economic situation is dire

[bickster]

Quite clearly, the problem here is the definition of profit.

As a complete and utter layman, Risso keeps talking about Profit, then all these other "costs" coming out afterwards and that is where most logical minds struggle, because to us, profit is what is left at the end when ALL the costs are taken out not some midpoint figure in the accounts, its the bottom line.

[peterms]

Peter, why do you keep going on about tax paid as a percentage of sales or gross profit? It's utterly nonsensical. Any company in a loss making situation (of which there are plenty) will have sales and gross profit, but pay no tax. And of course you don't deduct "liabilities" from gross profit, as liabilities are a balance sheet item. If you're talking about expenses, then in the above company £8m goes on wages, pensions and directors' emoluments, on which lots of nice tax and NI will be paid. They've then paid £1m in rent, and have £600K depreciation. It really is as unremarkable a set of accounts as you could hope to see, and is only being focussed on because of who owns it. All this tax as a percentage of sales is just buffoonery of the highest order. I could link to several extremely boring companies in the UK who I know work hard, have no form of tax planning whatsoever but who struggle because the economy is up shit creek, and who pay very little corporation tax. As a result, their tax to sales or GP ratio would be very small, but that's the thing, if you don't make profits, you don't pay tax. Where exactly do you think Osborne is manipulating things above?

If a company appears to be unsuccessful and reports little profit, it would be unremarkable. If a company appears to be very successful and reports little profit, it would prompt questions. Starbucks, Google, Amazon being three examples which have been exercising MPs today. Large turnover and little profit? Inconclusive. Could be a failing firm, or quite the opposite. The blog I quoted suggests questions are there to be asked.

We seem to come at this from quite different places. You seem to accept the figures that companies report. I think it's as well not to take these things at face value. For example, if you look at "rent", which seems to be a straightforward matter of fact, in the care home sector it has been a mechanism for asset-stripping care companies, paying daft amounts to companies which get hived off by the financiers which bought these companies, leaving the poor sods in the homes to be rescued by the public sector. It was a device, not an objective market reality or matter of fact.

As for Osborne's family firm, I don't know if they are doing anything which falls within the law but also within the scope of the things which had members of all parties spitting feathers today when discussing the three heroes mentioned above. But I am clear that given his position, it would be very helpful to be able to assure ourselves on that.

[Risso]

Quite clearly, the problem here is the definition of profit.

As a complete and utter layman, Risso keeps talking about Profit, then all these other "costs" coming out afterwards and that is where most logical minds struggle, because to us, profit is what is left at the end when ALL the costs are taken out not some midpoint figure in the accounts, its the bottom line.

Er, no. There's gross profit, which is simply your sales less your direct costs of sale (eg with Starbucks, sales less costs of beans etc). Then you deduct your admin costs (rent, wages etc) which gives net or bottom line profit. This is what gets taxed. Leftie loonies going about "percentage of turnover paid as tax" is utterly moronic.

[Risso]

Peter, if anybody is taking anything at face value, it's you and your insistence on believing without checking the facts everything that left wings blogs trot out. I at least attempted to look at the facts and figures of the case. Your 'proof' in the Osborne story was some crap graph showing tax paid as a percentage of sales, which as stated is utterly meaningless.

[peterms]

Peter, if anybody is taking anything at face value, it's you and your insistence on believing without checking the facts everything that left wings blogs trot out. I at least attempted to look at the facts and figures of the case. Your 'proof' in the Osborne story was some crap graph showing tax paid as a percentage of sales, which as stated is utterly meaningless.

I don't think you've followed a word of what I said. You've seen I've quoted a blog, and concluded that I believe everything you assume it says, regardless of what I actually said.

[bickster]

Er, no. There's gross profit, which is simply your sales less your direct costs of sale (eg with Starbucks, sales less costs of beans etc). Then you deduct your admin costs (rent, wages etc) which gives net or bottom line profit. This is what gets taxed. Leftie loonies going about "percentage of turnover paid as tax" is utterly moronic.

And quite clearly you are incapable of taking the accounting hat off

[Risso]

I don't think you've followed a word of what I said. You've seen I've quoted a blog, and concluded that I believe everything you assume it says, regardless of what I actually said.

So what exactly what was your motive for saying:

"Not forgetting Mr O

Why exactly would he be the right person to crack down on taxdodging, I wonder?"

I will happily apologise if you did in fact mean that his company accounts were an example of a company paying the correct amount of tax, although somehow I doubt it.

