In the past 48 hours our website has received 1,000 login attempts from machines all over the world. This is a sophisticated attack on our website, and our brilliant web specialist says it is the largest non-DDoS attack in history. It seems someone wants to shut us down – but why?
It could be because of our crusading for a fairer tax system for UK based small business enterprises. Someone wants us to stop sharing information that keeps money in business owners’ pockets and out of reach from the tax man. It’s not that we’re against businesses paying tax, but rather we believe small business has an unfair share of the tax burden, while big business gets special treatment.
You may remember that we proposed an additional turnover tax in a previous blog to counter the rather creative tax management strategies of big business. Maybe this is what rattled someone’s cage and provoked them to take steps to stop us from speaking out.
But whoever tried to hack our website will be disappointed. We will continue to highlight the imbalances in our tax system, which allow big businesses to fail to pay their share while small businesses struggle to stay afloat.
Whatever the reason for the attack, we’re going to be increasing our security. So whoever is trying to shut us down will have to try much harder because our crusade for a fairer tax system that brings big business to account will never end.
Amazon pays less in tax than it receives in government grants
To give you a recent example of the smoke and mirrors used by big businesses, the UK arm of internet shopping giant Amazon paid £2.4m in corporation tax in 2012, but received almost the same amount (£2.5m) in government grants. The grant from Scottish Enterprise, part of the Scottish government, was to enable Amazon to develop its operations in Scotland and to create more jobs.
Amazon’s grasping for money while keeping its other hand in its pocket is even more outrageous when you consider that it generated more than £4.26bn in sales to British customers. How does it get away with this? By exploiting current loopholes in where money is generated and where it is taxed.
The Conservative MP Charlie Elphicke, who has led a campaign against the tax practices of large multi-nationals, condemned the Scottish Government inducements to Amazon. “It is a nonsense for the Scottish Government to be giving grants to Amazon to build a distribution centre that they would clearly have to build in the UK anyway,” he said, “The idea that Amazon is based in Luxemburg defies belief.”
With some arrogance, Amazon has informed MPs that the company earns its profits in Luxembourg, its European headquarters, and is therefore not obliged to pay any more tax than it already does. Amazon manages to pay only a tiny fraction of its profits in corporation tax because all sales to British customers are routed through aLuxembourgaffiliate, Amazon EU Sarl.
Amazon’s UK operations are funded by fees it receives from Amazon EU and, since these only just cover operating costs, little is left over for Her Majesty’s Revenue and Customs (HMRC) to tax. Amazon EU pays little tax in Luxembourg because it pays hundreds of millions of Euros each year in fees to a tax exempt affiliate, also registered in Luxembourg.
Liberal Democrat MP John Hemming said the figures showed the inadequacy of existing rules to tackle the problem of profit shifting by major corporations. While a spokeswoman for tax avoidance campaign group UK Uncut said, “It’s an absolute disgrace that Amazon is paying such tiny amounts in tax. The government should be clamping down on tax avoidance rather than slashing the welfare state, privatising the NHS and cutting legal aid for ordinary people. This shows us yet again that the Government is making a political choice rather than an economic necessity.”
Last night MPs from all parties attacked Amazon’s tax stance, which they warned was harmingUK-based high street retailers.
“Amazon’s behaviour is not only unfair, it is anti-competitive, putting British businesses that do pay their proper tax at a disadvantage,” said Margaret Hodge, chairman of the Public Accounts Committee (PAC). “Paying £2.4m in tax on £4.2bn of sales is just a joke. What people will find particularly galling is that the amount Amazon is paying in tax is actually less than they are taking fromUKtaxpayers’ pockets in the form of government grants.”
So if you are planning to buy any books, I suggest that you vote with your feet and place orders with www.thebookpeople.co.uk instead.
How Google pays just £6m on £2.6bn profits
The revelation about Amazon’s derisory tax bill emerged at the same time as the grilling of Google’s Vice President for Sales and Operations for the second time to answer accusations that he misled the PAC over his company’s tax affairs.
In November Matt Brittin claimed that all his company’s sales team were based inIrelandand that the job of itsUKstaff was merely to market Google as an advertising space. The distinction allowed the company to pay just £6m of tax on £2.6bn of profits derived in the UK in 2011. However, an investigation by the news agency Reuters has suggested many of Google’s UK staff have job descriptions that would contradict this.
Today Mr Brittin denied trying to “disguise” the way its business operated to minimise its tax bill in the UK. Instead he insisted that he stood by evidence he gave last year that all of the firm’s advertising in Europe was sold through its offices in Ireland.
Such practices are at the top of the UK Government’s agenda for its chairmanship of the G8 this year and will be discussed by world leaders when they meet in Northern Ireland next month.
Ministers promise to get tough, but will they succeed?
Ministers have promised to take action following the revelations about how little big name brands like Apple, Starbucks, Google and Microsoft pay in tax in markets where they reap billions in sales. The companies say they follow the rules but David Cameron and George Osborne say that they intend to impose tighter regulations that would prevent the out-sourcing of profits to low tax jurisdictions.
We’ve heard this talk on forcing big businesses and brands to pay their fair share of tax before. Politicians will have to find a way that chains brands and businesses to a system where tax is paid on where it is generated. But when you consider that opposing them are some of the best accountants money can buy, able to find loopholes as soon as authorities try to tie them down, you have to question whether the Government will succeed.
Whatever the outcome, you can rely on us to continue campaigning for a fairer system on our blog no matter how many hackers try to shut us down.
Ray L Best
PS Ray is an Alternative Financial Planner and published author. Published works include “How Much!” and “Inheritance Tax Simplified”, which both cover Inheritance Tax. He is also responsible for “Financial Reality”, a seminar that outlines the need to radically re-think current financial planning issues.
For wealth management, inheritance tax planning, capital gains or corporate tax planning, please e-mail firstname.lastname@example.org or call 01189 347 920 to arrange a free consultation.