McDonald's taking the piss on corporation tax; HMRC falling for it.

From The Telegraph:

The British arm of McDonald’s paid £123m for “franchise rights” last year, as part of a controversial structure that is under investigation for enabling unfair tax avoidance.

The European Commission launched a probe last year into whether Luxembourg’s tax arrangements for McDonald’s amounted to illegal state aid, as part of a broad crackdown on companies that route money through subsidiaries to cut their global tax bills.

The point being that such royalty payments are an allowable deduction for UK corporation tax purposes and there is only 5% withholding tax on payments of 'royalties' to an entity in Luxembourg under Article XII of the UK-Luxembourg double tax treaty (I thought it was 0% but it says 5%). That money then gets shuffled out of Luxembourg tax-free to heck knows where.

Now, let's have a proper read of that Article:

(1) Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. However such royalties may also be taxed in the Contracting State in which they arise and according to the law of that State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed 5 per cent of the gross amount of the royalties.

(2) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

(3) The provisions of paragraph (1) shall not apply if the recipient of the royalties, being a resident of a Contracting State, has in the other Contracting State in which the royalties arise a permanent establishment with which the right or property giving rise to the royalties is effectively connected. In such a case, the provisions of Article VII shall apply.

How on earth does McDonald's get away with claiming that the royalties don't relate to 'permanent establishments' which they have in the UK? Some McDonald's restaurants are owned and operated by McDonald's corporation itself and some are franchises, but given the level of control which McDonald's has over its franchises, I'd still count them as permanent establishments.

Ergo, on a sane reading of the treaty, those royalty payments are liable to perfectly ordinary UK corporation tax.

(Clearly, McDonald's is paying vast amounts of VAT, so overall it might well be paying 'too much' tax in total, I'm just saying.)

Well yes, apart from...

DC emailed me a link to an article about Luxembourg. Somebody had leaked/published details of tax deals arranged between PriceWaterhouse Coopers and Luxembourg. Instead of doing something about the tax evaders, Luxembourg charged the whistlebower with theft and other criminal offences.

The countries who think they've lost out are all complaining like mad and demanding that Luxembourg stops this nonsense, but the best part is right at the end of the article:

Luxembourg’s finance minister, Pierre Gramegna, struck a conciliatory note on the international stage, telling a meeting of European finance ministers: “We are a country that wants to combat abuse … If we want to find solutions to this issue we have to tackle it together.”

Speaking to a domestic audience, however, he has described the affair as “the worst attack Luxembourg has experienced in its history”.

Reminds me a bit of the famous George W Bush quote from 2002:

My trip to Asia begins here in Japan for an important reason. It begins here because for a century and a half now, America and Japan have formed one of the great and enduring alliances of modern times. From that alliance has come an era of peace in the Pacific.

Q: Why doesn't Amazon pay any corporation tax on turnover of $50 billion?

A: Because corporation tax is calculated as a percentage of a company's profits, so if a company's profits are very low or it makes losses, it doesn't have to pay any.

So let's have a look at Amazon's consolidated group profit and loss account for 2012 from here:
Ah.. I see, it has wafer thin margins so we wouldn't expect it to pay much corporation tax in most countries in which it has sales.

Glad to have cleared that up!

Of course it is a matter of time until somebody turns up and says "Ah, but they hide all their profits in offshore subsidiaries!" which is the sort of thing only an idiot would say because those accounts are the consolidated group accounts, in other words it aggregates all profits (or losses) or all Amazon's subsidiaries, including all the money "hidden in offshore subsidiaries".

There'll be another Enron sooner or later where the auditors agree to omit some subsidiaries and to include others just to suit the client, but Amazon is not Enron. It is a very efficient mail order company that buys stuff and sells stuff (and advertises other people's stuff).

"Ah yes!" shout the lefties, "But they don't pay much VAT in the UK either because they route their sales via Luxembourg."

Yes, that is quite true, they do. They'd be stupid not to. VAT is an EU tax and the EU rules say that people who make money over the internet only have to register for VAT in one EU Member State and you can pretty much choose which one, so Amazon did the sensible thing and chose the one which has the lowest VAT rate (for internet sales) which happens to be Luxembourg. Their tax, their rules.

