Tax Matters – How Does Spend Matters Operate?

Since the debate about Google's tax affairs erupted last week, virtually everyone I have seen is asking just one question - so Peter, how much tax does Spend Matters Europe pay?

Well, we’re not ashamed of our tax affairs here at Spend Matters Towers. We do of course owe a duty to our shareholders to legitimately minimise the amount we pay, but we always follow the rules in place in whatever countries we operate in.

So our structure is quite simple. Spend Matters Europe is registered in three different islands somewhere off the coast of Haiti – one for “Spend”, one for “Matters” and one for “Europe”. But the intellectual property in the brand name Spend Matters Europe is owned by a holding company based above a kebab shop in Gibraltar, and that firm charges a small licensing fee to our operating companies for the right to use the name (no more than £3.7 million. A week.)

Clearly, we don't actually carry out much real “value-adding” income generating work in the UK, just like Google. Those of you who think you've spotted me negotiating deals over a beer at various conferences are mistaken - that was simply a hologrammic presentation of my corporeal self which barely moves from Dublin, the true nerve centre of our operation. From Dublin, we operate the “double Irish” tax manoeuvre, all perfectly legit of course, which means a magic leprechaun makes our profit disappear in return for a payment to the Irish Government of some £4.72 a month.

When I say we are based in Ireland, that is except for our internal procurement operation, split between Zug and Luxembourg (next door to Vodafone). That buys on behalf of the whole group and then sells goods and services on to those firms, adding on just a small mark-up (67% currently) to cover its costs.

Did I say Dublin? Sorry, if we are talking about me personally as opposed to our corporate nerve-centre, I actually spend 328 days a year in a tax-free monastery in the foothills of the Andes. The Dublin office runs fine without me. Anyway, all these totally legitimate steps mean that our tax rate this year in the UK will be -25.4%. We calculate that HMRC owes us about fifty grand.

We are only joking of course. We get revenue, we pay for goods and services, the difference is profit, that gets taxed at whatever the rate is – down to 20% now. We don't do anything fancy - it is hard for small firms to replicate the avoidance moves the big boys pursue because there is a cost which is relatively fixed whatever your size; professional tax advice for instance.

But it does annoy me when I see that Spend Matters Europe paid more tax in the UK than Facebook in 2014. Yet here is the core of the issue. If you showed me a way to pay less tax - legally - then of course I would do it. Most of us would. So you can't really blame these firms, although you might hope that they start considering reputational risk (but Google and Facebook are de facto monopolies now). It really is up to governments to sort this out if they really are serious. But that will take collaboration between countries to stop “tax competition” – what is the real chance of that happening?

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