UK Uncut ‘Pay Day’ protests

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• Here is how the scam works.

  Companies that operate in the UK pay tax upon their UK profits, they pay VAT, they pay national insurance on their UK staff's salaries and those staff pay income tax. They will pay local business rates on their premises.

  Where the company is headquartered if it is a multinational determines what happens to their earnings once taken out of each country they do business in. It is generally a good thing to have multinational headquarters as you will gain extra tax revenue, but also because they use lots of other expensive goods and services, and employ the well paid staff. If the headquarters of a firm is in the UK then they will likely use a UK law firm, a UK accountant, UK IT consultants etc etc

  The issue many people have is with tax rules that basically allow you to massively reduce your tax liability in the UK (and elsewhere) by various methods, often involving loans. Loan interest payments aren't taxed (quite sensibly) but this can be abused by using an offshore headquarters. So the owning company is based in the British Virgin Islands "lends" lots money to its UK subsidiary which makes regular interest payments back to the owning company. Those interest payments happen to coincide with the profits the British subsidiary makes, which basically reduces its profits to 0 and therefore reduces its tax liability massively. The BVI company has very healthy profits but in a country that doesn't tax them. It gets much more complicated but that is basically the idea. Google "sold" various technology rights to their European subsidiaries and receive interest payments back, hence their low tax rate.

  The real kicker is that these Headquarters that are making all the profits and pay zero tax are often held under nominee directorships, so you cannot find out the real private owners..

  The bank address for the offshore Headquarters company can be anywhere. It does not have to also be in the off shore country.
  The company nominee directors have direct access to this bank account to do what they want.
  This is because the offshore havens do not require the accounts to be audited or even for accounted to be submitted in general.

  Ironically the "EU Tax savings directive" passed in 2008 stopped the ability of private individuals to do this. They did this by forcing all countries banks to expose all persons accounts everywhere to the other governments. This was lead by the main progressive tax countries of course to stop personal tax liabilities moving off shore and to avoid paying tax in high tax countries.
  Just what companies are stil allowed to do.

  Its painfully ironic what is going on. Think about the scale of the damage this causes to all of society and the ripple effects it has and its staggering.

  Talk to any London accountant you have known for 5 or more years and they will tell you this in detail. If you don't have a long standing relationship with them then they are unlikely to discuss this dirty laundry with you.

  ggg - March 3, 2011, 00:28 / Report abuse

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