[peterms]

So what exactly what was your motive for saying:

"Not forgetting Mr O

Why exactly would he be the right person to crack down on taxdodging, I wonder?"

I will happily apologise if you did in fact mean that his company accounts were an example of a company paying the correct amount of tax, although somehow I doubt it.

Repeating myself here.

As for Osborne's family firm, I don't know if they are doing anything which falls within the law but also within the scope of the things which had members of all parties spitting feathers today when discussing the three heroes mentioned above. But I am clear that given his position, it would be very helpful to be able to assure ourselves on that.

[TheDon]

And quite clearly you are incapable of taking the accounting hat off

But when articles are quoting gross profit and going "Look at all this profit, but they pay no tax!" someone needs to keep the accounting hat on and explain that gross profit, quite frankly, means nothing.

Pointing out a company made "30million+ gross profit" is entirely useless, and damages any point trying to be made as it shows a blatant ignorance over simple accounting.

[Risso]

Repeating myself here.

As for Osborne's family firm, I don't know if they are doing anything which falls within the law but also within the scope of the things which had members of all parties spitting feathers today when discussing the three heroes mentioned above. But I am clear that given his position, it would be very helpful to be able to assure ourselves on that.

The two scenarios aren't even remotely comparable though, as even a cursory glance at the accounts would have shown. I don't doubt for a second that Google and Amazon are engaging in all sorts of nefarious activity tax-wise, but then unfortunately most countries' tax legislation is really, really bad when it comes to internet based companies, as legislation was mostly concocted to do with either the physical transfer of manufactured goods, or the provision of financial services from one country to another. The internet makes things much, much more complicated. Looking at Osborne's company though, it looks like a relatively simple trading company with nothing untoward whatsoever. It doesn't have a complicated multi-jurisdictional structure, and really just looks like a company that is suffering due to the recession, which you'd expect from a business concerned with high end home improvements.

[peterms]

The two scenarios aren't even remotely comparable though, as even a cursory glance at the accounts would have shown. I don't doubt for a second that Google and Amazon are engaging in all sorts of nefarious activity tax-wise, but then unfortunately most countries' tax legislation is really, really bad when it comes to internet based companies, as legislation was mostly concocted to do with either the physical transfer of manufactured goods, or the provision of financial services from one country to another. The internet makes things much, much more complicated.

Yes, the internet adds a new dimension. However, listening to Amazon and Starbucks explain the chain of value creation in their respective companies today, I wonder how much difference there actually is. Both deal with a physical product which has to be transported and processed in order to add value. Both route some of the financial transactions through low tax jurisdictions in order to reduce tax, and in both cases this bears little relation to the location or transit route of the goods in question, or the location of the staff who process them or the support functions which underpin them. In one case the ordering is internet-based, in the other not; but that seems not to create any real difference in the value chain as described by the (admittedly obfuscating) senior staff concerned.

Looking at Osborne's company though, it looks like a relatively simple trading company with nothing untoward whatsoever. It doesn't have a complicated multi-jurisdictional structure, and really just looks like a company that is suffering due to the recession, which you'd expect from a business concerned with high end home improvements.

Yes, simple structure. Not sure about the recession. If their level of activity and profit is related to activity not in the economy as a whole but in the tiny segment to which they sell (and surely this is what you would expect), then that particular bit of the economy has been doing very nicely thank you, with top-end houses changing hands for prices which seem to go ever higher. To give an example, the number of houses changing hands in the month of May for prices over £1m doubled from last year to this year. That is the market Osborne and Little sell to (not that they only sell to new purchasers, it's just a proxy for that stratum of society which might buy their wallpaper).

I can see why they might want to report low profits. I can't especially see why a long-established company with presumably a good understanding of their market, which you would think is on top of all the usual things about running their business by virtue of having done it for many years, would find it harder to make profits in a booming market filled with flush buyers.

[snowychap]

Looking at Osborne's company though, it looks like a relatively simple trading company with nothing untoward whatsoever. It doesn't have a complicated multi-jurisdictional structure...

I'm not saying there's owt wrong with the Osborne company but it isn't quite that simple is it?

The one linked to is a subsidiary of the group co. and there's also an Osborne and Little, Inc. in there.

[peterms]

On previous points about how Starbucks manages to present losses in the UK and profits elsewhere, they told the committee yesterday that the UK operation has the beans bought and roasted for them in the Netherlands, they pay a 20% surcharge on the cost of that to the Dutch operation (or is it 20% to the Swiss branch for purchase, which employs 40 people, and a separate charge to the Dutch one for roasting?), and there is a tax rate on that which has been specially agreed between Starbucks and the Dutch government and which they refused to reveal, because it's "confidential".

