Monday 3 December 2012

Starbucks, Amazon, Google, Microsoft, WPP all in the news about tax avoidance through Ireland. And now they know it.


The British Government is to explore an internationally co-ordinated new tax designed to capture the earnings of companies like Amazon, Google but also Starbucks, according to The Telegraph. The particular focus is to force online companies pay more tax on sales they generate in the UK. Some use a variety of legitimate, but certainly questionable, ways of avoiding tax. In the case of Starbucks, for example, they apply fees from their Dutch parent to minimise their local UK tax.

And it's causing an outrage against the brand. 
And rightly so.

Activist Group, 'UKUncut' has announced a day of action (Saturday Dec 8) against Starbucks and these protests are aimed at bringing Starbucks to their senses or to put them out of business. One way or the other. 

The UK Government wants to close the loop that allows web companies avoid millions of pounds on tax and in fact, repatriate a lot of it to Ireland, the lowest corporation tax economy in Europe (12.5%), to avoid paying it locally. 

There can be little doubt at all now, that the heralded Irish Government investment plan is little more than a sham, based purely on tax incentives for multi-nationals locating here. In fact, it could be said that it's based on facilitating widespread tax avoidance across Europe, technically legal as that might be. But this is why Ireland's 12.5% tax rate is under European pressure.

Up to 50% of Irish corporate tax revenue may relate to taxes paid on income earned by US multinationals outside Ireland.

I once looked after The Industrial Development Authority (IDA) Advertising so I have a good understanding of their level of expertise.....and although, applauded by Government, the truth is beginning to come out. It's all about tax.

It has been often thought as bizarre, that for a country the size of Greater Manchester, Ireland is the European HQ for Google, Facebook, LinkedIn and others. It is becoming more clearer that when companies locate here, it facilitates their tax avoidance elsewhere, such as in the UK. Tax avoidance is of course, not illegal.

Indeed, even the very British Ad Group, Martin Sorrells's WPP (part owners of Dublin Ad Agency DDFH&B and Group M), had based itself in Ireland for tax reasons and shockingly, the company is now discovered to be actually Jersey registered. One wonders why it needs to registered in a small, tiny island like Jersey known really only for its "special" tax facilitation? Good reasons, no doubt.

Amazon is also shockingly, actually registered in Luxembourg, another famed principality for its tax shelters and discreet facilities. Amazon? THE American retail success? It had used Luxembourg VAT laws to its own competitive advantage for example, charging only 3% on an ebook sold in Britain whereas other booksellers had to charge 20%. That loop is now being closed and I've been a fan of Amazon, but it's just worn thin.

Google, with a staff in the UK of 1,300 books most of its revenue to surprise, surprise, Ireland. So it earns money in the UK but funnels it through Ireland. That's Ireland's great tax regime I mean that attracts companies like these in the first place.

Actually Google's "Irish" revenue is recorded as 12.4 billion. How ridiculous is that? Gross profit in Ireland in 2011 was recorded at 9 billion!! It's truly ridiculous. 

The whole tax avoidance is unravelling and more and more are beginning to understand the tax avoidance which Ireland has been facilitating against its European partners, and most notably, our biggest trading partner, The UK. So much of these investment decisions have been PR spun as being based on attracting business to what is said, a better educated workforce in Ireland, when in fact, they are simply decisions based on tax "incentives".

And the UK are not happy about it.

For example, Amazon, last year in the UK, earned 3 billion sterling in sales. But only declared 207 million of those as being from the UK and consequently, over the last three years has only paid UK tax of 2.3 million on total sales of 7.1 billion. Shocking undoubtedly, but it's being called immoral by many, albeit utilising legal tax manoeuvres.

Microsoft in 2005 were commented on in The WSJ for routing profits from Germany into Ireland. I mean it's actually funny that one Microsoft subsidiary called 'Round Island One Ltd', is actually based in a solicitors office and turns out to be one of Ireland's greatest companies. It has 9 billion in profits in 2004 and no staff. Not bad eh? And nobody has ever heard of it.

Google, paid UK tax of a tiny 6 million on UK revenues last year of 2.5 billion. Wow.

Ireland is helping them do that through "phantom" services.
Ireland is Europe's biggest Tax haven, followed by Switzerland.
And Ireland's tax schemes are now coming under the spotlight as it starts its European presidency from January 1st.

But more importantly, it's making the lie told by successive Irish Governments that Ireland was somehow an attractive base because of its workforce, its green fields, its beautiful scenery.

And it's wrong.
And we need to say it's wrong even if it's to our own detriment.

2 comments:

  1. Hi, I'd like to use your photo on my blog. I'll be glad to provide a reference back to you or link.

    ReplyDelete
  2. Hi, "One more thought" you'd need to ask my permission to use this photo on my blog, This photo is mine and has been used on this blog without permission or reference back to my business which happens to be www.googies.co.uk

    ReplyDelete