The same revolving door happened over the contentious controlled foreign companies rules (CFC), concerning the way companies can claim their business is in a tax haven, although the goods appear to be sold here. Challenged on Amazon, one of the accountants explained that though Amazon seemed to sell goods here, trundling delivery vans along tax-financed roads, in fact a warehouse is not a “permanent establishment” in tax law. It doesn’t exist.
No, Amazon is nothing at all to do with the CFC rules. Those apply to a corporation that is domiciled in the UK and has overseas subsidiaries. As most will know Amazon is a US domiciled corporation. The CFC rulse just aren’t relevant.
What is relevant for Amazon is the Luxembourg UK double taxation treaty:
(3) The term `permanent establishment` shall not be deemed to include:
(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
There is nothing at all unusual about this. That double taxation treaty is based upon the standard OECD one, is the same as we have with some 150 other countries and the same that those 150 countries have with each other.
Oh, and it dates from 1967 or so. It ain’t anything new at all.
The 30 companies called in to help write the new CFC rules have some 3,000 subsidiaries themselves in tax havens. Would they give the government advice against its self-interest? This is the wheeze that Starbucks made famous. By claiming it needs to buy coffee beans at high price from its Swiss subsidiary, most of what should have been UK profits went to the Swiss low-tax regime, with virtually nothing paid here. HMRC plods after all this transfer pricing, but it has just 65 people in that department, while these accountancy firms each admitted to having some 50 people in their transfer pricing departments: that’s 200 high-paid dodgers pursued by 65 overworked lower-paid HMRC staff.
Starbucks and coffee: it was a 20% margin that they paid Switzerland. And they did have to pay Switzerland some margin. For they were indeed buying all the coffee: not paying a margin over the basic cost would have meant breaching the transfer pricing rules, see? It does indeed cost something to have people buying coffee for you, something over and above the base cost of the coffee.
Oh, and even when you add back in that coffee margin Starbucks was still making a loss in the UK. That 20% margin on the coffee was about £4 million. Less than the recorded loss.
And if any journalist would like to ask Margaret Hodge a real question, how about this? Which firm of accountants did you use to shelter your holding in Stemcor from inheritance tax?
You ghastly, hypocritical cow you?