The Amazon guy was the most splendidly obstructive witness. He told them, with a straight face, that they don't know how much of their profit arises from UK sales, and that he doesn't know who owns the company. He stopped short, just, of saying "A big boy done it, and ran away".

MPs from all parties were incredulous, and angry. Let's see if they actually do anything about it.

[Risso]

I'm not saying there's owt wrong with the Osborne company but it isn't quite that simple is it?

The one linked to is a subsidiary of the group co. and there's also an Osborne and Little, Inc. in there.

There are two holding company that own the UK and US trading companies. All very straightforward, and the fact that the company appears to have an overdraft, bank loan and uses invoice based finance suggests that it's just fnding things hard going. There's no company in a low tax jurisdiction, so there doesn't appear to be any sort of intra-group naughtiness.

[Risso]

On previous points about how Starbucks manages to present losses in the UK and profits elsewhere, they told the committee yesterday that the UK operation has the beans bought and roasted for them in the Netherlands, they pay a 20% surcharge on the cost of that to the Dutch operation (or is it 20% to the Swiss branch for purchase, which employs 40 people, and a separate charge to the Dutch one for roasting?), and there is a tax rate on that which has been specially agreed between Starbucks and the Dutch government and which they refused to reveal, because it's "confidential".

The Amazon guy was the most splendidly obstructive witness. He told them, with a straight face, that they don't know how much of their profit arises from UK sales, and that he doesn't know who owns the company. He stopped short, just, of saying "A big boy done it, and ran away".

MPs from all parties were incredulous, and angry. Let's see if they actually do anything about it.

I only caught a bit of it, but Margaret Hodge didn't impress me at all, as she seemed not to know anything about what she was talking about, and kept repeating things like "you're probably paying all your staff the minimum wage". Probably?

[peterms]

I only caught a bit of it, but Margaret Hodge didn't impress me at all, as she seemed not to know anything about what she was talking about, and kept repeating things like "you're probably paying all your staff the minimum wage". Probably?

She doesn't impress me either, and never has. Neither is the format helpful - questions tend to be haphazard because they have to give everyone a turn, a line of questioning is therefore usually not pursued to conclusion, there is grandstanding with people wanting to make remarks which will get them publicity, and MPs often seem to have done little background research. It's presented as something like a forensic examination, and it's anything but. All of these faults were evident yesterday.

Astonishingly, the execs seemed even less well prepared, and it was this carelessness and therefore underlying contempt for the process (despite repeating "respectfully" at the start of most answers) which will have annoyed the MPs as much as, possibly more than, the taxdodging.

[peterms]

The next question is this. If a few MPs can get these companies to damn themselves so comprehensively with a selection of not especially well prepared questions, what on earth have HMRC been doing?

[snowychap]

...so there doesn't appear to be any sort of intra-group naughtiness.

Which is not the same as saying what you did first time round.

Again, I didn't say there was owt wrong with the Osborne things* but it isn't just the case that there is a simple trading company and that's it.

The phrase you use above implies that one avenue for 'naughtiness' is inter group transactions and transfers, isn't it?

*What would you say about the waiver of the inter co. loan in 2009 that meant that the trading company in the UK filed a net loss of over £7.5 million? (for avoidance of doubt, this is not a leading question as it may be a very okay, normal action)

There's no company in a low tax jurisdiction

That doesn't really matter, does it? It would be about relative rates of taxation and about how best to report within each jurisdiction within each period so as best to 'take advantage' of what are doubtless differences between tax regimes, surely?

[Risso]

Which is not the same as saying what you did first time round.

Again, I didn't say there was owt wrong with the Osborne things* but it isn't just the case that there is a simple trading company and that's it.

The phrase you use above implies that one avenue for 'naughtiness' is inter group transactions and transfers, isn't it?

*What would you say about the waiver of the inter co. loan in 2009 that meant that the trading company in the UK filed a net loss of over £7.5 million? (for avoidance of doubt, this is not a leading question as it may be a very okay, normal action)

That doesn't really matter, does it? It would be about relative rates of taxation and about how best to report within each jurisdiction within each period so as best to 'take advantage' of what are doubtless differences between tax regimes, surely?

Yes, it is just a simple trading company. The fact that it has a UK holding company that the sales get hived up to doesn't alter this one iota.

[snowychap]

Yes, it is just a simple trading company.

As you've posted, there are two trading companies.