Interestingly (yes it is you bastards), to use the brand "Scotch Whisky", the stuff only has to be distilled in Scotland. You can age and bottle it anywhere you like (in Corsica, they drink a brand of Scotch called "Altore" which is distilled in Scotland then shipped to Corsica to be aged in barrels next to the Med and then diluted down from cask strength with local spring water). So your "Genuine Scotch Whisky O'Glen Xinjiang" would be a viable product under EU labelling laws.
Yes, I'd heard that before. I think that bet on Chinese Scotch is going to pay off well before the ten years are up, because most people with a large amount of shares in whisky are probably aware of it too.
I wouldn't mind that so much, if it were Diageo's senior staff who were going to be working 18 hour days with armed guards instead. That'd at least have a ring of justice about it.
Boring Tax Fact: for as long as Diageo plc remains a UK-registered company, all money that it actually pays to shareholders as dividends (="the point of being a company") has been taxed at 28%, because that's the way the law works - you can only pay shareholders money earned by the UK plc and hence taxed at 28% by HMRC, or remitted as dividends by foreign companies and hence taxed at 28% by HMRC. [*]
Worth keeping an eye to see whether they follow the likes of Experian and re-incorporate the parent company offshore, in which case proper tax avoiding, rather than fairly pansy deferring, can take place.
[*] except for countries with double-tax treaties with the UK, where we waive tax rates above 28%. That means that if their profits are taxed at 40% in the US, then we don't re-tax the money the US company pays as a dividend; if their profits are taxed at 20% in the Netherlands then we take another 8% of that dividend; and if their profits are taxed at 0% in the Ropey Shelter Haven Country then we tax the whole dividend at 28%.
john b> At the moment, yes, in principle.
From next tax year, not quite. HMRC is bringing in a participation exemption for foreign income, so that dividends/other repatriated income will be exempt from corporation tax. There's lots of finer details to be aware of (stopping excessive amounts of debt being put through the UK etc.) which means the net cost is estimated as being surprisingly low [proportionately], £700m-£1bn are the numbers I've seen bandied about.
I must admit I've not boned up on the details too closely, as it's not currently relevant to the organisation I'm inhouse advisor for...
And on footnote 7, the Guardian is talking shite.
DGE's taxation payment for FY08 was gbp522m on profits of gbp1.58m.
They kindly put a reconciliation of 'what the UK tax liability would've been' versus 'tax actually paid' in their accounts (here). Its UK tax liability for 2008, if all profits generated in the UK and no abroad profits at all, would've been gbp617m.
The reasons for those differences are interesting, and might actually be worth looking at in more depth. But sadly the twats who wrote the Guardian piece, and presumably actually spend significant amounts of paid time doing so, are too fucking ignorant to dwell on that and instead went all 'oooh, selling stuff to Dutch people; oooh, not much tax paid in the UK, let's ignore all the tax they pay abroad' to create an entirely meaningless story that stirs the base.
Grrr. More medication.
& yes @ RJ, that's something that's actually worth worrying about - the UK rule of 'if taxed abroad, don't taxed, if not taxed abroad, do tax' was coherent, sensible and fair, and abolishing it isn't something I'm at all comfortable with.
Cheers John - I picked up that Guardian article as I was looking for the company's annual profit and made the mistake of taking it at face value. Post updated to reflect.
Before readers kick off on an extended jag on that issue, it's worth pointing out that taxation isn't really my main concern here so much as Diageo's Hmm, nice jobs you guys have, let's fuck your town to pieces by converting them into hard cash for shareholders, shall we attitude.
Will John ever be able to disagree with anybody without calling them idiots, stupid, or fucking ignorant?
@ejh the people who wrote the Guardian article aren't just people I disagree with, they're people who're either too incompetent to be journalists or deliberately lying.
John,
I wouldn't quite be so quick - deferred tax movements account for a 1/3 of the overall tax charge, which is surprisingly high, in my experience.
(Deferred tax is a handy accounting fiction that unfortunately makes accounts tricky for the laymen. It's not an actual payment of tax, but a provision for a future tax benefit or cost caused by events in the current year. For example, if you make a tax loss in one year, you won't pay any tax, but should be able to use these losses in future (and get reduced tax bills) - i.e. a future tax benefit. This tax benefit is an asset of the firm, and the logic of double entry accounting means that it creates a credit to your P&L. )
Looking at Note 25, the 'other temporary differences' column is remarkably large, which makes me suspicious that something odd is going on.
End of society as we know it.
End of society as we know it.
I'd say that happened roughly two years after I was born, when this kind of thing ceased to be an unacceptable depradation of an emerging royal class. Soon afterwards, it became The way things should be and it's now The way things are.
Either way, firing squads are surely the answer.
Interesting Blog post.
To expand on Richard J's point, basically deferred tax arises because depreciation charges/alloances for taxation purposes are far greater than depreciation charged for the economic useful life of an asset in the accounts.
Which begs the Question. Diageo are being given tax incentives to invest here, but can't be arsed/bother to stay because they can can get effective slave labour in China and more profits.
Remember the Cadbury Report/Corporate Governance/Ethics stuff etc a fair few years back?
Wipe your unemployed arse with it!
they're people who're either too incompetent to be journalists or deliberately lying.
Hey ho.
John Band, never knowingly understated.
John - try acquainting yourself with the notion that a good point is not improved by being put badly. Or indeed aggresively.
It's only fair to note that Tim Worstall had a nit to pick with this post...
http://timworstall.com/2009/07/0...the-word-makes/
I didn't think it was that interesting but then, he didn't seem to make much of my 30-year-long wealthy plutocrats relentlessly fucking the working man while their flacks tell us it's making us all happier and better off thesis either, so fair's fair.
@ DSquared,
From The Times, today...
In an interview with The Times at (Diageo's) Scottish headquarters on the outskirts of Edinburgh, Mr. Morgan agreed that there could be advantages for the company in outsourcing bottling nearer to big international markets such as Eastern Europe and the Far East.
He said "There are incentives for us sometimes to ship bulk out to markets and bottle locally... There would be taxation benefits that come from that and inducements from governments, but we prefer not to do that.
Magnus Linklater, same page, is a savvy cat - when the European boss of Diageo says "Give us carte blanche to do what ever we like or we will fuck you up goodstyle," he knows what that means...
Diageo has made it clear that it is not interested in moving its bottling operation outside the country...
Linklater says we need a mature approach, but he's wrong. We need heads on sticks, pour encourager les autres.
While we're at it, that's another Timmehwankism: The posts that, once you remove the blockquotes, go "ah uh? oh".
But if it keeps the advertisers happy...
John - try acquainting yourself with the notion that a good point is not improved by being put badly. Or indeed aggresively.
I do 'aggressive'; you do 'patronising'. I annoy you; you annoy me. I don't think either of us makes our points *badly*. Se a vida e.
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