Value Altered Tax

February 4, 2009 7:23 AM

The Tax Gap- "The Guardian will examine the extent of tax avoidance by big business, day-by-day over two weeks. We are naming more than 20 major British companies, and analysing their secretive tax strategies to ask: are they paying their fair share?".
posted by Gyan (34 comments total)

This is the part where someone claims that a "legal" "tax strategy" is automatically ethical and moral because it makes money, which is an absolute good.
posted by DU at 7:27 AM on February 4 [1 favorite]

A section of the Tax Gap subsite also addresses the Guardian's own tax position.
posted by Jakey at 7:36 AM on February 4 [1 favorite]

Wow, that link about their own tax position is so typical. They try to gloss it over by saying someone reviewed it and found "nothing abnormal". Then they get called on how ridiculous that is when they are are funneling money through Cayman Island corporations to avoid taxes, so they write a defensive rebuttal and close any further commenting.
posted by smackfu at 7:51 AM on February 4 [2 favorites]

Depending on how common corporate tax avoidance is in the UK, there may, in fact, be nothing "abnormal" about it.
posted by Gyan at 8:01 AM on February 4 [1 favorite]

There are dirty ways for small players too. My brother in law went to a seminar on a tax dodge where you give money to a charity that proposes to send medical supplies to the third world, then turns around and sells them and gives contributors the principal back, or the insurance from after the supplies expire. I forget the exact details. Everyone's a winner!

"It's legit", he tells me.
posted by fleetmouse at 8:02 AM on February 4 [1 favorite]

fleetmouse, that's the worst type of tax fraud for the defrauder, because if the charity gets busted, which they eventually will, the IRS has a handy list of people to audit.
posted by smackfu at 8:05 AM on February 4

Tax Justice Network and Tax Research
posted by Abiezer at 8:07 AM on February 4 [1 favorite]

I thought it was the worst type of tax fraud because it made me want to punch my brother in law in the face. And that can lead to marital stress.
posted by fleetmouse at 8:14 AM on February 4 [3 favorites]

Ah, yes, the "Tax Gap". This is a fabulous wheeze whereby a politician decides how much he think the Government "should" get in tax, looks at how much it does get in tax, and decides the rest is immoral tax evasion. Says who?

There are two simpler ways to fix the tax system:

1 Increase the basic rate of tax rather than pressuring tax inspectors to increase their yield from companies. But that's politically unpleasant, much easier to blame companies.

2 Simplify (or at least stop changing) the tax system. But that's hard work and takes time away from passing ANOTHER Criminal Justice bill with some juicy tabloid-friendly measures, results in winners (who keep mum) and losers (who complain loudly) and so is again politically unpleasant, and gets in the way of Brown's attempts to micromanage the economy (R&D tax credits, for example) because [sarcasm] a career politician knows so much more than the private sector about the best allocation of cash. After all, his twelve years in charge of economic policy has gone so well, hasn't it? [/sarcasm]

I'll hold my hand up and admit I contribute to the "Tax Gap". I have a pension, on which I get a tax refund, and an ISA, a savings vehicle on which I pay no tax. Am I a bad person? Should I just dump the money into a current account so I can pay more tax on it? After all, the Government has some more wars in Iraq and hopeless IT projects and discredited bankers to spend their money on.

No. I shall arrange my affairs, quite legally, to pay the least tax possible. Why should any company behave any differently?
posted by alasdair at 8:17 AM on February 4

50 minutes.
posted by DU at 8:19 AM on February 4 [2 favorites]

If only we could lock out the off-shore banking industry. They exist to evade taxes and launder money. Why do we tolerate that?
posted by a robot made out of meat at 8:47 AM on February 4

Says who?
People who become aware that your company has hired teams of lawyers and accountants to set up offshore subsidiaries in notorious tax havens.
posted by Abiezer at 8:48 AM on February 4

Because they are a separate country?
posted by smackfu at 8:48 AM on February 4

Why do wethe rich, ruling classes tolerate that?

Why indeed.
posted by DU at 8:55 AM on February 4

This is a fabulous wheeze whereby a politician decides how much he think the Government "should" get in tax, looks at how much it does get in tax, and decides the rest is immoral tax evasion. Says who?

