I don't really understand this. Corporation tax (in the UK) is 21% which is much lower than income tax for many people. They aren't vehicles for distributing wealth to individuals. Some high divident countries are but may seek to increase the value of the company itself. And of course large companies take on distinct personabilities (and aims) themselves.
Corporates are just legal entities that distribute wealth to individuals. So why have income tax and corporate tax at different rates. If you had one simple tax rate system on individuals and corporates we wouldn't have so many corporates set up, which apart from legal liability issues, are mainly set up to benefit from the ability to reduce the tax levied on the way out. The loopholes in corporate tax are caused by easements intended to cater for "unfairness" if applied to transactions they were not intended to catch. Why not just make the whole system fair for everyone and no need for easements which are the pathway to loopholes.
I don't really understand this. Corporation tax (in the UK) is 21% which is much lower than income tax for many people. They aren't vehicles for distributing wealth to individuals. Some high divident countries are but may seek to increase the value of the company itself. And of course large companies take on distinct personabilities (and aims) themselves.
Difference is Corporation Tax is against profits rather than income and can be offset for losses in previous years.
I stick by my suggested solution of a turnover tax rather than a tax on profits. Thus for every £1 of sales amazon/starbucks etc have TO UK CUSTOMERS, they are charged say 1% in turnover tax which can be offset against their UK corpration tax liability, if any. Thus it makes no difference where their company is registered, it's a cost of making sales in the UK. I don't see how this cannot be easily implemented and enforced, say for all businesses with a turnover in excess of £100m.
This might be a stupid question but what about companies that have the required turnover but still make a loss?
Exactly. And a turnover tax would simply mean an adjustment to pricing to take account of the impact on profits. If my business is less profitable selling to UK customers I will look to develop a market in other countries. That doesn't improve our tax revenue and reduces the number of jobs and services supporting the business.
I am aware of businesses that turn over tens of millions with a 1% margin to cover profits. The impact on this sort of company compared to a finance related business with a 30% margin will not allow a turnover tax to be "easily implemented". Whatever, the tax actually ends up being paid by the consumer, not the corporation, just like VAT as has already been mentioned, and it would impact every business regardless of whether they were paying a "fair" level of tax or not.
But the turnover tax would only impact those businesses who do not currently pay enough CT in the UK to offset the turnover tax, which would work effectively as an advance CT payment. If businesses such as Amazon have to increase their pricing to cover it, this simply reduces their sales advantage over UK resident taxpaying businesses who are otherwise at a disadvantage through not having an international network through which they can shield profits from HMRC. If the business is already paying CT then there is no impact on the profits after tax - the turnover tax would be offset against that. I picked 1% on the basis that if we assume a 5% profit is reasonable, then tax at 20% would yield 1% of turnover in tax. If AmazonGoogleBucks had to pay 1% of their UK turnover in tax, there is no way they would depart from the UK to develop businesses elsewhere. They just might declare a bit more UK profit as it wouldn't increase their tax bill - they'd already have paid it in turnover tax. (I didn't call it advance corporation tax to avoid confusion with that one, but it might have been a better way of expressing it).
Corporates are just legal entities that distribute wealth to individuals. So why have income tax and corporate tax at different rates. If you had one simple tax rate system on individuals and corporates we wouldn't have so many corporates set up, which apart from legal liability issues, are mainly set up to benefit from the ability to reduce the tax levied on the way out. The loopholes in corporate tax are caused by easements intended to cater for "unfairness" if applied to transactions they were not intended to catch. Why not just make the whole system fair for everyone and no need for easements which are the pathway to loopholes.
I don't really understand this. Corporation tax (in the UK) is 21% which is much lower than income tax for many people. They aren't vehicles for distributing wealth to individuals. Some high divident countries are but may seek to increase the value of the company itself. And of course large companies take on distinct personabilities (and aims) themselves.
Difference is Corporation Tax is against profits rather than income and can be offset for losses in previous years.
Well, quite (as well as against investment and expenditure). So I'm hard pressed to understand how harmonising income and corporation tax woudl encourage more companies to pay tax on their profits here.
I agree that it would stop free lancers setting up businesses but that's a pretty minor issue.
Tax is merely the process by which private wealth is taken away by the State to spend as the State decides rather than individuals.
