I think it is wrong to simplify it in this way. It isn't just a question of a country's tax code and tax rates or corporation tax piracy, but a combination of them: http://en.wikipedia.org/wiki/Double_Irish_arrangement#Dutch_...

(That said, I'd love to see the world's longest tax code, the UK's, simplified).

A multinational's access to resources and ability to exploit tax systems internationally is at the least unfair to smaller national businesses, and you could say to nations as a whole. Either we need to admit that corporation tax is dead and we need to tax end points like transactions or consumers, or we need to admit that unilateral taxation is dead and we need to collaborate internationally.

Centuries old thinking about business and tax does not apply in globalised business - and that includes your own, which would just provide a race to the bottom and would achieve little.

Oh yes, lets race to the bottom! That always turns out well!

I think it would be a race to some balancing point rather than a race to the bottom. Why shouldn't governments maximize their tax incomes in the same way companies maximize their profits? I think here that balancing point becomes the maximum taxes gathered when weighed against competing tax bases.

And the bottom has been reached if the profits are being parked in Bermuda ... that's an effective tax rate of 0% for the company and an effective income of 0 for the government too.

They have another option though, instead of just trying to price themselves competitively they can change the rules and enforce better.

A government doesn't have to compete like this if it holds the key to its market. If the rules are changed adequately you absolutely can say that they must pay to play, and pay what you ask.

A mail-order company like Amazon is a different beast in this respect, but something like Starbucks which has hundreds or thousands of physical locations can't just set up somewhere else if you set the rules right.

It sounds like you're saying that now that Starbucks has an entire infrastructure in the UK and therefore can't just set up somewhere else, you've got them by the short and curlies, so you can change the laws any which way you want to extract as much tax from them as you please.

Starbucks followed the law. You may not agree with the way they did it, or what the law says, but AFAICT nobody is arguing that they've done anything wrong (in the legal sense) right now.

The avoided taxes are corporate. All the VAT, taxes related to the jobs they've created (which are legion, as you yourself have admitted), local taxes (I am unfamiliar with how these work in the UK, but I presume they exist)... are still being paid. Starbucks is significantly improving the state of the coffers, and it's also minimizing how much it does so, as is its right and responsibility.

<i>The avoided taxes are corporate. All the VAT, taxes related to the jobs they've created (which are legion, as you yourself have admitted), local taxes (I am unfamiliar with how these work in the UK, but I presume they exist)... are still being paid.</i>

Amazon "sells" all the e-goods they can from a notional location in Luxembourg so that they can charge a 3% VAT rate on them. Small physical goods are / were shipped out of Jersey (although how many of them actually came from Jersey and how many were notionally shipped there and back again? Your guess is as good as mine...and I wouldn't put it past Amazon to push that little loophole as far as they possibly could) so that they incurred no VAT at all, until the government finally clamped down on that little scheme.

Trust me, if they can avoid the VAT, they will do so, and pocket the difference at the expense of local suppliers who can't afford the economies of scale that would permit them to set up these schemes.

And if you really think Starbucks artificially moving profits around by charging more than the market rate for coffee beans from it's own traders in a low-tax country is legal, I have a bridge to sell you. Unfortunately, the Inland Revenue just doesn't have the manpower to clamp down on the proliferation of ways in which companies can play these kind of "Hollywood Accounting" games, which is why some kind of alternate-minimum-tax approach is the only workable solution IMO. (Assuming you believe in corporation taxes in the first place of course, which is a whole separate kettle of fish!)

No, I'm saying that Starbucks operate coffee houses in the UK, as such they are operating a business within UK borders. Regardless of some status as a homeless multinational they are operating a coffee shop business within the UK.

It makes no sense to me that a local or national chain should be at a disadvantage because they pay corporation tax in the UK, when a multinational can essentially run the same business but spirit away the profits when tax-time comes around.

That's what I mean by the government holding the keys to the market, it should be possible to say that if you want to operate here and have access to our (clearly lucrative) market then you run by the same rules as everyone else, giving an honest account of the profit and loss made on the business in this country.

"The avoided taxes are corporate."

So? The corporation is operating a business in the UK.

VAT is a tax on the purchaser, not the company. PAYE is a tax on the employee, not the company. Yes, they pay 'business rates'. As they are required to. And no, I'm not suggesting what the are doing is illegal, I'm suggesting it should be made so.

The benefits of Starbucks operating the UK without paying corporation tax is debatable. Is it really improving the coffers if people would go for coffee anyway, in a place that does contribute back to the society it's operating in?

Excellent points. Thank you.

I agree ... And my original post states the laws should be changed. But why not change them in a way that maximizes the tax income and makes the country more favorable to corporations?

I don't think it's a bad idea in isolation, I'm just not sure it's a solution to the current problem. The race to the bottom that struck me is competing on being the place where the magic profit fairy makes her appearance.

I think both solutions would probably be great - fix the glaring problem that multinationals can avoid corporation tax though legislation (where local and national firms can't), AND then try to maximise take (and employment and all those other good things) by adjusting tax levels.

Sound good?

--edit-- if his is broadly in line with what you were saying from the word go then sorry for being an argumentative arse. Need more sleep...

If the UK set its corporation tax level down to match Switzerland's, then Switzerland would just lower theirs. Eventually you'd have a whole planet that doesn't require huge multinational corporations to pay any tax at all. How is this a good thing?

Yes, when has free market competition ever lead to good things?

Furthermore, I think you are making the unwarranted assumption that it's a race to zero, as opposed to some balance point greater than zero where the companies actually have some reason to pay that tax. If we're all paying taxes for the common good, then presumably there's some common good in it for them, too? Or are corporations only things that we extract money from?

If corporations are paying extremely low tax, then the shortfall in government finances has to be made up elsewhere. It doesn't matter whether it's a race to zero or not, if government is not earning on corporation tax then it comes down to personal taxes on the people of that country. How is it fair for a multi-billion pound company to pay near-zero tax, and the shortfall to be made up by individuals? All this will do is increase the gap between the richest and the poorest people, and have a negative effect on social mobility. Frankly, I don't want to live in your future.

That would mean encouraging, in the long term, offloading more taxes to people rather than corporations.

It makes sense to try enforcement instead.

There is no sense in frantically racing to charge as little tax as possible. That is not a viable solution unless you really want to see what budget cuts look like.

lowering tax rates while simplifying tax code to reduce/remove loopholes would, in theory, increase revenue. in an ideal world, simpler tax code would reduce the need for accountants as well, further reducing costs.

I'm not sure that "simplifying tax code" and "reduce/remove loopholes" go together, do they? The simpler the language, the more "wiggle room" there usually is. If you want to reduce/remove loopholes, you're going to definitely be complicating the tax code else you leave too much room for interpretation mistakes.

You need to read more by the author. He's in favour of massively simplifying the tax code through a General Anti-Avoidance Rule.