Tax Language: Corporate Tax Avoidance

Tax may have increased on many of our goods and services but do companies also have to pay more tax? Read the text and find out. You’ll find useful tax language highlighted and explained below to expand your Business English vocabulary.   Image source & copyright:   What do Amazon, Google, and Starbucks all have in common? They’re huge companies, they have thousands of employees and they make more money in one day than I will earn in a lifetime. Yet, more importantly, they pay very little tax.   [poll id=’56’]   Some of them, like many companies, have based their European businesses outside the UK to avoid paying full UK tax. This is called corporate tax avoidance and it’s not illegal. Using an Ireland or Luxembourg-registered office for a company simply incurs lower tax rates. It’s a piece of cake.     Another trick they use is that they charge their own subsidiary companies for services, referred to as transfer pricing: again, completely legal. Both of these examples are commonly called exploiting loopholes in the law. So, how much are these companies paying or not paying? One British MP said that allegedly had the highest UK tax rate of 1.9% in 2011 when the company’s turnover was £208m. Google also got away with paying 0.9% but based on a turnover of £396m. The biggest tax dodger though was Starbucks. The coffee giant with stores all over the world and one on practically every London street paid absolutely nothing. It earned £398m but not one penny went to the tax man in corporate tax. More shocking though is that some say Starbucks has paid no tax at all during the last two years. While Amazon has also been able to only pay 3% VAT on book sales within the UK when the official rate is 20%. As you can see in the infographic above, some of the companies aren’t actually profitable. Starbucks claims to have lost £33m in 2011 and Google just over £21m. Amazon is the only one to have turned a profit with £3.1m. From the perspective of British customers and taxpayers, these companies are taking their money and running away with it. Yes, they are employing many local people but why do other companies have to pay full corporate tax when they don’t? Each of these companies argues to support corporate responsibility but this doesn’t look very responsible. Several politicians have said tax laws need to change in the UK. In nearby France, the government may have already taken action and issued (£629m) a tax bill to Google. Whether they pay it though is anyone’s guess.

Tax language

corporate tax avoidance
when companies don’t pay tax
incurs lower tax rates
their actions mean they pay less tax
subsidiary companies
companies owned by them
transfer pricing
when one part of a company makes another pay for products or services it provides
exploiting loopholes
taking advantage of gaps in the law
the money a company gets from sales
tax dodger
a person or company who/which avoids tax
the tax man
a slang way to refer to the person who collects tax but generally is used to refer to the tax office
turned a profit
made a profit

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