I am not saying you're saying it, but there will always be people who say this or that is a waste of taxpayers money. However a zero tax rate would lead to a lot of conflict, especially if the fire on the roof of the zillionaire's house next door spread to my place!
Eaxctly, what is important is deciding what is best a function of the State and makes sure you raise the tax to provide it. In fact, the State spends more than it can raise in tax, and the way to balance is raising tax, reducing spending or increasing the wealth on which tax is levied. Increasing wealth is arguably the least painful and most sensible longterm strategy, but politically unpopular with those who just want to increase tax hoping to make the rich bastards pay for it and hope it leaves everyone else untouched. You can depict reducing tax as taking some of the State's pie and giving it to the rich instead of the poor, or you can depict it as the State freeing up money for the wealth creators to hopefully give the State a bigger pie to help the poor.
No one with half a brain would say there should be a zero tax objective, but it shouldn't prevent us trying to tax more efficiently. We have got to the stage where taxation has gone beyond what it should be used for and has become a tool misused to engineer behaviour and impose political ideology. Now if we change a tax, it is so enmeshed in political overtones we have lost the ability to reform tax for beneficial fiscal objectives.
Thankfully others have taken issue with aspects of your post, so i can concentrate on a couple of things where you seek to ascribe an agenda to me and others that I simply don't have.
Where have I or any other CL'er in this thread argued for increasing the tax on all corporations? I am talking about the blatant unfairness of some corporations deliberately avoiding tax, while other corporations who compete with them do not do so. I presume you would consider Justin King of Sainsbury to be an admirable businessman who has created wealth (possibly for you if you bought their shares), and he is publicly critical of Amazon's tax arrangements. I don't think he is driven by political ideology.
Your rubbishing of the definition of avoidance is unfair. Of course it's difficult to write laws which withstand any unseen eventuality, but that is true of laws on any area. The difficulty with tax law is that immediately you have the army of Big 4 consultants ready to take them apart and flog avoidance schemes to their willing customers. Nevertheless the solution is to put them to test in court. At least we have a decent legal system based on the concept of 'the reasonable man'. When the reasonable man fully understands what these jokers are up to with their Dublin and Luxembourg invoices, he will conclude that they are pulling the Mother of all fast ones.
Finally your concept of flat tax has been tried in various new democracies in Central Europe, including Estonia and Slovakia. They are not considered to be proven successful. I am not sure, to be fair, that it has been conclusively shown one way or another. However, I believe that Google in Slovakia plays the same trick as it does elsewhere in the EU, pretending that "the deal is concluded" in Ireland. While Skype, which originates in Estonia, is one of those companies accused of cutting a deal with Juncker in Luxembourg. So I conclude that it doesn't matter to this type of company leader if tax is "flat" or simplified. Some of these companies will simply move heaven and earth not to pay tax in countries where they do significant business, if they can find a way not to. While other companies, such as Sainsbury and John Lewis, do not do so. It is morally wrong in my opinion because companies are part of society. I fear however that you may have been one of those nodding in agreement when Thatcher said "there is no such thing as society". So we will probably never agree.
"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." - Ronald Reagan
I always thought the difficulty the government has re: corporation tax is balancing attracting companies for job creation vs money for the public purse. Notably it's become more of an issue recently given how companies like google are utilising the legislation to pay less etc. I just think it's another example of those in big business yielding unaccountable power.
My mrs is soon to be leaving WPP, Sorrell's group. They were one of the companies that moved their company registration to Ireland to pay a lower tax rate. She's soon to be leaving because what they pay her for her role is well below market rate. They know that when filling her role they'll be plenty of willing applicants even though the rate of pay isn't as much as others. I imagine they take a similarly cavalier approach with how they protect themselves from paying too much corporation tax
Glad you have raised WPP, since it allows me to bring in Google. I do a lot of work for WPP, and have discussed the tax issue with local directors. They tell me that individual units of WPP do pay local corporation tax in each jurisdiction they operate in. So in Prague I think WPP has about ten different units all filing and paying CIT. One of them is Group M. They buy media, e.g. TV ad. time.