Central European Cow Attack Round-up - March 2012

Better late than never...
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Düsseldorf 1 March: Die Klägerin sah ihre Rechte aus dem im Jahr 2005 eingetragenen Geschmacksmuster des Puddings "Paula" durch den von der Beklagten vertriebenen Schoko-Vanille-Pudding verletzt. Sie beantragte per Eilantrag, für den von der Beklagten vertriebenen Pudding ein europaweites Verkaufsverbot auszusprechen. Das LG wies den Antrag allerdings zurück.. Es lag weder eine Verletzung eines eingetragenen europäischen Designrechts (Gemeinschaftsgeschmacksmusters) der Klägerin noch irgendein Wettbewerbsverstoß durch die Beklagte vor.

Upmarket pudding manufacturer Dr Oetker has been selling puddings called "Paula", with packaging features the eponymous cow wearing sunglasses. Downmarket supermarket chain Aldi brought out a similar rival product called "Flecki" in 2011, with packaging showing a slimmer, white cow with a bell round her neck. Dr Oetker sued for trademark/design right infringement.

Held: Aldi's packaging was not that similar as to amount to an infringement or to unfair competition. Neither cow was called to give evidence.
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Tyrol 9 March: In Trins ist Donnerstagabend ein Bauer von seinem Stier schwer verletzt worden. Das rabiate gewordene Tier hätte den Bauern fast erdrückt. Der Mann musste noch in der Nacht auf Freitag operiert werden. Der 72-jährige Landwirt wollte den Stier zu einem anderen Stall bringen, wo das Tier eine Kuh decken sollte. Auf dem Weg aus dem Stall wurde der Stier plötzlich rabiat, heißt es. Er drückte den Bauern gegen eine Wand.

A 72-year old farmer was taking a bull to another stall to cover a cow. The bull suddenly went mad and squashed the farmer against the wall. The man had a life-saving operation the next day and is out of immediate danger.
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Hamburg 9 March: HAMBURG. Eine lebensgroße Nachbildung einer Kuh sorgte am Mittwoch für kurze Aufregung in Rahlstedt. Das Glasfaser-Tier wurde von Unbekannten auf die Bahnstrecke Hamburg – Lübeck gestellt und verursachte eine Notbremsung einer Regionalbahn, bei der glücklicherweise niemand verletzt wurde. Die Kuh wurde unter dem Triebwagen des Zuges eingeklemmt und der Kopf wurde zerstört.

A life sized fibreglass model of a cow caused a panic on Wednesday when pranksters placed it on a railway line. The driver carried out and emergency braking manoeuvre. Luckily, nobody was injured but the model was caught under the train and its head was crushed.
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Luxembourg, 12 March: BIWER - Ein Bauer wurde am Montagmorgen von einer Kuh schwerverletzt. Er musste per Rettungshubschrauber in die Klinik gebracht werden. Wie es zu dem Arbeitsunfall kam, bei dem ein Landwirt von einer Kuh in Biwer schwerverletzt wurde, ist derzeit nicht bekannt.

A farmer was badly injured by a cow and taken to hospital by helicopter. It is now clear how the accident happened.
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Tyrol 13 March; Eine freilaufende Kuh hielt am Montag einige Lienzer in Atem. Es dauerte nämlich eine ganze Weile bis das Tier wieder eingefangen werden konnte. Ein mutiger Zeuge verfolgte die Kuh mit der Kamera... Bei ihrem Streifzug durch Lienz demoliert sie einen Zaun und in einer nagelneuen Lagerhalle ruiniert sie die Estricharbeiten. Schließlich konnte das Tier aber doch wieder eingefangen werden, ohne dass es sich selbst oder andere verletzt hatte.

A cow escaped from the slaughterhouse and was filmed by a brave witness who followed her on foot. On her rampage, she demolished a fence and trampled through freshly laid concrete in a new warehouse. The cow was caught without anybody being injured.Editor's note: The video is well worth watching, you really wouldn't want to stand in the way of one of those. You can feel the cameraman's panic when she charges straight at him.
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Lower Austria 20 March: BEZIRK ST. PÖLTEN-LAND. Bei einem Brand auf einem Bauernhof in Böheimkirchen im Bezirk St. Pölten-Land sind am Dienstag zwei Menschen verletzt worden. Vermutlich hat das Feuer in einer Melkanlage seinen Ausgang genommen, so die Sicherheitsdirektion. Über 50 Kühe konnten aus dem Stall gerettet werden.

