Tuesday, April 17, 2012

Rmoney's Tax Rate is Very High ...

Lib Dem FoP     Mon Apr 16, 2012

…compared to the rates paid by Google, Amazon and some multi-millionaires in Britain.

Mitt Romney's effective tax rate of 15% maybe low but it is 120 times the rate paid by Gooogle for its operations in the UK.  According to CNN, the Romneys paid $3.2 million in federal taxes on a joint income of $21 million. However in the UK Google had advertising sales of £2.1 billion but used various devices to pay only £5 million in UK taxes:

Google has shielded itself from the British taxman by locating its international operations in Ireland, where the corporation tax rate is a mere 12.5 per cent, around half that in Britain. Even that rock-bottom Irish rate, however, is not low enough to satisfy the company and its wealthy founders.

It has deployed complex  techniques known to tax experts as a ‘Double Irish’ or a ‘Dutch Sandwich’ to funnel profits to the white sands of Bermuda, via the Netherlands. The result: Google, which makes much of its money from advertising, racked up sales of £2.1billion in the UK, but paid a mere £5million of tax, or a rate of less than a quarter of one per cent

Amazon managed to pay nothing in corporation taxes or on it's sales (VAT) by designating its UK operations a "distribution center" and using another tax dodge.
Last night Richard Murphy, a tax expert and founder of the Tax Justice Network, said: ‘Luxembourg is a tax haven used by lawyers and accountants to help their clients get out of paying tax.’

He estimates Amazon’s sales in the UK were around £2.8billion in 2010, which would have resulted in profits of around £125million.

If it had paid corporation tax, charged at 28 per cent in 2010, this would have resulted in a tax bill of £35million.

Corporation tax is one of the biggest sources of income for the Government, used to pay for vital services such as hospitals, schools and care homes.

Amazon passes on to Luxembourg its 2% VAT on e-books it sells direct to consumers in the UK. The British authorities get nothing.

Rmoney's income tax rate outstrips that paid by some of the richest in the UK. One dodge that is regularly used is to arrange their affairs so they are not in the country for more than 90 days a year, thus paying "non domicile" rates. People like F1 racing car drivers (most F1 cars are designed, built and tested in Britain) set up home in tax haven like Monarco. That still involves the minor inconvenience of having to pay income tax at their much lower rate but if you are rich enough, you can avoid even that. The Inland Revenue count a day "resident" if you are in the country at midnight.

She said the donor was so rich that it was worth his while making flights to nowhere to avoid an enormous tax bill.

The lobbyist said that with a fortune like his, 'you can sleep on your jet three times a week. You can do whatever you want. The world literally is your oyster.'

She said a helicopter took the donor to Luton airport where he stepped onto his jet and retired for the night in an onboard bedroom.

Since 2008, the tax authorities' 'midnight rule' has applied to anyone who is still in the UK on midnight of the 91st

So this guy would spend the night flying in international air space and therefore owe tax to nobody.  Apparently the guy has now stopped his "snooze cruise at 20,000 feet".

Despite being right wing led, the current UK coalition government is taking steps to close all these tax loopholes. (The Liberal Democrats campaigned on raising the starting point of tax to £10,000 over the parliament and the leader, Nick Clegg's speech included reference to the scandal of a managing director paying less tax than the person who cleans his office.) The Chancellor of the Exchequer (finance minister) George Osborne commissioned a report on tax avoidance by the very highly paid and found many had an effective tax rate of under 10%.

The report found that Britain’s 20 biggest tax avoiders have used three main loopholes to legally reduce their their income tax bills by a total of £145 million in a year.

Two thirds of them wrote off business losses in one of their companies against their income tax bill, reducing it by as much as half .

Several of them offset the cost of business mortgages or borrowing on buy-to-let properties against their income tax bill, while others took advantage of relief on donations to charity.

Mr Osborne is now determined that millionaires will have to pay tax of more than a third of their earnings.

From next year, the total amount of tax relief that any individual can claim will be limited to 25 percent of their income or £50,000 – whichever is greater.

One of the difficulties that Osbourne has run into is that many were using donations to charities to avoid paying income tax at higher levels. While there are some dubious overseas charities currently benefiting and some UK charities, like the fee paying school Eaton may be surprising, some big charities are claiming this will prevent large benefactions.

Ordinary "Pay As You Earn" income tax payers, the vast majority, do not get such tax relief. Instead the charities can claim an amount of roughly 22% to represent the income tax that would have been paid. I see no reason why a similar scheme could not be extended to higher rate tax payer making donations over, say £50,000 where the charity would get a tax benefit, not the individual. That should sort the benefactors from the tax avoiders.

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