Now 20 years ago in London Group M (or its equivalent) would be spending most of its clients' money with various TV stations going to make up ITV. Each of those ITV companies was UK based and pays UK CIT. Group M top people would meet with top sales people from say Thames (in those days) and thrash out deals worth millions.
That is still what they do, but nowadays, they also meet with a new and powerful player. Google. Google likes to tell you that it is a "technology company". This is bullshit. It is a media sales company. Just like ITV, it sells advertising around its content. Tomorrow, people at Group M will doubtless meet with people from ITV and people from Google. Those Google people will be UK (probably London) based employees. They will discuss advertising requirements of UK based companies to address consumers based in the UK. They will sign deals worth millions, just as the ITV boys and girls have done.
But there is one difference. Only one, as far as I can see. When the invoice for millions from Google arrives in the Group M accounts dept, it will have a Dublin address. Google claim that "the deal has been concluded" in Ireland and therefore any and all applicable CIT is payable in Ireland.
This is nonsense. While it is true that Google have a tech centre in Dublin, I have been assured many times by the agencies that their sales people are UK based , and working on the UK market. When an advertising sales deal is concluded, no executive management time is expended in Ireland. Nobody flies to or from Dublin to cut the deal.
The reason why they get away with it? Well Erich Schmidt's mendacious excuse is that our tax laws are at fault; if we changed them, he'd cough up. Bullshit. The problem is that HMRC don't understand Google's real business in advertising sales. Imagine if this went to a UK court. The judge would ask himself where "the reasonable man" would think the business between Google and Group M was conducted. There could be only one reasonable answer. And it isn't Dublin.
Prague, how about this example.
I used to work for a small company that relied heavily on Google for leads. We had a couple of Google Adwords accounts and paid for placements on certain keywords.
Our Account Manager was in Dublin. If we wanted to speak to someone in Google, it would have been a call to Dublin or a flight there. This was despite the fact that we were in the UK and we were only buying ads for UK display/clicks. From our perspective, Google was a company with local HQ in Dublin, no different to if it had been an Irish company.
Where did those transactions take place?
On the other hand, a lot of our customers were in Ireland. They found us because they went out of their way to search for cheaper UK suppliers - we didn't target the Irish market. Because we had a 'local market' of 55m, we were able to beat Irish competitors on price. I think the Euro exchange rate was also favourable at the time. When Irish customers ordered, we collected UK VAT on their orders, regardless of whether or not the goods actually arrived into the UK at any stage. Again, at the time, the rate of VAT in Ireland was 23% or 24% whereas the UK rate was 20%, so that presented an advantage to us and to HMRC.
Where did those transactions take place? Should we have been adding Irish VAT and paying that over to Irish authorities, even though we weren't an Irish company, and we had no presence or marketing in Ireland?
None of that is to say that Google aren't avoiding tax, just to say that where a transaction takes place may not be as black and white as you say.
I accept you final point, sure. Regarding your VAT point I think there is an answer which others here will know better, but on the rare occasion my company has invoiced to another EU country we have not added Czech VAT at all. I forget what you call it but it is a widely used EU harmonisation device (not some tax dodge!)
I think you would only ever sell to companies, not individuals, so your customers would have an EU VAT number, which allows you to draw up an invoice without adding on Czech VAT. Lots of our customers in Ireland were individuals, not businesses, so we had to charge VAT, and we did so at the UK rate, not the higher Irish rate.
Not a tax dodge. As I said higher up, the burden of VAT falls on households, not on businesses so it makes sense for the harmonisation to remove VAT at point of purchase for business (I think - I'm not a tax expert).
Given that, where did the transactions take place between me and my customers in Dublin and Cork? Was it with me in the company in the UK, or was it where they were when they called with credit card details?
I guess my point on Google was firstly to challenge your dismissal of Google's operations in Dublin as a mere "tech centre". Even if that's all it was, surely you would see that the "tech" is central to Google's business. I know sales people like to think all the hard work happens in sales presentations and deals, but ultimately what was being sold was the tech.
Prague, tax avoidance is no more than ensuring a person, individual or a company or whatever, pays the minimum amount required by law. People, particularly politicians and the media are often content to confuse this with evasion or conflate the two different concepts.
