Google Ordered Back To UK Parliament To "Explain Itself" Following Investigation

DavidGilbert99 writes "Last November Matt Brittin, Google's European chief gave a pretty convincing account of himself as he tried to explain why Google wasn't paying more tax in the UK. All the sales staff were based in Ireland apparently and the UK-based staff were there just to promote the platform for advertisers. Great. Nothing to see here. Move on please. Well, actually there is a little more to the story, as an investigation by Reuters has discovered. There are many sales staff in the UK with titles and responsibilities curiously close to what most people would call sales staff and as a result Mr. Brittin will once again have to face Margaret Hodge and the PAC to explain just what is happening."

Comments

Googled it?

[M3.14]

I wonder if Reuters did use google to find it out.

Re: Googled it?

[Anonymous Coward]

Bing? :)

I interviewed for Google in Ireland

[Anonymous Coward]

I did a couple of interviews for Google in Ireland, yet all my interviewing was through the UK... 0.o

It usually works like this

[Anonymous Coward]

1) The public fund protection of Google's entitlement to private ownership and profit;

2) In return, Google bribe the right people at HMRC and central government to turn a blind eye;

3) Google gets all the benefit of a particular society but little of the responsibility.

What will have happened here is that something went wrong at stage 2.

The universally sad thing about Libertarians is that they don't undertand that power always fills a vacuum: the less powerful you make democratic government, the more powerful you make privately owned businesses.

Re:It usually works like this

[philip.paradis]

The universally sad thing about Libertarians is that they don't undertand that power always fills a vacuum: the less powerful you make democratic government, the more powerful you make privately owned businesses.

That's the point. Nothing is misunderstood, aside from your misunderstanding of economics. You probably also suffer from an unfortunate tendency to view markets with blinders and therefore see large players dominating various fields at any given snapshot in time as a bad thing, but without the ability to see that such domination is still better than the alternative of unskilled bureaucratic control that is necessarily comprised of similarly flawed human beings with no real accountability to speak of in the same examined period, with those two options being an exclusive OR proposition, and without understanding that disruptive forces periodically come along in said markets to upset the entire deal in a constructive manner.

In other words, you probably aren't somebody who effects large scale change in the first place, and happily you're not somebody who will wind up having any real influence on things in any event. You probably think you speak for the masses in some respect, but the truth of the matter is the masses don't even know what they truly believe beyond their own personal lives. This has always been true, and will always be true as long as economic scarcity exists. You might as well stop wasting your time concerning yourself with such things and just live your life.

TLDR: This is how the human species operates. Get used to it and relax.

Re:It usually works like this

[sa1lnr]

"Google bribe the right people at HMRC"

If you looked at the career history of those at the top of HMRC you would see that there is no need for bribery.

Re:It usually works like this

[gutnor]

You probably also suffer from an unfortunate tendency to view markets with blinders and therefore see large players dominating various fields at any given snapshot in time as a bad thing, but without the ability to see that such domination is still better than the alternative of unskilled bureaucratic control that is necessarily comprised of similarly flawed human beings with no real accountability to speak of in the same examined period.

By living in a democratic country you have a guaranteed slice of control on the government and therefore there is some accountability. With private entities, the accountability is only to the shareholders, which exclude most of the masses. That's in the best of cases, with a privately owned company, you don't even have access to that.

The only difference at this stage is market pressure which address the "unskilled" bit of your rant. That should allow you to get a better service in theory. Of course there is the drawback that you need unskilled bureaucratic control to make sure the market is fair.

TLDR: You make a very weak attempt at justifying the personal insult against GP in your second paragraph and trick slashdot moderators to mod you up.

Re:It usually works like this

[Anonymous Coward]

You probably also suffer from an unfortunate tendency to view markets with blinders and therefore see large players dominating various fields at any given snapshot in time as a bad thing, but without the ability to see that such domination is still better than the alternative of unskilled bureaucratic control that is necessarily comprised of similarly flawed human beings with no real accountability to speak of in the same examined period, with those two options being an exclusive OR proposition, and without understanding that disruptive forces periodically come along in said markets to upset the entire deal in a constructive manner.

