The UK Politics and EU Referendum thread - merged

[david3103]

No that's a fair point. I accept that.

It was a more a theoretical question that should a company seemingly making decent "EBITDA" seek to avoid paying corporation tax wherever possible. But I admit I phrased it pretty badly.

Thing is, EBITDA, isn't a way of assessing how much tax a company should pay in a given year. It is a methodology for comparing the performance of companies after stripping out the costs which can vary according to location (tax and interest costs) and history (depreciation and amortisation).

Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?
Lowering CT by reducing taxable profits through higher wages equally so?

Evading CT by dubious use of transfer pricing and shifting profits within a group is a very different thing.

[AlunB]

No that's a fair point. I accept that.

It was a more a theoretical question that should a company seemingly making decent "EBITDA" seek to avoid paying corporation tax wherever possible. But I admit I phrased it pretty badly.

Thing is, EBITDA, isn't a way of assessing how much tax a company should pay in a given year. It is a methodology for comparing the performance of companies after stripping out the costs which can vary according to location (tax and interest costs) and history (depreciation and amortisation).

Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?
Lowering CT by reducing taxable profits through higher wages equally so?

Evading CT by dubious use of transfer pricing and shifting profits within a group is a very different thing.

I didn't say it was.

As to your three points.

Broadly, but it depends
Broadly, but it depends
Agreed.

[DungBeetle]

"Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?"

Not according to the japester who wrote that £93 billion corporate welfare report! 

[AlunB]

"Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?"

Not according to the japester who wrote that £93 billion corporate welfare report! 

Or that japester in number 11 downing street

http://www.theguardian.com/business/2013/may/29/energy-crackdown-government-end-tax-scheme

[david3103]

No that's a fair point. I accept that.

It was a more a theoretical question that should a company seemingly making decent "EBITDA" seek to avoid paying corporation tax wherever possible. But I admit I phrased it pretty badly.

Thing is, EBITDA, isn't a way of assessing how much tax a company should pay in a given year. It is a methodology for comparing the performance of companies after stripping out the costs which can vary according to location (tax and interest costs) and history (depreciation and amortisation).

Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?
Lowering CT by reducing taxable profits through higher wages equally so?

Evading CT by dubious use of transfer pricing and shifting profits within a group is a very different thing.

I didn't say it was.

As to your three points.

Broadly, but it depends
Broadly, but it depends
Agreed.

You asked if a company seemingly making decent EBITDA should seek to avoid paying CT. Seems implicit that you were using the measure for that purpose.


btw, depends on what?

[AlunB]

No that's a fair point. I accept that.

It was a more a theoretical question that should a company seemingly making decent "EBITDA" seek to avoid paying corporation tax wherever possible. But I admit I phrased it pretty badly.

Thing is, EBITDA, isn't a way of assessing how much tax a company should pay in a given year. It is a methodology for comparing the performance of companies after stripping out the costs which can vary according to location (tax and interest costs) and history (depreciation and amortisation).

Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?
Lowering CT by reducing taxable profits through higher wages equally so?

Evading CT by dubious use of transfer pricing and shifting profits within a group is a very different thing.

I didn't say it was.

As to your three points.

Broadly, but it depends
Broadly, but it depends
Agreed.

You asked if a company seemingly making decent EBITDA should seek to avoid paying CT. Seems implicit that you were using the measure for that purpose.


btw, depends on what?

On if it's legitimate/fair usage of the system (the vast majority of cases) of if it's being abused.

And I've no idea how you got that from what I said, but let's not disappear down that semantic rabbit hole.

[DungBeetle]

"Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?"

Not according to the japester who wrote that £93 billion corporate welfare report! 

Or that japester in number 11 downing street

http://www.theguardian.com/business/2013/may/29/energy-crackdown-government-end-tax-scheme

I'm not sure I trust the Guardian on any "capital allowances" matter given the fanfare they gave the corporate welfare report.  It's not clear to me what the energy firms are being accused of doing by Osbourne.  Why wouldn't they be able to claim capital allowances on a new power plant?

[AlunB]

"Lowering CT by investing in assets and thus being able to claim Capital Allowances is surely fine by all?"

Not according to the japester who wrote that £93 billion corporate welfare report! 

Or that japester in number 11 downing street

http://www.theguardian.com/business/2013/may/29/energy-crackdown-government-end-tax-scheme

I'm not sure I trust the Guardian on any "capital allowances" matter given the fanfare they gave the corporate welfare report.  It's not clear to me what the energy firms are being accused of doing by Osbourne.  Why wouldn't they be able to claim capital allowances on a new power plant?

Torygraph any good?

http://www.telegraph.co.uk/news/earth/energy/10087756/George-Osborne-Power-firms-tax-claims-unacceptable.html

[DungBeetle]

Oh I see what they were up to.  Install new rigging at a business.  Make the business pay the cost.  Try to claim capital allowances on the work done even thought they didn't pay for it.  Naughty indeed.  That's a complete abuse of the system though in my opinion though as opposed to being a negative of the principle of capital allowances.

http://www.ft.com/cms/s/0/149b24ec-c88d-11e2-acc6-00144feab7de.html#axzz3psUmUbV5

[AlunB]

Oh I don't think anyone rational would say the principle of Capital Allowances is negative. Quite the opposite. But as with most things in the tax system it's there to be abused by those that want to have go.

[DungBeetle]

Oh I don't think anyone rational would say the principle of Capital Allowances is negative. Quite the opposite. But as with most things in the tax system it's there to be abused by those that want to have go.

But that takes us back to the corporate welfare report where all capital allowances are deemed to be "government subsidy".  Which is bonkers.

[RickBFA]

The other thing that struck me as positive for the tax take by using salary/dividend is the fact that the remaining funds after tax are in the hands of individuals who will spend a proportion of it generating other jobs, paying VAT etc.

The company paying corporation tax and leaving the funds undistributed in cash reserves generates nothing extra (other than the obvious point that every company needs working capital/financial stability).

Given this, assessing how ethical a business is by judging it on how much corporation tax it pays is pretty naive.

[AlunB]

The other thing that struck me as positive for the tax take by using salary/dividend is the fact that the remaining funds after tax are in the hands of individuals who will spend a proportion of it generating other jobs, paying VAT etc.

The company paying corporation tax and leaving the funds undistributed in cash reserves generates nothing extra (other than the obvious point that every company needs working capital/financial stability).

What is Apple expecting to happen with its $205bn cash reserve?

[AlunB]

The other thing that struck me as positive for the tax take by using salary/dividend is the fact that the remaining funds after tax are in the hands of individuals who will spend a proportion of it generating other jobs, paying VAT etc.

The company paying corporation tax and leaving the funds undistributed in cash reserves generates nothing extra (other than the obvious point that every company needs working capital/financial stability).

Given this, assessing how ethical a business is by judging it on how much corporation tax it pays is pretty naive.

People aren't half making some leaps of logic with my questions and comments here.

[RickBFA]

The other thing that struck me as positive for the tax take by using salary/dividend is the fact that the remaining funds after tax are in the hands of individuals who will spend a proportion of it generating other jobs, paying VAT etc.

The company paying corporation tax and leaving the funds undistributed in cash reserves generates nothing extra (other than the obvious point that every company needs working capital/financial stability).

What is Apple expecting to happen with its $205bn cash reserve?

Apple are hardly a typical example. They are a fairly unique. How many other businesses do you know with those reserves?

I presume they will eventually buy other business and also distribute funds to shareholders in some form or other.