Nero Holdings Limited - stay of execution

[Keef]

Even if they fined them a load of money, I very much doubt they'd then use it to benefit the ED community (if that's what you meant?). I personally disagree that it should be used on the area anyway. If Southwark were to fine them, then Southwark should use any money they get on the things that most need sorting....

[Peckham native]

Mark Wrote:

-------------------------------------------------------

> As far as I can see they've done wrong but I

> believe the punishment should benefit the

> community if possible. Anyone know what the

> maximum fine imposable is?

They did wrong by not applying for planning permission. They legally put this right by applying for retrospective planning permission. This was refused and they are appealing against this refusal. They can only be fined/closed down if they lose the appeal and then carry on trading.

[edhistory]

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9685571/Caffe-Nero-CEO-fights-back-on-tax-claims.html

[The ED Wilberforces]

So, they are all at it. How depressing.

Anyone up for a boycott of all these corporate 'tax avoiders'?

[James Barber]

I had the misfortune to meet the Caffe Nero Finance Directo at the planning application appeal.

During a break I personally found him one of the most arrogant and unpleasant people I've ever met. His view of the 'little people' ie. his customers and the sites neighbours was at best rudely dismissive.

So I do not find it surprising they've chosen to find loopholes to avoid paying any corporation taxes.

What is even more shameful is chancellors for decades have allowed this situation to develope where companies can choose to pay or not pay UK taxes. It is plainly immoral and unsustainable if we wish to have a thriving UK liberal economy - it's a zero sum game.

If you find it offensive do boycott those organisations you feel are being immoral and place your business with UK registered companies that do pay tax. But do also write to your MP and newspapers. Unless they think people are really bothered it will quickly slip of off the national agenda.

[peckhamboy]

I think there's a danger of getting things rather out of proportion. There are a number of perfectly legitimate ways of reducing tax bills (especially for corporates) - all introduced by governments keen to encourage particular activities or to promote business and entrepreneurship. For example, payments of interest on debt are tax-deductible. A company would be mad not to take advantage. Surely the fault is with our overly complex tax system more than with the companies who have to navigate their way through it?

And if the problem is multinational companies registering in countries with low tax rates, perhaps the cause is that our tax rates are too high? There is plenty of evidence that reducing tax rates also reduces tax avoidance as the marginal gains become smaller and it's no longer worth the hassle and expense of complex tax planning.

It will never happen though. It requires imagination and balls, and it's so much easier for politicians to surf the wave of public outrage and demand that 'immoral' businesses stop their disgusting and totally legal ways of reducing their costs.

[James Barber]

But that's a zero sum game where countries keep lowering tax rates until comapnies pay no tax and the entire tax burden is placed on individuals - which effectively doesnt mean the rich who also avoid tax.

No, peckhamboy what you suggest is not helpful but I do agree chancellors have sold UK plc down the river. Simple tax on turnover which would bring enough tax receipts to reduce employers National Insurance contributions - which is a tax on employing people.

[peckhamboy]

I think you may be over-politicising the issue James. I appreciate that we come at this from different ideological viewpoints but I don't recall suggesting rates are reduced to zero. Even small reductions in rates can have significant impacts on behaviour. The point is that the UK has relatively high tax rates and relatively few benefits to living and working here.

Those who really lose out in this game are the ones with sufficient income to be considered 'fair game' and insufficient income to be able to afford accountants and lawyers to take advantage of loopholes - which is why the 50% tax rate was reduced but the horribly cynical removal of personal allowance has been allowed to remain, why child benefit has been removed, why the childcare voucher scheme benefit has been reduced.

[James Barber]

So UK plc reduce corporation tax, Germany then reduces it, UK plc then reduces it to compete, etc, etc.

Effectively bigger businesses play one coutry of against another but the big business only exists because of the citizens of those countries.

[Cyberia]

Never mind comparisons with Germany and Ireland - according to the article, UK is competing with IoM - zero%.

Here's the relevant quote: "Although the vast majority of Caffe Nero?s business is conducted in the UK, its parent company is based in the Isle of Man for tax purposes. Despite its geographical proximity to the UK, the standard rate of ?corporate income tax? is 0pc on the island."

And apparently the UK profits are all eliminated with 'PIK' notes, at a high rate of interest... Doubtless all very much legal, but not exactly making it easy for the UK to compete!

[mikeb]

1. I get fed up when companies claim they are paying lots of tax because of PAYE - that is tax that I am paying, not the company or its shareholders.