At least with democracy, if they're being particularly obnoxious you can vote out the fuckers. How do I vote against an anti-competitive corporate monopoly?

Re:It usually works like this

[hughbar]

Yes, but unhappily the other fuckers are usually very similar to the previous fuckers and about as corrupted by non-transparent lobbying and the entitlement culture of professional politicians [in the UK, they've usually been to Oxford and haven't actually had a 'job' except as 'special advisers']. I think there are a couple of solutions:

1. Apprenticeships for politicians and senior civil servants. They need to live in bad housing and do shit jobs before any promotion
2. Sortition http://en.wikipedia.org/wiki/Sortition choosing representatives by lottery, to prevent all the cosy, sweetheart stuff. The quality won't be worse and will even out

There are probably plenty of other ideas, but what we have certainly doesn't work properly for the 'people'.

Re:It usually works like this

[rednip]

Most bad government has grown out of too much government. - Thomas Jefferson

Whenever I see a quote like that attributed to Thomas Jefferson, I always [use a popular internet search tool] to find more often than not that it's simple right wing fantasy. Why am I not surprised, that it's fake?.

Here are some more things to chew on:

• All of our founding fathers spent their entire lives as politicians both during the colonial era and after the revolution. The idea that they were somehow 'afraid of government' is ludicrous.
• The idea that revolution was 'a bunch of farmers with their personal guns' is ridiculous, it was funded by state governments (Continental Congress) and supported by the French crown.
• Thomas Jefferson didn't write the Constitution, nor the bill of rights, as he was minister to France that entire time, he wasn't even on the committees. Was he really even a 'Framer'? Also, for all his views, when given the chance as a President he governed with an expansive view of both executive and federal power.

Re:It usually works like this

[RaceProUK]

"Google bribe the right people at HMRC"

If you looked at the career history of those at the top of HMRC you would see that there is no need for bribery.

IIRC, Vodafone escaped a huge tax bill by taking one of the HMRC top dogs to dinner. Once.

Not quite 'Minimum Bribe Level: 1 Turnip', but not far off.

Re:It usually works like this

[Anonymous Coward]

Obama misspoke. What he meant to say was: "You didn't build that (company) [by yourself, without the help of government to provide you vital services]"

Re:It usually works like this

[Anonymous Coward]

It wasn't just infrastructure that he was referring to (which is a hell of a lot more than roads); it's things like the rule of law, dependable electricity, clean water, safe pharmaceuticals and food, small business loans, public education, etc. that make your small business more successful than that taco stand outside Kabul.

BTW, my favorite Jefferson quote is "But Ms. Hemming, what on earth would you do with freedom? Now back that sweet fanny over here."

Re:It usually works like this

[Anonymous Coward]

Oh yea? Chew on these genius.

"If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself."

Federalist #51, Madison

"Whensoever therefore the legislative shall transgress this fundamental
rule of society; and either by ambition, fear, folly or corruption,
endeavor to grasp themselves, or put into the hands of any other, an
absolute power over the lives, liberties, and estates of the people;
by this breach of trust they forfeit the power the people had put into
their hands for quite contrary ends, and it devolves to the people,
who have a right to resume their original liberty, and, by the
establishment of a new legislative, (such as they shall think fit)
provide for their own safety and security, which is the end for which
they are in society."

John Locke, Second Treatise of Civil Government, Ch. XIV, sec. 222

"But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

I'll leave it as an exercise for the reader to identify that last one.

Now fuck off.

Re:It usually works like this

[Charliemopps]

Sure glad I got the constitution to protect me from people like you :-)

Thanks for the info on the quote. It's pretty clear he believed exactly what the quote says, but I'd rather not quote something that's inaccurate. Also, in the very link you provided it says the quote first arose in 1913, long before the republican party or conservatives (neither of which I belong to) were what they are today.

Here's a new quote from your link:
"The natural progress of things is for liberty to yeild, and government to gain ground." - Thomas Jefferson to Edward Carrington, Paris, May 27, 1788

I'll go on to my righting fantasies about Thomas Jefferson thinking Government was the enemy of liberty now. No idea where I came up with such an idea, but I'm sticking to it none the less.

