Eight speculations

I know, I know: bloggers should resist the urge to speculate about a company’s tax affairs unless they’ve really spent a good long time scouring company registries, reading court cases, talking to people in and outside the company, corresponding with tax directors. Doing their best to review everything that’s in the public domain, and as much of what isn’t as they can get their hands on.

I haven’t, it’s fair to say, done all this with Starbucks.**

But Starbucks sits so interestingly in the tax arena - as ‘bricks-and-mortar’ a retail operation as it’s possible to get, yet accused of all the same shenanigans with royalties and intangibles and offshoring of intra-group services as the ‘digital economy’ guys – that I just couldn’t resist the company’s announcement last month about moving its European HQ to the UK, a move Starbucks claims “will mean we pay more tax in the UK”.

Why does it matter?

I wanna be a male model in a Mothercare mag

You can spot South London’s stay-at-home dads by our single scuffed brogues. It’s like a crap middle-class gang sign. The reason, I finally figured out after weeks of Sherlockian puzzling, is simple. Many prams and buggies have their brake lever at foot level. Releasing it quickly requires a swift upwards flick of your right foot, which ensures that you look like a pro whipping the buggy off a Number 37 bus, but over time makes a real mess of your Jasper Conran uppers.

I’ve yet to strike up a conversation about teething with a stranger simply because of the state of his footwear. But since my partner and I decided to go halves on our year’s parental leave, I’ve found myself, when I’m not with my daughter, on the lookout for similar discreet tics and identifiers. Because daytime dads and other male child-carers are a shy bunch. For some reason we tend not to get chatting very naturally at playgrounds and library story sessions. There are a few dedicated dads’ playgroups (most on Saturdays, aimed at working dads), but otherwise few informal networks, no online Dadsnet (actually, I shudder at the thought of what a Dadsnet chat forum might look like). Men looking after young babies in particular, whose range of out-of-the-house activities is more limited than that of toddlers, can easily assume that we’re an exotic and endangered species.

Corporate tax 2.0?

Sorry, I thought you meant... [Photo by Gillicious, CC, Flickr]

I promised I wouldn’t write about tax, either on this blog, or while I was away on leave; and am therefore failing on both counts. I’ve been tempted into this transgression by the surprisingly radical report released over the summer by the Economic Affairs Committee of the UK House of Lords, the latest in the deluge of UK parliamentary inquiries into tax avoidance and the integrity of the corporate profit tax. As you’d expect from a committee that includes both Nigel Lawson and Robert Skidelsky, its report is politically provocative (what report on tax can afford not to be these days?) But it’s also in parts a more theoretical and birds-eye view than the reports of its Commons sister, the Public Accounts Committee, can afford to be.

Unsurprisingly, the brief media coverage focused on the politically provocative bits: proposals on naming/shaming, HMRC ‘deals’, barring tax-scheme advisers and publishing large corporates’ tax returns. Far less commented upon, though equally radical, has been the Committee’s blue-sky consideration of alternative corporate tax systems – and particularly a recommendation for the Treasury to examine the possible advantages of taxing corporate sales instead of corporate profits - or, more properly, to replace the corporate profit tax with a ‘destination-based cash-flow tax’, or DBCT. (Michael Devereux of the Oxford Centre for Business Taxation, who was appointed the Committee’s specialist adviser for this enquiry, is the UK’s leading proponent of the DBCT, and has probably done more technical groundwork on it than anyone else).

That there’s political space in the parliamentary system for this kind of big-picture thinking, rather than simply considering particular tax controversies, is an unambiguously good thing. (Though the Committee’s grand vision isn’t limitless: other ‘big-picture’ solutions, particularly proposals for the formulary apportionment of the whole profit base of a multinational group, enjoy easily as large a fan-base as the Destination-Based Corporate Tax, albeit amongst a politically rather different crowd; yet the Committee’s report rejected such ‘unitary taxation’ proposals without much detailed consideration).

But what of the DBCT? (And we really need a better acronym…) A DBCT would have two features fundamentally different to the current corporate income tax. First, it would be ‘destination-based’: rather than being levied on a company’s income in that company’s country of residence, or by the ‘source’ countries where the value underlying a piece of income is deemed to be created (generally where it produces goods or services), it would be levied instead on income from the sales of goods and services in the country where that entity sells its goods or services. Close to a classic VAT, it would essentially apportion the tax base of a multinational according to where that multinational makes its sales.