The Fantastic Four

Image article 4 Fantastics

Ces temps-ci, nous découvrons que bon nombre d’entreprises multinationales utilisent des stratagèmes  d’évasion fiscale pour optimiser leurs bénéfices. Ceux-ci sont légaux et de plus en plus ingénieux, mettant à mal les Etats et créant l’indignation. Qui se cachent derrière les montages financiers élaborés pour contourner les lois ? De très puissants acteurs internationaux qui œuvrent en toute discrétion, les cabinets d’audit comptable et financier. Nous vous proposons d’en savoir plus sur les 4 plus grosses entreprises d’audit, appelées les  « Big Four » et sur les affaires qui secouent le Royaume-Uni depuis quelques mois.

***

The “Big Four” have nothing to do with sports! In fact the also named “Fat Four” (there used to be five of them) are the four biggest audit firms. Among them two are British: Ernst & Young and PricewaterhouseCoopers. These multinational companies employ (or hire) 700,000 people in 150 different countries around the world, their profits are huge: together they generate a turnover of almost $100m per year. What do they do?  One of the official targets of the Big Four is “to interpret tax laws and optimize the profitability of their customers”, in other words to help companies in their tax avoidance schemes (tax evasion is illegal). How do they do that? Lawyers and accountants study tax law day in and day out until they find loopholes that can be used to help their clients. Then they come up with ingenious tax avoidance schemes for their customers. Their main asset is that they recruit the very best tax experts. They are able to offer them fabulous salaries which can peak at £845 (1000€) per hour! Faced with this brain drain the tax administration can’t keep its best elements and has no power to fight tax evasion, which has soared in the last few years. Audit firms have a disastrous impact on the UK’s tax revenues: many companies have achieved tax evasion for many years and owe tax authorities millions or billions of pounds. And Ernst & Young (E&Y), a British company, as the auditor of Google and Amazon, is responsible  for tremendous amounts of tax evasion in its own country, which in times of crisis is enough to create quite a stir.

Currently, the United Kingdom which is in triple-tip recession is deeply touched by this phenomenon. Three recent cases created a scandal in the UK: Google, Amazon and Starbucks. The three companies are all clients of the Big Four (as are all big corporations in fact). The three financial packages are different but the point remains largely the same. Let’s focus on Starbucks’ to explain one of the many different strategies found by an audit. Starbucks has only paid £8.6m tax in 14 years although their turnover last year in the UK was about £398m, according to Reuters. It represents less than 1% tax per year. Why does Starbucks pay so little? As farcical as that may seem the coffee giant had reported losses even though the UK market is said to be profitable, according to managers. Starbuck’s shrewdness consisted in creating many sister companies set up in European countries which have very business friendly lax laws. After that, the process is quite simple but cruelly efficient: the coffee sold in the UK is bought by a Swiss subsidiary. Starbucks UK buys the coffee from its Swiss sister at a higher price or at the same price than the coffee sold in cafés. The sister company based in Switzerland can thus make tremendous profits contrary to Starbucks UK. And the Swiss enterprise pays Swiss taxes (which are lower than they are in Britain) while Starbucks UK, taxable in the UK, doesn’t pay taxes because it doesn’t make profits! This scheme conceived by Deloitte is unfair but not illegal, so the British government can’t fight against this tax avoidance.

Recently, some waves of outrage have erupted in public opinion. In the UK demonstrations denounce the efforts big companies make to avoid paying taxes when the country is in recession. “Tax shaming” is on the rise and tax protesters like UK Uncut are in the spotlight. The UK’s government can hear these cries for justice and trying to fight tax avoidance. Google, Amazon and Starbucks were auditioned before the Committee of Public Accounts of the British House of Commons on November 12th 2012. MPs asked for explanations and were surprised to hear Starbucks hadn’t made any profit in the UK. Some disgusted politicians, like Labour’s deputy leader Harriet Harman, have called for a boycott of Starbucks et al. However most of the big companies are clients of the Big Four. The countries that promote the Big Four, Switzerland, the Netherlands and Ireland, are also to be blamed. Nevertheless one shouldn’t take too much pity on the United Kingdom as London’s City is as much of a tax haven as many more exotic tax havens. Who’s outraged now?

Clément MOREAU & Julien VIELCANET

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s