Avoidance potential increases with legislative complexity. Politically driven complexity is usually responsible. There is no simple regime that makes it clear what one's liability should be unless your affairs are themselves very simple so there is no moral imperative to seek out a tax figure that exceeds the minimum required. Dippenhall is right to suggest that Parliament really does not have a clear vision of the "right" tax figure for complex corporations and Richard Murphy who is actually a very well known campaigner is a little misguided when he adopts the Parliamentary intention rhetoric - it suits his agenda.
Root and branch simplification of the system would help but no Government in my lifetime has ever seriously attempted this. Rather they just keep on bolting on more and more complexities to a creaking system and then rely on HMRC to try and do their best with it.
The multi-nationals that offend people are already obliged to comply with Transfer Pricing legislation and you can be sure that HMRC do spend resource monitoring how they do this and that they challenge areas of perceived risk.
Where have I or any other CL'er in this thread argued for increasing the tax on all corporations? - Nowhere. The point you are trying to avoid is that you can't create a tax that is legislated to only catch unfair activity. If you impose a tax that some entities are not intended to pay, it has to be clear and unambiguous. You will struggle to work with a law that says this tax is only paid by firms that don't pay enough tax in accordance with the rest of our tax laws and are taking advantage of the fact that we can't define what fair means.
Your rubbishing of the definition of avoidance is unfair. Of course it's difficult to write laws which withstand any unseen eventuality, but that is true of laws on any area. The difficulty with tax law is that immediately you have the army of Big 4 consultants ready to take them apart and flog avoidance schemes to their willing customers Tax laws are incomprehensible to anyone who is not a tax lawyer or tax adviser, even then specialising in one particular field. Bemoaning the involvement of consultants to interpret how the law works, as written down, as opposed to what law makers thought they were writing down just proves the failure of tax legislation. HMRC have no right to regard avoidance as subverting what parliament intended, they have a duty to apply the law as written down and as the Courts interpret what Parliament intended from the words written down, and nothing else. If you can't get the words right the system's a failure.
Some of these companies will simply move heaven and earth not to pay tax in countries where they do significant business, if they can find a way not to. Some also might move heaven and earth to provide the best return for the pension funds that bought their shares.
I fear however that you may have been one of those nodding in agreement when Thatcher said "there is no such thing as society". Your example has put the quote into its intended context perfectly. The impact on society is the result of individual behaviours and their sense of responsibility. Relying on "society" to solve your problems comes down to relying on the actions of individuals, if individuals don't take responsibility society will still exist, it's just that it might as well not exist.
We pay taxes so that the State can fund the delivery of public goods which we all benefit from, but which the private sector may not deliver efficiently. The police force is just one obvious example. Society in this country has also decided that a degree of redistribution of income is appropriate, providing a safety net which any of us might need if we suffer misfortune. Views might differ on the role of the state, it's size and the degree of income distribution, but nobody sane would disagree with these basic points.
We have also agreed as a society that the taxes we pay should be fair and linked to ability to pay. That's not a matter of economic efficiency, it's a fundamental value. If taxes paid are, in practice, not fair and proportionate then that fundamental value, that agreed objective of society, is being confounded.
Arguments about what might happen to the taxes not paid, how the monies might be spent and what the impact of that might be on economic activity and wealth creation are completely irrelevant and belong in a different debate. They don't change the fact that society's objective of fairness is not being achieved. I don't see how that can be acceptable in a democratic society.
Those who argue, amongst other things, that Parliament is at fault, that the tax system needs to be simplified, that we should expect individuals and corporations to take all measures possible to minimise their tax liability and that integrity and morals don't come into it, are being logical, but in my view are failing completely to recognise the inevitable and damaging consequences of the culture they appear to wish to promote.
Put simply, a world with no values, a world in which following the letter of the law while circumventing its spirit is the "done thing", is a world in which the objectives of society, in this case fairness in the taxes we pay, are never achieved because the clever innovator is always one step ahead of the regulator. It is a kafkaesque world in which the rule book gets inevitably and inexorably larger and larger and more and more complex as the daily lives of individuals and corporations are overwhelmed by bureaucratic procedure. It is a supreme irony that this is where unfettered free market economics and it's selfish culture ultimately leads.