You know, I used to try and fight this kind of reasoning, but you know what Alasdair: you win. You're right. Who is this big bad "government" (some BS about a corporation "by the people, for the people" comes to mind, but I don't remember) to tell us how much money it needs to do what it does? It just makes so much more sense to trust corporations with non-elected officials to look out for my interests.

Also, I assume you're not using the internet now, or for that matter a computer, and that you never drive on public roads or the interstate, and have never needed ambulance or other emergency rescue service, or flushed a toilet on a public utility system "for free," or strolled around a public park or checked a book out at the library, or benefited in any way from public education or publicly-subsidized university research, or flown on a plane, or used the US postal service, or made a phone call. Or at least, I assume you'll be okay with not making use of any of those things in the future? Because me, I don't need any of 'em anymore if it means having to pay a single shiny nickel of my hard earned cash (oh--heh! I guess we'll have to find a way to mint our own shiny nickels, too, from now on).
posted by saulgoodman at 8:57 AM on February 4 [5 favorites]

Why should any company behave any differently?

Because companies operating at scale extract magnitudes more from the system than an equivalent number of individual ever could hope to. They lobby and tie up our elected officials; they change legal frameworks to benefit themselves. They don't have to think about inheritance tax or continuity. They are effectively immortal.

Unless you're immortal, know a huge number of politicians personally and can get time with them, and can change laws to suit yourself - in this case, you're right. Companies and individuals should be treated equally.
posted by davemee at 9:00 AM on February 4 [4 favorites]

...(some BS about a corporation "by the people, for the people" comes to mind, but I don't remember)...

Well, on second thought, if you're a Brit, alasdair, your government's just got no legitimate moral basis at all, so disregard this part...

(I couldn't be more kidding--in fact, God Save the Queen!--so please no pile-on...)
posted by saulgoodman at 9:01 AM on February 4

He said why should a company behave any differently, not be treated any differently.
I agree with you both.

If you play by the rules laid down, good on ya.

If we as citizens don't like the rules, then we need to change the rules.

Companies should have to play by different rules, but that's not the current state of things and I can't blame a company for taking full advantage. Nor can I really fault the uber-wealthy.

Now, if they break those rules, God help them.
posted by BeReasonable at 9:09 AM on February 4

As long as there are powerful institutions (corporations, governments, religions ... take your pick), powerful institutions will bend the rules in their favor.

The only thing that's surprising is that an individual would prefer one or other powerful institution over another.
posted by ZenMasterThis at 9:21 AM on February 4

I have personally managed my affairs to minimise tax liabilities. I found a loophole where you can avoid any tax whatsoever. All I had to do is arrange for my income to be less than £6,000 a year, and voila! The taxman cometh no more.
posted by Sova at 9:30 AM on February 4 [1 favorite]

Wait, corporations are paying for legislative influence and avoiding tax?


No representation without taxation!
posted by Sova at 9:33 AM on February 4 [3 favorites]

I shall arrange my affairs, quite legally, to pay the least tax possible. Why should any company behave any differently?

Because corporations are not people. I see hypothetical situations that compare businesses to people all the time. Portraying corporations as people doesn't make sense.

You don't live forever. Corporations do.
You have ethical and moral responsibilities. Outside of profit, a corporation has none.
You are liable for what you do. A corporation is *built* to limit liability.
Unlike a corporation, you have a body to beat and a soul to damn.

The fiction of corporations as people isn't even based on an actual Supreme Court decision, but on a biased court reporter's notes in the Santa Clara case.
posted by Monsters at 9:55 AM on February 4 [3 favorites]

I thought US corporations as an entity derived from the "Limited Companies" of English common law?
posted by ZenMasterThis at 10:08 AM on February 4

I thought US corporations as an entity derived from the "Limited Companies" of English common law?

Yep. Companies were chartered by the crown, which gave the company a monopoly. Limited liability was built in- in part, to protect the royalty that issued the charter. This evolved into US corporations being chartered by individual US states.

Corporations didn't always exist in their current form, though. Originally, corporations were limited to doing business in the state where they were chartered, and charters expired after two years- giving the states great control over how companies operated.

