3 - The economic environment Flashcards
how is the internalisation and power of cooperations shown?
they now have the power to dictate taxations policies go governments
now try to even avoid the historically low levels of taxation
how do society pay for businesses profits for sharholders?
through taxation
what is neo liberalism?
a form of liberalism (say that individual freedom is major probs in government) that teds to favour the free market,
termed by belied that sustained economic growth achieves human progress
what is financialisation?
financialised economy?
development of financial capitalism during the 1980 - 2010
debt to equity ratios increased and financial sectors accounted for an increasing share of the national income relative to others
debt based economy
dominance by banks
minimal controls
global competition vs. governments = tax avoidance
why is taxation considered to be a favour?
growing power of corporations and their ability to play governments off against each other for business means that governments may use favours such as taxation
what is the difference between tax avoidance and tax evasion?
avoidance = legal evasion = illegal
what is an example of tax avoidance/
you buy concentrated juice instead of fresh juice
avoiding the tax on the fresh
what is an example of tax evasion?
telling the tax man that you earn less than you actually do as a means to evade higher taxation
what do companies pay tax on?
only on profit not on revenues
what is the facebook example in which shows how little companies are actually taxed?
2014 UK revenue = 223,000,000
(lost 28 milllion)
2014 UK tax = 4,237
why do large companies want to make a loss in the UK?
so they don’t pay a higher tax (1 in 4) pay virtually nothing
how much does the UK lose from tax avoidance a year?
£2.7 billion
how much does UK lose from tax evasion a year?
2016-2017 it was 1.7 bill
what are the two ways in which someone could AVOID tax?
- transfer pricing
- tax havens
what is transfer pricing?
(how big companies in the UK who sell cheap make a loss in the UK)
a transfer price is the price set between companies in the same group when exchanging goods and services
price the transactions high but they are still inside your company or less so there is less tax
profit allocation method, companies can book profits in a different country which have a lower tax return
what is the purpose of transfer pricing?
to push profits into countries where tax rates are more favourable or have more loopholes to be exploited
what has transfer pricing increased?
globalisation
what is a tax haven?
(when you take money out of the system all together)
- some states are primarily established for this reason
- laws created for the beneift of non residents
- do not recognise international law
- veil of secrecy
how does a tax haven work?
(via a law firm)
- set up a company in a tax haven
- use nominee director to hide identity (pay someone else)
- register bank account (putting different aspects everywhere)
- banks will hide identity
how much money is in tax havens?
Gabriel Zucman (economist) states that $8.7 trillion resides in tax havens
what is the limited progress being done to prevent tax avoidance?
1) transfer of data
tax havens may refuse to provide - however countries can now threaten to cut trade)
2) procurement transparency
you have to declare you are a tax payer in the UK and who is the beneficiary
3) public register of real owners
get rid of nominee directors, there is a register but its is not made public
4) HMRL
must have more power, reduced power over the years
5) MNC reporting requirements
declare financial statement before transfer pricing, hasn’t been done
6) US
most countries have signed up to stop tax havens except the US which is now one of the biggest tax havens and no one is going to threaten the US (Nevada)
what are the consequences of tax avoidance?
- governments have less money have to borrow more money (debt is increased - unstable)
- unpaid taxes could do a lot (student loans)
- increasing inequality, gap is bigger now, rich can afford to avoid tax
- terrorists and drug dealers can use such avoidance techniques, increasing crime
What happened to HSBC in terms of high risk money (terrorists consequence)
in 2012 had to pay $1.9 billion to the US for failing to implement proper money lauder controls
had £38 billion high risk money
how much does the government outlay on student loans each year?
£14 billion
what is a sharing economy company?
a company that only owns the transactions such as airbnb and uber, the community owns the assets in which it runs its business off, can avoid tax altogether, profits sucked into offshore accounts, locate intellectual property with low tax, no responsibility in providing product or service
how much tax did airbnb pay in 2016 in uk?
how much did they take in rent payments?
188,000
657 million
what did the observer write?
in 2012 said that there was 13 trillion dollar in tax havens
what did dad leigh write?
2008
tesco had offshore holding companies in luxembourg in which would transfer £50 million a year
how much did the HRMC say was leaked out of the UK in tax avoidance?
2016 - 17
1.7 billion
what idd eric mandel say?
regarding the 3.3 billion dollar coca cola vs IRS battle
coca cola was holding 42 billion offshore earnings in which no tax was taken
if case goes any further than tax years 2007 and 8 could be liable for $10million in tax liabilities
what is the arms length principle
involved in transfer pricing in which when transferring money etc you should treat company as if you would nay other you didn’t know
what happened in 2018?
Tax justice campaigners celebrated this week as a nifty cross-party move from British Members of Parliament Margaret Hodge and Andrew Mitchell forced the UK’s Overseas Territories – many of them in the Caribbean – to stop hiding the owners of companies they incorporate.
what did margeret hodeg say in terms of facebook?
outrageous how much tax they pay in uk
it is just 0.62% of their revenue
with an income of 1.2 billion
