From that article it sounds like they were within the law. So who's at fault, Rolls for playing the game, or the taxman for not refereeing properly..?
We expect foreign Companies to pay UK tax on sales in the UK (e.g. Starbucks and Amazon), so it goes that we should expect UK Companies to pay tax in their countries of sale. They can't pay it in both
That's what Rolls Royce are doing. They're not avoiding paying tax. But unlike Starbucks who are selling in the UK and not paying tax here, RR do not sell anything here.
It is not taxes on sales which are under discussion here, but taxes on profits (Corporation Tax). Sales taxes like VAT are duly collected and paid over by all these companies in their countries of sale. If RR makes profits in the UK, surely it should pay UK tax on the profits, but allegedly does not - that's the issue. Nobody is proposing double taxation, but single taxation (rather than none) would be good.
That's my point Except I don't believe RR are not selling anything in the UK. Think of all the RN & RAF supply and servicing. Not to mention the BA fleet. The more I think about it, the less comfortable I become.
As I read it, RR ARE paying their taxes, but in/to the country where the profits are made (through their national/local agents). So if RR make a profit on sales in USA (for example), you think they should still pay tax on those profits in UK ? Would love to agree with you, but that's how we got into the "Starbucks & Amazon" scenario. Corporations will simply register in the Country with the most advantageous tax rates.
It depends what you mean by "the country where the profits are made". As you rightly say, RR like Starbucks can use artificial transfer pricing to make profits appear in some other jurisdiction instead of UK. But if you make engines in Derby and sell them all over the world, in a sense the profits are "made" in Derby (even if they are moved elsewhere by accounting tricks) - and so the tax on the profits ought to be paid in the UK. We all know that disreputable companies like Starbucks and Amazon carry out these unethical practices, but it was a bit of a shock and a disappointment to find Rolls-Royce joining them.
But that's the point isn't it ? RR are doing what we want Starbucks etc to do (not the same as) i.e. The RR profit comes back to UK, but after the tax is deducted/paid in the country of sale. Or have I got that wrong? Where I'm feeling really uncomfortable is the suggestion that RR have NO profit from sales (engines or service) in UK. Surely that can't be right as I said above? That would of course undermine my argument.
Mr. Biscuit: I entirely agree with you. You can't have it both ways. Either the profits are where the sales are, or where the company is domiciled. The only difference I can see here is that RR are making things in Derby and exporting them. The profit should therefore be in the UK. In the case of Starbucks, they are making coffee in the UK (although they could import it from the US at some ridiculous price) and selling it in the UK, so the profit should be reported in the UK. Amazon have huge warehouses in the UK, which are essentially their "shops" so ditto, the actual business is happening in the UK. Google is more complicated as they are essentially an advertising agency. I have less of a problem with that agency being located in the States. After all, they are selling cleverness, and that cleverness is largely based in the States.
That's a first. No-one's ever done that before. Ask my Wife (but then she'd probably say they have) :frown:
I would have said the profits are where the company makes whatever it makes. RR aero engines and Starbucks coffees are made in UK, and that is where the taxes on those profits should be paid. That isn't having it both ways, it's simple consistency. My view is that individuals arriving in UK to live and work or foreign companies arriving to invest in assets and operate businesses here are very welcome - provided they pay their taxes in full. People and corporations who set about avoiding taxes and transfer-pricing away their profits so they pay nothing are not welcome at all.
So the cost of all the Chinese, Taiwanese, Japanese, Indian, Korean, French (you get the idea) components and materials that are imported and go to make a "British" product, should be excluded from the profit calculation (as tax on their profit margin will be paid in the country of origin) ? Gonna get real messy !!
