Nero Holdings Limited - stay of execution

[david_carnell]

To those who say it's not illegal, you are correct.

Then again, neither is being a dick. But no one will ever thank you for it.

[LondonMix]

Also DaveCarnell, while I get why you believe the only outcome would be lower profitability I think that if you think it through you will realize that the impact will be different for different types of businesses.

Businesses for which demand is fairly inelastic because the good is a ?necessity? will be able to pass on any new costs (such as higher taxes) to the consumer if there are no international substitutes that can be imported at a lower price.

For businesses where demand is very elastic, if there are no huge barriers to entry, real economic profits are zero (from a microeconomics perspective). That simply means that if the profits for doing something are higher than what someone considers the minimum required, more and more people will crowd into the field until competition drives profits down to a level at which no new businesses consider it worth the effort to open unless one has close. At this point the sector has matured as it?s no longer expanding. That equilibrium rate of profit is different for each sector (very risky businesses need to produce a high rate of return to compensate for risk). If the profits fall too low (even without it making a company insolvent) people would rather invest their money in other things rather than running a business (for example, if your profit margin for running your local coffee shop fell close to the government bond interest rate, wouldn?t you rather just fold it up, stick your money in a government bond and collect your interest?). The new cost will mean that businesses will exit the sector until profits increase again due to reduced competition and a new equilibrium will be created. Practically, this means higher prices and fewer shops offering a service.

The scenario in which profits will decrease is for industries that operate with profit margins that would normally attract new businesses to open except that there are huge barriers to entry which prevents the competition mechanism from working properly. These are industries that usually require a lot of money start, though there are many other barriers to entry. These are the only businesses where profits would simply fall and there is still a limit on how far they can fall before there are repercussions.

[KidKruger]

Dave, I'd happily be called a dick for a few ?million a year.

Oh, hold on...

[LondonMix]

You are still drawing a false analogy between companies doing something that?s legal but still ?bad behavior?. It?s not bad behavior. The government essentially tells these companies, we want you to do this so you can have a lower cost basis and expand and contribute to employment growth. They do it and then you demonize them, which is ridiculous.

david_carnell Wrote:

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> To those who say it's not illegal, you are

> correct.

>

> Then again, neither is being a dick. But no one

> will ever thank you for it.

[david_carnell]

Except that barriers to entry in being a competitor to Amazon are huge. The cost of establishing a rival company at this stage would be close to impossible.

So we could easily enforce (or change) taxation legislation requiring them to pay profit on UK generated profits to HMRC without them shedding thousands of jobs. They don't sell items cheaper than anyone else due to cunning tax lawyers, they do it through shrewd negotiations in economies of scale.

And their customers already pay their costs. They have the operating profit to show for it. This isn't some ethereal company that Google could possibly claim to be.

[LondonMix]

I agree on Amazon. But a unilateral change in the broader tax system would have other repercussions. It?s difficult to change the tax rules so they only apply to specific companies. Truth be told, in the US, once companies really come to dominate one sector too much (particularly a vital one) so that it threatens competition they are broken up. This most famously happened with AT&T back in the day.

[david_carnell]

In a similar fashion, Starbucks had a raptor-capitalist approach to rival, independent coffee shops by using their buying power to open multiple outlets in small geogrpahic areas, often running at a loss until their competitors couldn't compete and closed. SB would then close all but one outlet and resume trading at profitable levels.

This isn't market forces at work, or Government looking out for business interests - this is rapacious capitalism being allowed to ride rough-shod over basic financial standards.

I'd be interested to see if Green and Blue could try and claim they are merely a trading name for a pan-European wine merchant based in Luxembourg!

[LondonMix]

The substance test (ie. can you be claim to be based somewhere else) involves costs such as having an office with employees there and all management decisions need to take place there-- so board meetings are often held in tax havens to substantiate this. Green and Blue could do it if they thought it would save them enough money to be worthwhile. However, small businesses do get other tax breaks so its often not worth it until they are of significant enough size. You'd be surprised how many small to medium sized companies are domiciled in the Isle of Man. This is not a practice limited to large firms.

Sounds like you are in favour of stronger anti-trust laws. What you are describing is already illegal but its hard to prove.