Anybody with the misfortune to be impacted directly or indirectly by the Volcker rule, for example, will know what I mean. The basic objective of this rule, which is to control the trading activity of banks, is straightforward and entirely reasonable. However, because the banks cannot be trusted to comply, indeed, they can be expected to find every possible way of circumventing the rule's intentions, the discussion, debate and drafting has reached a quite staggering level of activity. Critically, many activities which have no relation to the rule's intentions are caught and, potentially, fundamentally compromised. It's a madhouse.
Some people may want to live in a world in which we will continue to slide down this slippery slope, but I don't. There is no easy solution, but we need to build a culture where the spirit of the law, rule book or tax system means something and is respected. To achieve that we'll probably need more "principles" based rules and guidelines and greater powers for regulators of all kinds to hammer miscreants if it is judged to be appropriate. If we don't do that society might, ultimately, react in a more dangerous and extreme way. The sense of injustice and impotence in the face of powerful corporations and their armies of advisors might simply overwhelm a more measured response.
Comments
Nothing illegal. but to me it stinks. What we need to do is increase the salaries - and capabilities - of top people in HMRC so that they can be recruited from the likes of Deloitte, not nicked by them. We could partly pay for this by reducing the number of useless little people at HMRC who pursue a million people for £300 each in arrears. (see my post above)
As for the PM of Luxembourg, again quite right, but he is now under a lot of pressure. If the EU didn't exist then each country could do what it likes. As it is, not just Luxembourg but also Ireland and the Netherlands have some questions to answer.
Tax is merely the process by which private wealth is taken away by the State to spend as the State decides rather than individuals. It has nothing to do with creating wealth, it can only re-distribute what wealth creators create, HMRC is not a wealth creator, the State is not a wealth creator regardless of how much it taxes people or corporates.
Corporates are just legal entities that distribute wealth to individuals. So why have income tax and corporate tax at different rates. If you had one simple tax rate system on individuals and corporates we wouldn't have so many corporates set up, which apart from legal liability issues, are mainly set up to benefit from the ability to reduce the tax levied on the way out. The loopholes in corporate tax are caused by easements intended to cater for "unfairness" if applied to transactions they were not intended to catch. Why not just make the whole system fair for everyone and no need for easements which are the pathway to loopholes.
The HMRC definition of avoidance is laughable. How can Parliament have designed legislation which has considered every conceivable variant of a commercial transaction and it's impact on changing accounting laws throughout the World. It's an impossible system to manage, it has too little precision and too much subjectivity in interpretation in trying to reflect political ideology. Where does parliament define a "fair" tax that everyone is screaming corporates should pay?
Thus for every £1 of sales amazon/starbucks etc have TO UK CUSTOMERS, they are charged say 1% in turnover tax which can be offset against their UK corpration tax liability, if any. Thus it makes no difference where their company is registered, it's a cost of making sales in the UK. I don't see how this cannot be easily implemented and enforced, say for all businesses with a turnover in excess of £100m.
If my company makes a loss I still have to pay VAT liabilities every quarter as it is collecting VAT on every invoice on behalf of the exchequer. I've had a variety of people advising me to go offshore and I've told them where to get off.
I'm not a lawyer let alone a tax lawyer but perhaps someone can explain why if a purchase is made in my house, that an entity can divert that transaction to Luxembourg to charge only 3%?
Solutions might include an EU wide interpretation of consumer Internet contracts and purchases, a minimum or standard EU wide vat rate or even (just to send len glover over the edge) an EU wide sales tax.
One would have to know a lot more about how US federal and state taxes work to explore this but my point is simple: the population of the five big EU economies (Germany, UK, France, Italy and Spain) are consuming a lot of goodies through the web and in shopping malls, football stadia etc. Our future lies in finding equitable solutions and not simply pointing the finger of blame.
You can argue that VAT is actually paid by the consumer and not by the business, which also reclaims the VAT they have paid to their own suppliers. (I know you know this, but everyone might not). The idea behind the turnover tax is to level the playing field between resident businesses who pay CT and non-resident businesses who do not. VAT treatment is generally the same for both, but the turnover tax mitigates the advantage of those such as Google pretending to be in Dublin, or those such as Starbuck who artificially depress their profits by paying royalties or inflated goods prices to offshore companies holding their IP. If Google as stated elsewhere are going to have £3bn of UK advertising sales in 2015 (and that number seems low to me) then there's £30m right off. And why not 2% instead of 1? £60m.