2. How much of the interest paid by Nero is being taxed on receipt? Sure some of the interest received is taxable but plenty is not. Yes, interest should not be tax deductible, completely the wrong incentive for a company.

3. However, let's be clear: corporations are not people - everything is ultimately owned by or for the benefit of individuals. So by all means tax corporations if it's easier than directly taxing people (particularly overseas or wealthy people) but let's be honest about the incidence of this tax: it is ultimately borne by shareholders, employees and customers.

4. Tax on turnover is unworkable - what is the appropriate level of tax? Operating profit margins vary across industries from 1% to 40%, and it is often those with slim margins that are providing the most useful goods to lower-paid people.

[Twirly]

Yet another reason to support small, local, independent businesses.

[antantant]

Small shops can be tax dodgers too, while some big companies do pay correct and ethical amounts of tax on the money they make in this country. What we need is an easy way of being able to tell who is naughty and who is nice.

[Penguin68]

The concern must be when large concerns can use their global reach to move 'taxable' earnings out of reach of comparatively high ticket tax regimes - thus effectively reducing their world-wide operational costs (where you take tax as a cost) - this allows them (if they wish) to reduce their prices against those who have to operate under local tax regimes. I am not saying that such price predation is taking place with Cafe Nero - but the potential is there is you have the option to distort your cost base.

I have been quite interested, if it is true that Starbucks has been declaring a loss for tax purposes in the UK for most of its operations here why it has not been charged with trading insolvently - as clearly it must technically have been - it would be interesting to see how the UK company would counter a winding-up petition.

[peckhamboy]

> I have been quite interested, if it is true that

> Starbucks has been declaring a loss for tax

> purposes in the UK for most of its operations here

> why it has not been charged with trading

> insolvently - as clearly it must technically have

> been - it would be interesting to see how the UK

> company would counter a winding-up petition.

Different tests. I'm no tax expert but profit or loss is basically income minus costs over a set period, whereas the insolvency test is essentially whether liabilities exceed assets or you are unable to meet your debts when due. In the latter, you can have plenty of assets on which you are not taxed (eg cash in the bank - you pay tax on interest but not on the capital). And then you factor in interest on loans, which is effectively offset against taxable earnings, other permitted deductions and amortisation, to give you your taxable earnings (or losses if you have enough deductions). So for companies with clever tax planners, if you structure your debt the right way you can operate at a loss for tax purposes without actually being insolvent.

[Marmora Man]

Interesting debate - probably worthy of a thread of its own.

First question - which of us reading this thread would pay more tax than they have to?

I watched Margaret Hodge chair the Public Accounts Committee where she and her fellow MPS gave us lots of posturing but little useful outcomes or ideas. The plain fact is that the reason why companies pay low rates of tax lies with the government and not with the individual companies or their Finance Officers. The problem is, as Peckhamboy has pointed out, far more nuanced than a simple "they should pay more" response.

By employing staff they do support the country by paying NI and through the staff's PAYE - what would the LibDems prefer, higher unemployment and a lonely position on the moral high ground, or companies moving to UK to take advantage of low corporate tax rates and bringing with them new jobs and employment opportunities?

The Laffer is a good illustration of how as tax rates vary from Nil to 100% so the revenues they generate creates a curve topping out at, in UK, around 44% - 46% (higher than it was about 10 years ago) and demonstrating that very high tax rates reduce tax take.

[*Bob*]

It will be interesting to see whether the great british public - who if stopped in the street and the strings pulled in their backs blurt-out 'fat cats! tax avoidance! getting away with it!' - will do anything other than continue to buy their stuff from these so-called 'shamed' companies.

I suspect that in the majority of cases, the chance of getting that thing on Amazon for ?1 cheaper then elsewhere will override any indignation.

[Alan Medic]

It may interest people to know that Starbucks are franchises, as a man in the audience in Question Time last week told the panel. Yes he pays royalties to Starbucks but if people were to boycott his cafe then he and 19 others would be out of work.

[Huguenot]

I wonder how much corporation tax the Blue Mountain coffee shop and others of its kind declared last year?

I'm guessing they put back their various loans and business expenses against tax and allocated cash to various contingency funds before calculating it ;-)

The idea that it's the big multinationals who are solely to blame seems a bit weird.

And as the audience member pointed out, each one of the shops employs a dozen people...

[Salsaboy]

And what they are doing is actually legal. It's the government that needs to change the law.