Cows carried out an arson attack on the milking parlour. A farmer and a fireman were injured during the operation to put out the fire and rescue fifty head of cattle.
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Berlin 26 March: In einem neuen Seminar können Bauern den richtigen Umgang mit ihren Kühen erlernen. Geleitet wird es von Peter Wametsberger: "Früher hatten wir das Rind durch die Anbindehaltung unter Kontrolle." Aber in den modernen Laufställen, in denen sich die Tiere frei bewegen, sei die Arbeit deutlich gefährlicher. Allein in Oberbayern und Franken werden jedes Jahr 2000 Landwirte von Kühen verletzt.

A seminar is being held to teach farmers how to deal with cattle properly. "Farmers used to control their cattle by tying them up, but they can move freely in modern cow sheds, which makes the work a lot more dangerous." More than 2,000 farmers are injured by cows in upper Bavaria and Franconia each year.

Editor's note: this is far worse than I thought. Those two areas are a tiny fraction of Germany, and still there are 2,000 attacks on farmers every year. Scale that up for the rest of the world and it's amazing there's anybody left alive.
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Upper Austria 29 March: Nach rund viermonatiger Pause als Stierfänger mussten die Einsatzkräfte der Freiwilligen Feuerwehr Ried am Donnerstag, 29. März 2012 um 07:07 Uhr erneut zu einer Stierjagd ins Stadtgebiet ausrücken.Wie bereits die beiden Tiere im Herbst 2011, nutzte auch Stier „Hansi" einen kurzen Moment der Unachtsamkeit bei der Verladung im Rieder Messegelände um entlaufen zu können... Die Feuerwehr war mit 3 Fahrzeugen und 18 Mann eine Stunde im Einsatz.

Four months after the last escaped bull escapade, the fire brigade had to hunt down a bull which had done a runner from the auction rooms in Ried. Three fire engines and eighteen firemen were involved in the hunt, which lasted one hour. No reported injuries.
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Switzerland 31 March Bauer Marti protestiert mit dem Tier schon seit längerem gegen die Grossbank. So stand der Muni auch schon vor der UBS in Grenchen. Gemäss eigenen Angaben hat Marti rund drei Viertel vom bei der UBS angelegten Geld während der Wirtschaftkrise verloren. Die Bank weist aber die Vorwürfe zurück.

Die UBS-Filiale von Büren wurde heute im Beisein von UBS-Verwaltungsratspräsident Kaspar Villiger nach einer Umbauphase wieder eröffnet. Klemenz Marti übergab Villiger einen Brief, während letzterer den Muni sogar streichelte. «Das Tier sieht böser aus, als es ist», so Villiger.

Klemenz Marti, a Swiss farmer who says that UBS lost (i.e. helped themselves to) three-quarters of his savings in the financial crisis carried out another protest against the Swiss banking giant by tethering his animal outside a UBS branch that had been renovated and was being re-opened. He passed a letter to the UBS chairman who was there to cut the ribbon. The chairman took the letter and patted the bull on the head, remarking the bull was a lot friendlier than he looked.
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Bavaria 31 March: BERCHING - Bei einem landwirtschaftlichen Unfall ist ein 81 Jahre alter Mann in Wallnsdorf in der Stadt Berching ums Leben gekommen... Der 81-Jährige hatte auf seinem Bauernhof in Wallnsdorf im Berchinger Stadtgebiet einen Freilaufstall betreten und wollte ausmisten. Eine Kuh rannte auf den Senior zu und riss ihn zu Boden. Bei der Attacke zog sich der Mann schwere Verletzungen zu. Der Bauer wurde ins Krankenhaus gebracht. Dort erlag er dann am frühen Abend seinen Verletzungen.

An 81-year old farmer went into the cow shed to clean it up. A cow ran up to him and pushed him to the ground, injuring him badly. He was taken to hospital where he died of his wounds later the same day.

"Farmer suffers cow attack"

From News 352 (Luxembourg):

Details unclear as victim is airlifted to hospital.

The new week started in the worst possible manner for a farmer in Biwer as he was badly injured by one of his cows on Monday morning. The incident happened around 10 am, with the exact details of the accident still unclear.

The victim was airlifted to Kirchberg hospital with the LAR-helicopter.

They need a helicopter? You can walk from one end of Luxembourg to another in about half an hour.