It's a while since I worked for an international group, but I am pretty sure France already has such a thing in place, and for much lower turnover figures than the one I suggest. I remember having to deal with it when I was at Kelkoo.
I used to work for a small company that relied heavily on Google for leads. We had a couple of Google Adwords accounts and paid for placements on certain keywords.
Our Account Manager was in Dublin. If we wanted to speak to someone in Google, it would have been a call to Dublin or a flight there. This was despite the fact that we were in the UK and we were only buying ads for UK display/clicks. From our perspective, Google was a company with local HQ in Dublin, no different to if it had been an Irish company.
Where did those transactions take place?
On the other hand, a lot of our customers were in Ireland. They found us because they went out of their way to search for cheaper UK suppliers - we didn't target the Irish market. Because we had a 'local market' of 55m, we were able to beat Irish competitors on price. I think the Euro exchange rate was also favourable at the time. When Irish customers ordered, we collected UK VAT on their orders, regardless of whether or not the goods actually arrived into the UK at any stage. Again, at the time, the rate of VAT in Ireland was 23% or 24% whereas the UK rate was 20%, so that presented an advantage to us and to HMRC.
Where did those transactions take place? Should we have been adding Irish VAT and paying that over to Irish authorities, even though we weren't an Irish company, and we had no presence or marketing in Ireland?
None of that is to say that Google aren't avoiding tax, just to say that where a transaction takes place may not be as black and white as you say.
Brings to mind the beginnings of the Fire Brigade/Fire Service. As far as I know in the old days insurance companies would fit a metal plate to your house if you, as an individual, decided to pay the premium. If your house caught fire the firefighters would attend, but only work on the places with metal plates on the wall.
This is from Wikipedia:
'Following a multitude of ad-hoc firefighting arrangements and the Great Fire of London, various insurance companies established firefighting units to fight fires that occurred in buildings that their respective companies insured. As demands grew on the primitive firefighting units they began to co-operate with each other until, on 1 January 1833, the London Fire Engine Establishment was formed under the leadership of James Braidwood. With 80 firefighters and 13 fire stations, the unit was still a private enterprise, funded by the insurance companies and as such was responsible mainly for saving material goods from fire.
Several large fires, most notably at the Palace of Westminster in 1834 and warehouses on Tooley Street in 1861, spurred the insurance companies to lobby the British government to provide the brigade at public expense and management. After due consideration, in 1865 the Metropolitan Fire Brigade Act was passed'
Should an individual decide whether to have fire cover or not, rather than paying tax to the State to do it?
If you believe (as I do) that there must be a number of joint enterprises to fashion a society, the argument is about the amounts, what for, the methodology and so on.
I suppose a really rich person could have their own fire brigade (as airport companies do) so they are personally sorted as individuals, but it was tried in the past, and it didn't work.
I am not saying you're saying it, but there will always be people who say this or that is a waste of taxpayers money. However a zero tax rate would lead to a lot of conflict, especially if the fire on the roof of the zillionaire's house next door spread to my place!
I am aware of businesses that turn over tens of millions with a 1% margin to cover profits. The impact on this sort of company compared to a finance related business with a 30% margin will not allow a turnover tax to be "easily implemented". Whatever, the tax actually ends up being paid by the consumer, not the corporation, just like VAT as has already been mentioned, and it would impact every business regardless of whether they were paying a "fair" level of tax or not.
The thing with Google and the UK is that we are talking about their big volume deals with the ad agencies. They realised they need to have top sales people, and based in the UK. Your account manager in Dublin is I guess the equivalent of your account manager in your bank branch, whereas the people I am talking about will be heavy duty managers earning six figure sums and agreeing single transactions worth millions. I think Google have chosen to put the account managers for small companies in Dublin to help shore up their case for dodging taxes in other countries. It is not convenient for their UK customers that's for sure, and they didn't do it because of the huge domestic Irish market.
Google actually has a small team in Prague. As far as I know they concentrate on domestic sales. They are certainly not technical wizards developing self-delivering beer for Czech pubs or anything like that. I will ask some friends in the agencies what is on a Google invoice they receive....
