If you don't owe tax then why would you pay tax?

The Fair Tax Mark was set up by Richard Murphy so obviously we’ll not be surprised to find that it is staffed by know-nothings. It is still a tad of a shock to find out that the person actually running the organisation doesn’t understand the very thing he supposedly accredits, the taxation of companies. But this is so, sadly:

Coffee shop chain Caffe Nero paid no corporation tax in the UK last year, despite ringing up profits of £25.5m. The company, which has 613 stores in the UK and Ireland, said it paid no corporation tax because its parent company reported a loss. Caffe Nero is part of Rome Pikco Group, a holding company that manages the chain’s presence in the UK, Turkey and the Gulf states, and reported a loss of £22.2m in the year to the end of May 2016.

Well, that’s fine. One part of the group made a profit, another part of it didn’t. Not quite exactly but roughly enough we tax at the group level, meaning we net off those profits and losses to get to the profit figure for the organisation as a whole – an obvious and logical thing to do.

As to why the no profit as a whole, from when this was all being shouted about last year:

The current owners of the company bought it with debt. There is interest to pay upon that debt. And corporation tax is a tax upon profits. The reason Caffe Nero does not pay corporation tax is because it does not make a taxable profit.

This information is readily available, seems simple enough to us and has been that easily available for half a decade now.

There really is nothing more to it than that. Well, except for the fact that the people who self-appointed to be the arbiters of what is fair tax seem not to understand this:

But Paul Monaghan, chief executive of the Fair Tax Mark ethical accreditation scheme, said its tax arrangements are ‘parasitic’ and ‘insulting to the intelligence of the British people’.

He added: ‘Time and time again, the likes of Caffè Nero come up with reasons to avoid paying their share of corporation tax.’

The reason Caffe Nero hasn’t paid any corporation tax is because they don’t owe any corporation tax. And don’t we think that someone running the Fair Tax Mark should say that, well, they don’t owe tax which is why they haven’t paid tax so that’s, erm, fair? And shouldn’t someone awarding Fair Tax Marks actually understand tax?

Or are we being hopelessly neoliberal here?

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  1. “Or are we being hopelessly neoliberal here?”

    Yes, Tim, you are. Where ‘neoliberal’ is a synonym for ‘dirty jew-lover’.

    I don’t know how much clearer the Nazis can make it for you: the ‘parasite’ referred to is the embodiment of Hitlerite fantasies about the ebil jooz stealing more than ‘their share’.

  2. A corporation in the US pays zero taxes not only because it lost money in the relevant year, or is carrying forward losses from a previous year, as permitted. It may be doing exactly what the government asked it to do, under the offer of tax benefits, such as opening a manufacturing plant in Puerto Rico or a blighted part of a big city. A high-earning individual may pay zero taxes by investing in federal or municipal bonds and letting the agency pay him below-market interest.

    The US plays the same game and holds up for shame those taxpayers who have responded to the government’s own offers, using the Alternative Minimum Tax to “recapture” taxes from “the rich.” (That last figure was not inflation-indexed, and every year the AMT swallowed up more middle-class taxpayers, deferred but not solved by Trump’s tax reform, though it did get rid of the corporate AMT.)

    Obama, never one to avoid class-warfare rhetoric, wanted the same thing, though he was apparently ignorant that we already had an AMT. His tax reform would have had us compute our taxes on THREE different forms to see if we could contrive to let the government renege on its promises.

  3. As many readers will know Richard Murphy is a non-executive and unpaid director of the Fair Tax Mark, which issued the following press release this month:

    AMT Coffee secures Fair Tax Mark and becomes first coffee retailer to offer a Fair Tax choice across coffee bars nationwide

    AMT Coffee, which has 53 bars across the UK and the Republic of Ireland, has secured the Fair Tax Mark, becoming the first coffee company with a nationwide presence to provide consumers with a Fair Tax choice across its coffee bars.

    AMT Coffee’s fair tax certification is significant given the findings of recent research from Populus*, which found that the UK public not only still mistrust companies such as Starbucks on tax matters (and that this is still negatively impacting their reputation), but that this mistrust has now also extended to other Food & Drink brands.