That changed in the mid-1800s, when Tom Scott of the Pennsylvania Railroad convinced the legislature to allow the P.RR. to hold stock in other companies. A whole cascade of events in the mid 1880s came together to give us the modern corporation, including "personhood", ability to incorporate in any state and unlimited charters.
posted by Monsters at 10:47 AM on February 4

erm, make that "mid 1880's" into "mid 1800s". Damn fat fingers!
posted by Monsters at 10:49 AM on February 4

Corporations shouldn't pay taxes, when they do it takes away from the amount of money that I can get from them through trickle down economics. Hopefully that check will be in the mail soon...
posted by Vindaloo at 10:51 AM on February 4 [2 favorites]

[sarcasm] See, now, I thought I was proposing increasing the rates of tax when I wrote "increase the basic rate of tax" above but it turns out I'm some kind of Randian libertarian committed to the destruction of the public sphere! [/sarcasm]

Supporting public provision of public goods is not the same as blindly supporting Government policy. I support the National Health Service. I oppose, for example, HMRC trying to end separate taxation for women in the Arctic Systems case because they regard it as part of the "Tax Gap": "The policy will be seen as an attack on a woman's right to own assets and receive income independently from her husband, and as a retreat from independent taxation."
posted by alasdair at 11:07 AM on February 4

We as "citizens" can't change the rules. We elect people who go to Washington and then they get invited to great parties and trips by lobbists that work for companies, not "citizens".
posted by DaddyNewt at 12:17 PM on February 4

Well, alasdair, I owe you an apology, because it seems I pulled the trigger on my little tirade too soon. My patience is just so completely exhausted with hearing any sort of grousing at all about burdensome taxation, etc., etc.

For a good percentage of us here in America, you'd think there were no other issues with any relevance at all, and that we have only magical fairies to thank for our public services and infrastructure. We never talk about the specific ways in which taxes are spent, just about how awful big bad taxes, writ large, are.

FWIW, in the US at least, I don't think changing the base tax rates would do much good, because so many of our companies get around paying their fair share of taxes by formally relocating to other countries with more favorable tax rates.

Like Goldman Sachs, for example, which after taking more than $14 billion in Federal aid money, moved the bulk of its business into its subsidiaries in countries with lower tax rates in 2008, so that it's overall US tax rate in 2008 was only 1% of its total revenues for the year.
posted by saulgoodman at 1:26 PM on February 4

or flushed a toilet on a public utility system "for free,"

As they say, "there's no free flush".
posted by ersatz at 2:12 PM on February 4 [1 favorite]

No, I'm sorry, saulgoodman, I was snarky back.

Yes, as a foreigner it's fascinating to read American conversations on public services. The National Health Service is the most entertaining subject: to us it's just part of the infrastructure, like the freeway system. You never think about it, it's just there, and everyone can use it. It's congested in places, but it doesn't cost anything to use. Rich people avoid using it by having private jets, but most people are happy to drive.

But then you read on US sites that it's some kind of Communist plot to sap our precious bodily fluids and that we spend 50% of GDP on letting poor people remove their unwise tattoos, and decent normal tax-paying folk have to wait ten years for poor treatment and you think "What? Where? Here? We spend half as much as you and have a better healthcare system. That's not 'Socialized', that's good government."

(I mean, on MetaFilter you occasionally read that our European social services have produced a Utopia of happiness and smiling children and you also do a double-take of disbelief, but that's less common!)

And then you read a comment from an American worrying that he's lost his job so suddenly his wife and kids can't go to the doctor or she's gotten divorced and now she's found a lump and can't afford the treatment and suddenly it seems so very very frightening and strange. You're so rich. You're so well-governed. Why haven't you sorted this out?

If President Obama managed nothing at all in the next eight years but a system of national healthcare for you I believe that would still make the most enormous difference.
posted by alasdair at 2:56 PM on February 4

No, I'm sorry, saulgoodman, I was snarky back.
posted by alasdair at 2:57 PM on February 4

Oh, and since the thread is moribund:

your government's just got no legitimate moral basis at all

Pah! You'll be back in the Empire in time, revolting colonist! We're just playing the (very) long game. Grin.
posted by alasdair at 3:16 PM on February 5

Well in that case, I, for one, welcome our gloomy new tea-sipping colonial masters--as long as we get to have double-decker buses, too. ;)
posted by saulgoodman at 6:57 AM on February 6