Edit: CONFIRMED...from an ad agency boss..
Yes, quite regular relationship on local level. And, re. charges, can't check the core invoices as we are managing search and display through xx, our digital arm. But, I'm quite confident that they are stil getting invoices from Dublin. We are paying admin fees (DoubleClick) to Dublin, that's what I know for sure.
I like Hans' idea.
Enormous effort and elaborate planning are required to waste this much money.” ― P.J. O'Rourke
I picked 1% on the basis that if we assume a 5% profit is reasonable, then tax at 20% would yield 1% of turnover in tax.
If AmazonGoogleBucks had to pay 1% of their UK turnover in tax, there is no way they would depart from the UK to develop businesses elsewhere. They just might declare a bit more UK profit as it wouldn't increase their tax bill - they'd already have paid it in turnover tax. (I didn't call it advance corporation tax to avoid confusion with that one, but it might have been a better way of expressing it).
I agree that it would stop free lancers setting up businesses but that's a pretty minor issue.
No one with half a brain would say there should be a zero tax objective, but it shouldn't prevent us trying to tax more efficiently. We have got to the stage where taxation has gone beyond what it should be used for and has become a tool misused to engineer behaviour and impose political ideology. Now if we change a tax, it is so enmeshed in political overtones we have lost the ability to reform tax for beneficial fiscal objectives.
Thankfully others have taken issue with aspects of your post, so i can concentrate on a couple of things where you seek to ascribe an agenda to me and others that I simply don't have.
Where have I or any other CL'er in this thread argued for increasing the tax on all corporations? I am talking about the blatant unfairness of some corporations deliberately avoiding tax, while other corporations who compete with them do not do so. I presume you would consider Justin King of Sainsbury to be an admirable businessman who has created wealth (possibly for you if you bought their shares), and he is publicly critical of Amazon's tax arrangements. I don't think he is driven by political ideology.
Your rubbishing of the definition of avoidance is unfair. Of course it's difficult to write laws which withstand any unseen eventuality, but that is true of laws on any area. The difficulty with tax law is that immediately you have the army of Big 4 consultants ready to take them apart and flog avoidance schemes to their willing customers. Nevertheless the solution is to put them to test in court. At least we have a decent legal system based on the concept of 'the reasonable man'. When the reasonable man fully understands what these jokers are up to with their Dublin and Luxembourg invoices, he will conclude that they are pulling the Mother of all fast ones.
Finally your concept of flat tax has been tried in various new democracies in Central Europe, including Estonia and Slovakia. They are not considered to be proven successful. I am not sure, to be fair, that it has been conclusively shown one way or another. However, I believe that Google in Slovakia plays the same trick as it does elsewhere in the EU, pretending that "the deal is concluded" in Ireland. While Skype, which originates in Estonia, is one of those companies accused of cutting a deal with Juncker in Luxembourg. So I conclude that it doesn't matter to this type of company leader if tax is "flat" or simplified. Some of these companies will simply move heaven and earth not to pay tax in countries where they do significant business, if they can find a way not to. While other companies, such as Sainsbury and John Lewis, do not do so. It is morally wrong in my opinion because companies are part of society. I fear however that you may have been one of those nodding in agreement when Thatcher said "there is no such thing as society". So we will probably never agree.
Merry Christmas all.
Not a tax dodge. As I said higher up, the burden of VAT falls on households, not on businesses so it makes sense for the harmonisation to remove VAT at point of purchase for business (I think - I'm not a tax expert).
Given that, where did the transactions take place between me and my customers in Dublin and Cork? Was it with me in the company in the UK, or was it where they were when they called with credit card details?
I guess my point on Google was firstly to challenge your dismissal of Google's operations in Dublin as a mere "tech centre". Even if that's all it was, surely you would see that the "tech" is central to Google's business. I know sales people like to think all the hard work happens in sales presentations and deals, but ultimately what was being sold was the tech.
Avoidance potential increases with legislative complexity. Politically driven complexity is usually responsible. There is no simple regime that makes it clear what one's liability should be unless your affairs are themselves very simple so there is no moral imperative to seek out a tax figure that exceeds the minimum required. Dippenhall is right to suggest that Parliament really does not have a clear vision of the "right" tax figure for complex corporations and Richard Murphy who is actually a very well known campaigner is a little misguided when he adopts the Parliamentary intention rhetoric - it suits his agenda.
