Friday, July 19, 2013


BLOG 139



I Googled myself the other day.  It’s not something that I do very often but I was looking for something.  When the list came up, I was surprised to see myself described as “long-standing tax avoider, Robert Maas”.  I don’t recollect ever having sought to avoid tax although I do admit that, when I am in America, I do occasionally look at the local sales tax rates and sometimes buy things where they are lowest.  I suppose that is tax avoidance.

Intrigued, I clicked through and found myself in the middle of an old article on the Richard Murphy website.  Richard is the scourge of what he perceives to be the tax avoider.  I don’t know what I did to him to merit that label.  Admittedly I rarely agree with his views, as I do not embrace his personal definition of tax avoidance.  I have only met him once as far as I can recollect.  I did have a brief correspondence with him a few years back when I questioned how he advised his own clients and he told me that there is a huge difference between tax planning and tax avoidance, but I chose to terminate the correspondence without learning what that difference is.

But I digress.  Richard’s website told me that he has a new book out.  “Over Here and Undertaxed: Multinationals, Tax Avoidance and You”.  It’s all about those three wicked tax avoiders Amazon, Google and Starbucks.  I was intrigued by the irony that, my having started from Google, Richard directed me to Amazon to buy his book (no, I didn’t rush out for a Starbucks coffee to sit down and read it).  I duly paid my £1.83 to Amazon in Luxembourg and settled down to read it.  Although I disagree with most of the content, it flows well and I thought it value for money.  Whether I would have paid, say, £2.50 to enable Amazon to pay more tax is another question.  I was also intrigued that Richard chose as his publisher US multi-national Random House.  I suspect that neither Random House nor Amazon will pay UK tax in its share of my £1.83, so only the bit (if any) that goes to Richard will pay UK tax.  I think it generous of Amazon to stock a book dedicated to slagging off Amazon.

But back to Richard’s book.  I found it very facile – although it is obviously not aimed at tax specialists.  It is very heavy on Richard’s personal involvement in challenging tax avoidance; he seems to be behind, or involved in, an awful lot of the public criticism of tax avoidance.  It also of course reflects Richard’s views of facts, which do not always conform with how others perceive them.  For example, Chapter 1 tells me that before 2008 almost no one (other than Richard and a few others) cared about tax avoidance, but in 2011 a story about Google’s tax was published in the UK which made people realise “that there were large companies … not paying their fair shares in taxes.  And what that meant was that ordinary people were going to have to pay more”.  This of course begs some very large questions.  What is a company’s “fair share” in taxes?  How much is “lost” by tax avoidance?  Are ordinary people really going to have to pay more?

Take “fair share”.  What is the fair share of tax to be paid in the UK on Richard’s book?  It was presumably written in the UK, published by a large US company, and sold to me by a Luxembourg website that I clicked through to from my house in the UK.  Which country should fairly get the tax on my £1.83 (or rather on whatever profit has been made out of my £1.83)?  Or should it be divided amongst the US, Luxembourg and the UK, and if so, how? The tax rate in the US is 35%, that in Luxembourg is 28.8% (effective) (I suspect actually that Amazon Europe are based there because it has a low VAT rate rather than a low corporate tax rate) and it is 23% in the UK.  Richard appears to think that it is fair for the UK government to get the tax.  It is not clear to me why.  Richard defines tax avoidance as “claiming the tax benefit provided by Parliament without suffering the anticipated economic consequences”.  I have written elsewhere about Google, Amazon and Starbucks (Taxation, February 2013).  None of them seem to me to be avoiding UK tax, even under Richard’s definition. 