[LondonMix]

Its times like this that I love the EDF. A complex subject being discussed with nuance and reason! There is a huge difference between tax evasion and tax planning. Tax planning is in no way immoral. The government intentionally creates ways for businesses to reduce tax and any who don't take advantage would be at a disadvantage. Most companies are using tax law exactly as the authorities intend them to rather than exploiting the law for ends never intended by the government. In fact most investment firms if they are concerned that they might be abusing a new law will go for a tax ruling from the authorities to clarify intent (this is very common). Even when people moan about tax havens they fail to realise countries often have tax treaties to enable this.

If you want to increase corp tax then advocate for a change in the tax laws but again be aware of the consequences. Some low margin businesses might be squeezed too far, or prices will increase or profits might fall. Profits falling might sound fine until you look to see who really owns shares (largely institutional investors like pension funds). For rich individuals, their income will be less and income tax will go down.

Small business owners who I have worked for do this as well as they don't want to pay tax on their business and then again as dividend taxes when they takeout the profit. Depending on the various marginal tax rates they manipulate how much they pay themselves as salary vs dividends vs corp tax.

[Twirly]

Salsaboy Wrote:

-------------------------------------------------------

> And what they are doing is actually legal. It's

> the government that needs to change the law.

Precisely

[Penguin68]

I do think we have to distinguish between acting legally and acting ethically - a company can (most normally do, including those currently being pilloried) act wholly within the law, particularly regarding tax law, whilst still acting unethically - it is generally considered ethical to pay taxes to regimes where you operate, and benefit e.g. from all the benefits which companies in the UK get from free labour laws and low social taxation (i.e. NI and equivalents) for companies, together with access to people prepared to work for you and customers prepared to pay for your goods and services - the 'availability' of both being at least partly delivered by the society, funded in part by taxation, from which they stem.

If Starbucks and others want just to benefit from Luxemburg and Swiss etc., taxation, they should operate just in those countries and not take tax delivered social and economic benefits from countries whose taxes they are not prepared to pay, even where legally they can work to avoid those tax burdens.

More and more companies preach 'corporate social responsibility' - that implies ethical behaviour which goes far wider than simply being directed just to customers, employees and stakeholders.

It is not just a matter of altering the law to catch these people, nor should we accept a robber baron mentality which suggests that anything not forbidden should be actively pursued. It may be technically legal, but these people are still cheating the societies they are drawing their (untaxable, apparently) income from - praying in aid legality does not excuse their lack of ethical consideration.

[david_carnell]

The idea that this can be blamed only on the government (or a series of governments) is simply ludicrous.

The fact that Amazon.co.uk try to claim they are not a UK company, despite having "fulfillment centres" dotted around the country housing thousands of products, employing thousands of people all paying UK PAYE income tax, billing customers in British pounds, using the Royal Mail and British road, rail and air infrastructure is the height of duplicitous disingenuity.

Governments have offered businesses plenty of tax breaks, grants and discounts and yet still these multinationals use their pan-national status to avoid paying money they do owe.

The premise that MamoraMan puts up is a straw man. Taxing these companies wouldn't result in job losses. Just less profit, less shareholder payout. And if (hypothetically) Amazon tanked, I'm sure many a high street bookseller and retailer would happily pick up the slack. The demand for the product would still remain. To keep this ED specific, if Costa on LL closed - other coffee shops pick up the trade and could employ more staff. Or another one opens in the same site and the identical scenario takes place. Unless of course, MM is claiming coffee consumption increases proportionately to number of outlets available?

Starbucks may well be a franchise, but they all pay fees and profit ratios to the head office. The fact they sell coffee from an office in Zurich (Switzerland being a renowned coffee producer!) and claim to be making losses in the UK is humourless irony.

[LondonMix]

Sorry but the UK etc. create tax treaties with tax havens (Isle of Man) to enable exactly this. This is not accidental or sneaky or just technically legal. Saying it?s unethical to use tax law as its intended is in my view missing the point. There is absolutely no cheating going on and everyone is entirely aware (meaning the authorities) of what they are doing. The behavior is not just legal but specifically encouraged. For instance, when the law recently changed to stop people from acquiring residential properties via offshore vehicles in the Isle of Man, many lawyers etc. spoke to the tax authorities to understand if they wanted to prevent commercial real estate transactions from being able to benefit from the existing tax rules as well. The answer from the authorities was "no" commercial real estate transactions were different because they want to encourage business.

The very existence of this complicated tax system is so the politicians can say one thing to the public while intentionally doing / saying something else to the business community.