Root and branch simplification of the system would help but no Government in my lifetime has ever seriously attempted this. Rather they just keep on bolting on more and more complexities to a creaking system and then rely on HMRC to try and do their best with it.
The multi-nationals that offend people are already obliged to comply with Transfer Pricing legislation and you can be sure that HMRC do spend resource monitoring how they do this and that they challenge areas of perceived risk.
Your rubbishing of the definition of avoidance is unfair. Of course it's difficult to write laws which withstand any unseen eventuality, but that is true of laws on any area. The difficulty with tax law is that immediately you have the army of Big 4 consultants ready to take them apart and flog avoidance schemes to their willing customers Tax laws are incomprehensible to anyone who is not a tax lawyer or tax adviser, even then specialising in one particular field. Bemoaning the involvement of consultants to interpret how the law works, as written down, as opposed to what law makers thought they were writing down just proves the failure of tax legislation. HMRC have no right to regard avoidance as subverting what parliament intended, they have a duty to apply the law as written down and as the Courts interpret what Parliament intended from the words written down, and nothing else. If you can't get the words right the system's a failure.
Some of these companies will simply move heaven and earth not to pay tax in countries where they do significant business, if they can find a way not to. Some also might move heaven and earth to provide the best return for the pension funds that bought their shares.
I fear however that you may have been one of those nodding in agreement when Thatcher said "there is no such thing as society". Your example has put the quote into its intended context perfectly. The impact on society is the result of individual behaviours and their sense of responsibility. Relying on "society" to solve your problems comes down to relying on the actions of individuals, if individuals don't take responsibility society will still exist, it's just that it might as well not exist.
We have also agreed as a society that the taxes we pay should be fair and linked to ability to pay. That's not a matter of economic efficiency, it's a fundamental value. If taxes paid are, in practice, not fair and proportionate then that fundamental value, that agreed objective of society, is being confounded.
Arguments about what might happen to the taxes not paid, how the monies might be spent and what the impact of that might be on economic activity and wealth creation are completely irrelevant and belong in a different debate. They don't change the fact that society's objective of fairness is not being achieved. I don't see how that can be acceptable in a democratic society.
Those who argue, amongst other things, that Parliament is at fault, that the tax system needs to be simplified, that we should expect individuals and corporations to take all measures possible to minimise their tax liability and that integrity and morals don't come into it, are being logical, but in my view are failing completely to recognise the inevitable and damaging consequences of the culture they appear to wish to promote.
Put simply, a world with no values, a world in which following the letter of the law while circumventing its spirit is the "done thing", is a world in which the objectives of society, in this case fairness in the taxes we pay, are never achieved because the clever innovator is always one step ahead of the regulator. It is a kafkaesque world in which the rule book gets inevitably and inexorably larger and larger and more and more complex as the daily lives of individuals and corporations are overwhelmed by bureaucratic procedure. It is a supreme irony that this is where unfettered free market economics and it's selfish culture ultimately leads.
Anybody with the misfortune to be impacted directly or indirectly by the Volcker rule, for example, will know what I mean. The basic objective of this rule, which is to control the trading activity of banks, is straightforward and entirely reasonable. However, because the banks cannot be trusted to comply, indeed, they can be expected to find every possible way of circumventing the rule's intentions, the discussion, debate and drafting has reached a quite staggering level of activity. Critically, many activities which have no relation to the rule's intentions are caught and, potentially, fundamentally compromised. It's a madhouse.
Some people may want to live in a world in which we will continue to slide down this slippery slope, but I don't. There is no easy solution, but we need to build a culture where the spirit of the law, rule book or tax system means something and is respected. To achieve that we'll probably need more "principles" based rules and guidelines and greater powers for regulators of all kinds to hammer miscreants if it is judged to be appropriate. If we don't do that society might, ultimately, react in a more dangerous and extreme way. The sense of injustice and impotence in the face of powerful corporations and their armies of advisors might simply overwhelm a more measured response.
“It’s clearly a budget. It’s got lots of numbers in it.”
― George W. Bush