Google has chosen to base its European operations in Ireland.  It is surely entitled to do so.  Ireland has chosen to finance its economy with a low corporate tax rate and a high VAT rate.  Most studies of tax, for example the Mead Report in 1978, and the Mirlees Review in 2010, recommend such a balance as sales taxes are easier to collect and taxing consumption does not inhibit growth as much as taxing income.  The UK itself has reduced its corporate tax rate significantly in recent years under both the Labour and Coalition governments, specifically to seek to attract multinational corporations to create jobs in the UK rather than somewhere else.  Google choosing to base itself in Ireland rather than in France or Germany or the UK (it surely can’t be expected to have companies everywhere and forgo the commercial economies arising from a single European base) seems to me no different to my choosing to buy my shirts in Wisconsin rather than neighbouring Illinois because the sales tax is lower.  The UK has entered into a treaty with Ireland (last updated in 1976) that says that the UK will not tax an Irish company on sales in the UK unless they are made through a permanent establishment in the UK and, in return, Ireland will not tax, say, John Lewis on sales in Ireland unless they are made through a permanent establishment (such as a shop) in Ireland.  That treaty had to be approved by Parliament.  Accordingly an Irish company paying Irish tax on internet sales to people in the UK, with the UK not seeking to tax such sales, is precisely the “anticipated economic consequences” that Parliament intended.  Of course there are some MPs who did not approve of that intention (or possibly who have since changed their minds) just as there are some citizens (like Richard) who do not do so (and, of course, a number who the media have stirred up to disapprove without understanding that this is the result intended by Parliament).  It is a fundamental concept of Parliamentary democracy that laws are made by majority decisions.  There are always bound to be some people who disagree with the majority view.

Tax treaties are an important tool in fostering international trade.  If the whole world had the same corporate tax rate, so multinationals had no incentive to shop around for locations, they would still be important – and Google would probably still base its European operations in Ireland because of the ready availability there of a skilled IT literate labour force, which may well be more important to Google than the tax rate. 

One of the things that Richard castigates governments for is that the UK has recently adopted the US practice of seeking to tax international groups of companies only on profits generated in the UK and leaving, say, the Australian government to tax profits made in Australia.  Previously our “controlled foreign company” legislation required a UK company with an Australian subsidiary to pay UK tax on the Australian profits (subject to a large number of exemptions) with the UK government giving credit for the Australian tax paid by the subsidiary.  It largely pretended that the group was a single company, based in the UK solely because the parent happened to be here.  Now we still tax overseas profits where we think they are generated in a particular place in order to avoid tax, but have a simplified system that saves a lot of work and accepts that an Australian company should be paying its taxes in Australia and what taxes are imposed in Australia should be of no concern to the UK simply because the company’s shareholder is a UK company.

Richard and other campaigners talk a lot about fairness.  That seems a lot fairer to me than the previous concept that a company (or rather the group of which it is a member) should end up paying the higher of the tax in its home country and the tax in the country in which the group parent is based. 

Similarly with Amazon.  The deal with the US is that the US should tax Amazon and the UK should tax John Lewis on internet sales made in the other country.  That seems a lot fairer to me than either that the two countries should both try to tax Amazon on the same profits or that Amazon should be caught up in the middle of a long squabble between the two as to which should do so.  Both countries have treaties with Luxembourg which similarly say that Luxembourg should tax a Luxembourg company on internet sales rather than the UK or US doing so.  That seems equally fair to me, but if it is perceived to be unfair, it is surely unfair to US taxpayers, not UK taxpayers, because Amazon Luxembourg is part of a US group, not a UK one.

Of course many people think that the concept of imposing tax where a company is based is inappropriate in the internet age.  I do myself.  But it is surely for governments to revisit their treaties, not for a tiny number of ill-informed campaigners to seek to bully multinationals into paying tax in a country where there is little logic in doing so.  That is actually what is happening.  David Cameron has asked the Organisation for Economic and Commercial Development (OECD) to look at the issue, and it is doing so.  Richard thinks – rightly – that it will take many years for governments to reach agreement on this issue and in the interim the UK should simply ignore the bi-lateral treaties that it has entered into with other countries.  I doubt many informed citizens share that view.

