corporation tax is paid on profits, not sales, for a start. That KPMG’s Chris Morgan felt the need to clarify this point in Tax Journal got me thinking. It seems that, in the wake of the recent spate of corporate tax scandals, there’s a confluence of opinion between the general public and many tax scholars.… Continue reading Is it time to tax companies on the basis of sales, not profits?
Category: The politics of international tax
Paper review: “How Nations Share”
In the case of international income, it is the disputes and their resolutions, and not the law on the books, that constitute the international tax regime. Yet it is all but impossible for citizens to observe exactly how, or how well, their governments navigate this aspect of economic globalization. This is Alison Christians’ contention in a… Continue reading Paper review: “How Nations Share”
Is eBay avoiding tax? (In which I endeavour to improve on a post by Mr Tim Worstall)
On Monday I discussed how I think most of the real debate about corporate tax scandals is about people’s normative interpretations of the tax system, not the technicalities of the particular structures. Then I read this: Another day, another report of an internet company avoiding taxes in the UK. This time it’s eBay, to follow… Continue reading Is eBay avoiding tax? (In which I endeavour to improve on a post by Mr Tim Worstall)
Is international tax like open source software?
Adapted from some comments I made on an academic paper (unpublished, so I can’t link). What has international tax got to do with “open source” software? Well, maybe nothing, but let’s run with it for a minute.
A great letter in this morning’s FT from a tax lawyer demonstrates not one but two points about the transfer pricing of royalty fees. The first is the way in which companies game the system:
The role of the tax expert was to identify the highest level of royalty that could be defended in attritional correspondence with the Inland Revenue. The lawyer’s role was to reach for the intellectual property precedents and draft licensing agreements, which bore the imprimatur of arms-length contracts although they were in reality no such thing.
Sometimes discussion of transfer pricing by campaigners obscures the difference between the blatent use of prices that are much lower or higher than should be permitted (this is true ‘transfer mispricing’, which is more akin to fraud) and the more common manipulation of prices to get the best tax position possible within the ‘arm’s length’ range.
I’m fascinated by the apparent inconsistency between attitudes in the corporate sector to different social issues. For example, why is it that most companies still argue that – give or take the most ‘abusive’ arrangements – the standard against which they should be tested on tax avoidance is the bare legal minimum, while in areas such as ‘sweatshop’ labour most concede that the legal minimum is not enough?
With this in mind, I was intrigued by a column in today’s FT by Michael Woodford, the former Olympus Chief Executive turned whistleblower. Woodford describes how a number of companies have been changing the way they do business to prevent prisons in the US from obtaining drugs that can be used for capital punishment.
Martin Hearson 