Shares in F1
- Thread starter Greenlantern101
- Start date
I'm putting it in this thread because it fundamentally underpins F1's profitability and therefore the likelihood and valuation on an IPO.
The mainstream media are starting to become more and more interested in F1's tax avoidance schemes:
http://www.dailymail.co.uk/sport/fo...ed-just-1m-300m-profit.html?ito=feeds-newsxml
http://www.espn.co.uk/f1/motorsport/story/117653.html
These stories come from a report written for The Independent by Christian Sylt
http://www.independent.co.uk/news/u...oration-tax-on-300million-profit-8728928.html
As always, Sylt has backed up his piece in mainstream media with more detail on Pitpass.com
http://www.pitpass.com/49551-F1s-tax-bill-shows-that-Ecclestone-hasnt-lost-his-magic
The "losses" that enable F1 to pay just £1m tax on £300m operating profit* come almost entirely because of loans between F1 companies (some bearing interest rates of over 15% per anum). These loans have been used to buy F1's assets from other group companies. The proceeds of these "asset sales" have then been taken out of the business through Delta Topco and a chain of CVC funds.
It is a bit different from other highly publicised cases that are driven by the deductable expenses incurred licensing IP. F1's is a bit different in that it relies on the deductability of interest payments to parent companies. It is all quite legal apparently. But, is a house of cards that could topple if the G20 do actually deliver on their commitment to clamp down.
* Actually what happens is that some group companies pay tax while others claim back massive amounts so that the net picture is the figure quoted. Each of the companies in my earlier diagram on page 1 of this thread plays a role washing the tax out.
The mainstream media are starting to become more and more interested in F1's tax avoidance schemes:
http://www.dailymail.co.uk/sport/fo...ed-just-1m-300m-profit.html?ito=feeds-newsxml
http://www.espn.co.uk/f1/motorsport/story/117653.html
These stories come from a report written for The Independent by Christian Sylt
http://www.independent.co.uk/news/u...oration-tax-on-300million-profit-8728928.html
As always, Sylt has backed up his piece in mainstream media with more detail on Pitpass.com
http://www.pitpass.com/49551-F1s-tax-bill-shows-that-Ecclestone-hasnt-lost-his-magic
The "losses" that enable F1 to pay just £1m tax on £300m operating profit* come almost entirely because of loans between F1 companies (some bearing interest rates of over 15% per anum). These loans have been used to buy F1's assets from other group companies. The proceeds of these "asset sales" have then been taken out of the business through Delta Topco and a chain of CVC funds.
It is a bit different from other highly publicised cases that are driven by the deductable expenses incurred licensing IP. F1's is a bit different in that it relies on the deductability of interest payments to parent companies. It is all quite legal apparently. But, is a house of cards that could topple if the G20 do actually deliver on their commitment to clamp down.
* Actually what happens is that some group companies pay tax while others claim back massive amounts so that the net picture is the figure quoted. Each of the companies in my earlier diagram on page 1 of this thread plays a role washing the tax out.
jez101 And this surprises you when the structure was set up by a man currently charged with paying a few million to a german banker who knew how his tax system worked to keep it out of the eyes of HMRC?
Actually, to be honest it does surprise me, that the company structure managed to get away with paying 0.33% tax rate is shocking, Bernie must be slipping in his old age as that rate is way too high for his liking...
Actually, to be honest it does surprise me, that the company structure managed to get away with paying 0.33% tax rate is shocking, Bernie must be slipping in his old age as that rate is way too high for his liking...
I don't think it was the corporate tax side that Bernie was worried about HMRC investigating. I think that was to do with his personal ownership, it's transfer to Bambino and Bernie's connection to Bambino. His tax arrangements were clean as long as he had no control over Bambino, the family trust that Ecclestone had set up in 1997 as F1's ultimate owner.
This control was important during a series of transactions between 1999 and 2006 when Bambino sold chunks of shares in F1. Bambino had to exist at arms length from Bernie for the tax break on the original transfer to be valid.
Gribkowsky was probably threatening to say that Bernie exercised control over Bambino during these transactions. This could quite easily have been a lie, but the threat of someone as knowledgeable as Gribkowsky saying it had to be taken seriously. Bernie could well have been the victim, it's one man's word against another.
It is of course quite possible that Bambino's trustees backed Bernie's judgment 100% and decided of their own free will to support their employee in whatever decision he took as CEO. ie. he didn't have to control them because they supported him to the hilt.
This control was important during a series of transactions between 1999 and 2006 when Bambino sold chunks of shares in F1. Bambino had to exist at arms length from Bernie for the tax break on the original transfer to be valid.
Gribkowsky was probably threatening to say that Bernie exercised control over Bambino during these transactions. This could quite easily have been a lie, but the threat of someone as knowledgeable as Gribkowsky saying it had to be taken seriously. Bernie could well have been the victim, it's one man's word against another.
It is of course quite possible that Bambino's trustees backed Bernie's judgment 100% and decided of their own free will to support their employee in whatever decision he took as CEO. ie. he didn't have to control them because they supported him to the hilt.
I have no idea if Bernie is guilty or not in relation to the issue in Germany but every time I think about it, all I can think of is £1000000, the British Government and a relaxation of the ban on smoking advertisment in F1. When looked through that prism it's much easier to form an opinion on his guilt.
Fenderman
Rooters Reporter
Bambino is the Ecclestone family trust set up for his daughters Petra and Tamara. Bambino is also implicated in the bribery affair since it is likely that the funds for the bribe came from coffers controlled by the trust. The convoluted web of F1's "legitimate" tax avoidance measures may in fact have a weak link if the authorities are astute enough to find it. However, finding and exploiting the crack in the chain may require a successful prosecution of Bernie and Bambino by the German court.
It will be very interesting to see if the web begins to unravel if the stock market gets nervous about F1's flotation amidst concerns for the likely downside of association with what could be viewed as a very corrupt organisation. At the very least, prospective investors will want to know that their investments will confer sufficient returns before the whole thing unravels. It's a safe bet that speculators will be the ones to rush for shares in the hope of unloading them quickly for a speedy profit. A cautious investor with any sense of morality and concern for their own credibility and that of their partners and contributors would be well advised to watch and wait.
It may be that once the Gribkowsky Affair has finally played itself out the whole "House of Cards" will have collapsed ready for a massive reshuffle and re-creation.
It will be very interesting to see if the web begins to unravel if the stock market gets nervous about F1's flotation amidst concerns for the likely downside of association with what could be viewed as a very corrupt organisation. At the very least, prospective investors will want to know that their investments will confer sufficient returns before the whole thing unravels. It's a safe bet that speculators will be the ones to rush for shares in the hope of unloading them quickly for a speedy profit. A cautious investor with any sense of morality and concern for their own credibility and that of their partners and contributors would be well advised to watch and wait.
It may be that once the Gribkowsky Affair has finally played itself out the whole "House of Cards" will have collapsed ready for a massive reshuffle and re-creation.
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