Monday, 13 July 2009

Amway's closed market generated fortunes for accountants

What continues to fool government regulators about how 'Amway' operates is the fact that the individual 'Amway Corporations' pay taxes on internal transactions between them and their agents.
In the UK, 'Amway' sells products and services to its agents at what 'Amway's' instigators arbitrarily define as a 'wholsale price,' but inclusive of standard rate UK Value Added Tax (15%).
In the UK investigation, more than 90% of 'Amway' agencies were revealed to be their own final customers, but, even if they had been selling to the public, the 15% VAT which they had already paid to 'Amway UK' is passed on by 'Amway UK' to the UK government. Unlike traditional retailers, the UK 'Amway' agents have no obligation to the UK VAT system themselves.
In the open market, traditional UK retail businesses which are registered with the UK VAT system, buy from other businesses who charge VAT on behalf of the UK government, but all businesses which are part of the UK VAT system are allowed to claim the VAT (which they have paid) back from the UK government.
For years, this fiercely complex VAT system has operated in the same way in European countries (although the rates have varied). The idea being that businesses act as unpaid tax gatherers, whilst it is only the final retail customers who pay VAT. Certain products and services have been exempt . There are many people who have observed that VAT has generated almost as much cash for accountants in fees as it has for governments.
Tellingly, even though there have been virtually no genuine external retail customers, the 'Amway' closed-market has still generated fortunes for accountants and governments around the world.
People who live in glass houses never want to throw stones.
David Brear

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