Last night I received a heartfelt phone call from almost every other member of the Justice for Taxes Network praising me for my performance on the television.
I felt that the debate was won in the first few seconds when i said tax avoidance is bad, but I went through the motions and delivered my argument in greater depth.
I will just reiterate it here again so that neoliberals can pick through the bones at their stupid leisure.
Few of us tax experts realised that profits could be moved into lower tax jurisdictions. I did.
And of those who did, only I knew what this meant until recently. In my recent triumph over Christie Malry, I unwittingly imparted the knowledge that corporation tax is not a credit for income tax purposes.
Apparently, this was known only by me.
What this means is that UK businesses don’t actually get the credit for the corporation tax they paid back through income tax when they pay dividends to their shareholders. This means that although the effective rates of tax on dividends and salary are exactly the same, they are in fact different.
But it also means that now other tax experts know that corporation tax is a real cost to UK businesses and not simply an issue of when tax is paid. They have started to realise what this means.
So, where everyone else was blissfully unaware of the advantage international businesses have over UK businesses by being able to mitigate their tax liabilities by pretending that some of it relates to investments, advertising, finance overheads and other centralised costs, loan interest and intellectual property rights created through economic activity overseas, I knew all along.
That is why I was able to break the Start Bucks story and others weren’t.
So, by reducing their corporation tax, Star Bucks became, what we tax experts call, advantaged.
But the real travesty is that other tax experts thought that UK businesses weren’t disadvantaged (the opposite of advantaged, ie getting an increase in corporation tax) because they were claiming their corporation tax back as an income tax credit.
But this is not so, as I have said all along. This represents a real cost to businesses which international groups can reduce by what is known as “transfer pricing sophistry”.
This is where somebody, a transfer pricing sophist, is paid to tell lies to HMRC about the UK business. However, the real trick is that they think they are telling the truth, because it sounds more convincing if they think they’re telling the truth.
Transfer pricing sophists are generally kept in isolation from all other employees so they cannot realise the terrible lies that they are led to believe, and can’t inadvertently mislead others.
So corporation tax isn’t paid by Star Bucks, but other coffee shops do, and what’s worse is they can’t claim it back as a tax credit for income tax purposes.
Ignore the fact that Star Bucks pay NICs, collect PAYE from their employees, VAT from their customers, pay business rates and vehicle excise duty, stamp duty land tax on their property purchases and various other indirect taxes and levies, and you see that Star Bucks pay no tax whatsoever in the UK.
You must ignore the other taxes because otherwise you run the risk of considering taxation as a blend of various taxes designed to extract appropriate amounts of tax for specific activities according to the deemed desirability, or undesirability, of those actives. This suggests incorrectly that somebody may have contribute significant tax despite one element being tiny or non-existent.
But the real issue here is a tax expert issue that you may not understand dear reader.
That is Star Bucks do not disallow the costs of business entertaining. Giving someone a coffee in a pleasant manner is considered hospitality. Given that this hospitality is given to a customer, it is business entertaining.
Therefore, all the costs associated with delivering that hospitality should be disallowed for tax purposes. Given that accounts for 100% of their UK business, they have no allowable expenses for tax purposes.
This is why references to turnover are so important. Basically, whatever their turnover is should be their taxable profit.
Given that their turnover was £1.2bn pounds, I calculate that they should owe corporation tax of exactly £360m million pounds, the corporation tax rate being 30% for expectation gap purposes.
That’s what I’ve calculated and I’m 100% certain it is correct.