The issue is not as simple as it is made out to be.  UK law says that if I go into a shop, pick up an item off the shelf, and proffer it to the cashier together with the right amount of money, I am offering to buy it.  The cashier is perfectly entitled to say to me that the price on the label is incorrect and the shop is prepared to sell it to me only at a higher price.  The legal concept is that I do not have a contract to buy until the shop accepts my offer.  It follows that if I write a letter to a company in America offering to buy something from it, I do not have a contract until the US company accepts that offer.  So where is my contract made?  It is surely in the US where it was entered into by virtue of being accepted there.  Why should it be different if I make the offer to buy by hitting a key on my computer in the UK and Amazon’s computer in Luxembourg accepts my offer and asks for my credit card details?  To source that sale in the UK because that is where my computer happens to be is not simply a tax issue; it undermines international contract law.  And what if I had bought Richard’s book on my i-pad when I visit Chicago, as I do every year.  I think that Richard would still want to source the sale in the UK because that is where I live.  On that logic, when I buy a beer at Rockbottom Brewery (my favourite Chicago Brew-pub) I ought to be saying, “I live in the UK so I shouldn’t pay Illinois sales tax as I won’t get any benefit from such tax, charge me UK VAT instead”.  I suspect that if I try that, I won’t be sold many beers!  Or perhaps I will, as the pub might take the 20% from me rather than the 9.25% that the Illinois government want, but then the UK government won’t see that money.
I want to challenge a lot of other things that Richard says in his book, but don’t have time to write a book myself, so I will stop there for now and revisit his subject in a later blog.


Friday, July 12, 2013


BLOG 138




I started this blog some years ago with the encouragement of my partners at Blackstone Franks LLP.  Blackstone Franks is now no more!  Well that’s not quite correct.  Blackstone Franks merged at the beginning of last week with CBW and is now CBW Blackstone Franks.  We have moved to CBW’s offices in Aldgate.


CBW is a larger firm than Blackstone Franks but its clientele is similar and so is its philosophy.  It also seems to be a fun firm to work for – although it may of course be that everyone was making an extra effort for our first week.


It’s a great move for me because CBW are letting me carry on much as before and in addition hopefully their clients will provide a lot of interesting new problems for me to solve.  They also want me to help them develop their tax consultancy practice and I am very much looking forward to that new challenge!


The demise of Blackstone Franks does not spell the end of the Journals of Robert Maas.  It does however mean that if you have been used to finding this blog via the Blackstone Franks website, I don’t know how much longer you can continue to do so as I suspect that CBW will want to close the site down.  However you can still access it through blogspot –


What is likely to be a bigger challenge is that CBW operates a paperless office.  Now I’m not entirely IT illiterate but I tend to be a bit of a Luddite (OK, I admit it! I’m a Luddite and don’t want to have to learn to live in the digital world) so I’m not looking forward to having to survive without hard copy files.


Talking about hard copies, I tend to print out tax consultation papers.  I like to scribble my comments alongside as I read a document.  I notice that HMRC are no longer allowed to put their consultation papers on their website.  It transfers the reader to a new cross-government site, “Publications – Inside Government – GOV.UK”.  I have just downloaded two Treasury consultation papers from the site.  One of them is entitled “HM Treasury. Hjgu!Bje!boe!ejhjubmthjwjoh. Kvmz!3124” and the other is called “HM Treasury. Tvqqpsujoh!uif!fn qmpnzf f. px of st I jq! t f dups” Kvmz 3124”.  Fortunately the body of both documents is in English so I will be able to read them.  The first is about Gift Aid and digital giving and the second is about Changes to ISA qualifying investments.  I hope that I can remember which bit of government gibberish relates to which!


Talking of consultation documents, I notice that the Gov.UK website does at least retain the contrast between thrifty HMRC and wasteful HM Treasury.  Some years ago HMRC realised that, like me, a lot of people print out their consultation papers and that accordingly they should be conscious of this and edit out blank pages and duplicated front pages on the digital version of their website.  That cuts down on wasted paper.


For the Treasury, by contrast, it’s, “Money no object; after all its taxpayer’s money, not ours.  Let’s just put the paper version on the web as it stands rather than have to spend a few minutes to remove unnecessary pages”  But then you’ve probably noticed that the George Osborne version of austerity is that local authorities must cut their budgets but it would be wholly unrealistic to expect central government to do the same, so the Treasury’s budget was increased, albeit not by as much as he would have done in more exuberant times.