    AMT Coffee has a presence in railway stations, airports and NHS hospitals. They join a growing list of retailers that have achieved the Fair Tax Mark, putting them alongside The Co-op, Lush Cosmetics, Richer Sounds and many others.

    Alistair McCallum-Toppin, an original founder of the company and Managing Director of AMT Coffee, said: “AMT Coffee was the first national coffee company to support Fairtrade, and I’m delighted that we are now the first coffee retailer to offer customers a Fair Tax choice across our quality coffee bars nationwide. Consumers are becoming much more discerning, especially when it comes to the ethics of a company. They want their brands to reflect their own ethical stances. The strength of feeling on companies paying their fair share of tax has really gained momentum over the last few years and the Fair Tax Mark allows us to respond to this overwhelming demand for clarity with our customers.”

    Paul Monaghan, Chief Executive of the Fair Tax Mark said: “Consumers are rightly angry when they hear of multinational coffee shops paying little or no corporation tax in the UK – sometimes year after year after year. Many consumers have boycotted the likes of Starbucks, but up until now they have not had the option of supporting a brand with locations nationwide that has independent assurance that it pays the right amount of tax in the right place, at the right time.

    “AMT Coffee do not make use of tax havens or abusive tax avoidance schemes, and would appear to be a natural fit for public sector procurers who want to ensure that taxpayers monies actively support tax justice. With more retail opportunities being made available in the likes of NHS hospitals and town halls, it seems only right and proper that the companies operating in the public sector should pay their fair share of tax and help contribute to these vital services on which we all rely.”

    As part of their Fair Tax Mark certification, AMT Coffee have provided additional clarifications on their economic activity and taxes in the UK and the Republic of Ireland. Their accounts provide detailed current tax and total tax reconciliations, as well as a narrative deferred tax explanation.

    Consumers looking to support businesses committed to paying their fair share of tax can find the more than 1,500 shops and offices of Fair Tax Mark accredited organisations at http://www.fairtaxmark.net/map


  4. “AMT Coffee secures Fair Tax Mark and becomes first coffee retailer to offer a Fair Tax choice across coffee bars nationwide”

    Thanks. If there’s a choice of 2 coffee places, I won’t be buying from them now.

    • “and Richer Sounds? Off my list of where to buy that AV receiver then.”

      I know Julian Richer in passing, and there’s zero chance he believes in Ritchie. Wait and see what he’s up to with this, it may well be that he’s setting Ritchie up, it may just be that he diddled Ritchie out of a free FTM and is happy to take the money of the anti-semites who’ll shop there because of it.

    • Seconded! Tim used to point the interested to the source, every time he quoted from it. Still does, but under this website’s formatting rules, we can’t see it without tracing his text with the pointer and seeing if it becomes underlined!

  5. “But Paul Monaghan, chief executive of the Fair Tax Mark ethical accreditation scheme, said its tax arrangements are ‘parasitic’ and ‘insulting to the intelligence of the British people’.”

    I expect those same customers would be quite keen for the current tax regime to continue though as they, along with shareholders and employees, are the ones that would actually end up paying the ‘fair tax’ indirectly.

  6. Maya Forstater last week on Twitter had a look at this company, and sees there is a large interest free loan from the company to directors.

    She then linked to a blog by Murph saying (in another context about someone else) that this is almost always tax avoidance.

    It’s there on Twitter if you follow Maya.

    But hey, FTM is a private organisation and it can accredit who it likes.

  7. Because you crucially failed to grasp the difference between commercial debt and intragroup debt. He’s saying the business activity has been structured to reduce paying tax. He differentiates commercial debt (ie to banks) and intragroup debt (where the profit-shifting often takes place).

  8. The big picture seems to be that pounds flow into the tills, Caffe Nero pays interest (a business expense), and the debt-holders pay tax on the interest. Caffe Nero also pays its employees (another business expense) and they pay taxes on their incomes. Thus, “Caffe Nero pays no tax” is arbitrary and artificial except to draw boundary lines so as to manufacture inflammatory polemic. Avoidance is not evasion, and structuring your affairs to pay less tax than gadflies would like isn’t illegal either.