Re:It usually works like this

[Dishevel]

A private company can not put me in prison without government help.
A Government can.
Some private companies I do not like. Most I do not have business with.
A few I am "Forced" (Meaning I am too lazy to figure out a different way) to do business with (Microsoft).
There is no competition for government.
I fear Government. There is no corporation (Even the Evil Microsoft) that I fear.

Re:It usually works like this

[Anonymous Coward]

How do I vote against an anti-competitive corporate monopoly?

With your dollars - a far more effective way of effecting change than hoping that some mid-level bureaucrat somewhere fears your single vote enough that he'll do what you want.

Or, by building an enterprise that competes with this monopoly. Businesses aren't natural resources that just magically grow on trees, and once you've harvested them all, no more businesses can be started.

How's the telephone company going to maintain its monopoly without a government grant?

Re:It usually works like this

[Anonymous Coward]

People seem to misunderstand that this happens naturally as governments become more abusive and corrupt. The people they govern as a general rule begin to give a fuck less and become more abusive and corrupt themselves until new power structures develop.

Were seeing that transition right now.

Re:It usually works like this

[Hunter Shoptaw]

I don't remember him saying, "You didn't build that (company)!" Oh! YOU added that in there! Gotcha. Well gee I guess if we can just add in the stuff we want to believe people said then it's fine. "(the government)....makes a nation great." - Impy the Impiuos Imp Wow you are such a socialist!

Re:It usually works like this

[Hunter Shoptaw]

No he didn't misspeak, he was taken out of context.

Re:It usually works like this

[Anonymous Coward]

A private company can not put me in prison without government help.

Shall we put that to the test?

Re:It usually works like this

[gutnor]

Just wondering what is there to protect you from ? You both disagree on what Jefferson thought ? If anything the constitution is actually preventing you to be safe, by making sure the government will not shut up either of you.

Re:It usually works like this

[Anonymous Coward]

Of course, your "full context" also conveniently omits the full picture. It SHOULD read:

"You didn't build that (company) [by yourself, without the help of government to provide you vital services. Government took your money in the form of taxes, and gave it back to you in the form of vital services that you could have purchased for yourself, but hey, we gotta keep some government bureaucrats employed!]"

Where do you think government gets the funds to provide services, again? Riiiiiight... by taxing corporate profits and business owners. They're not getting any tax revenue from the people mopping floors living at the poverty line, dipshit.

Re:It usually works like this

[fredrated]

Funny thing about that, for the last 30 years the tax burden has been steadly shifted from corporations and the leisure class to "the people mopping floors living at the poverty line"

Re:It usually works like this

[Anonymous Coward]

Every person in the US that is in prison or jail because they pissed of a powerful private company was put there by the government.
It is the power of the Government that is abused in the interests of the company.
Less powerful government and people win. To a point of course.+

Re:It usually works like this

[gmanterry]

Funny thing about that, for the last 30 years the tax burden has been steadly shifted from corporations and the leisure class to "the people mopping floors living at the poverty line"

Sorry, but you haven't looked at the tax rolls lately. Remember the 47% who don't pay taxes. Those are the people mopping floors. I am the one of the middle class people still paying income taxes and, in my opinion, that's why the country is going broke. Everyone who earns money should be paying their fair share to support this spendthrift government. Even if it's just $20.00 a year. Everyone who votes, should have a 'dog in the race'.

Re:It usually works like this

[abirdman]

You're missing the fact the government and the corporations are practically the same entity now. There's an open door between mid-level government bureaucrats, mostly regulators, who go to work for private firms, and their co-workers who.go back into government. Many people in oil, pharma, and finance, especially banking, spend time as regulators, and then go to work for the companies they previously regulated. Private individuals can't really fight corporations (viz. the oil spill in Arkansas). Only government is powerful enough to control the corporations, and smaller government will make it weaker in that regard.

Re:It usually works like this

[Anonymous Coward]

I can guarantee you that the US Federal Government is not lacking in power over our lives.
Neither is the State of California.

Re:It usually works like this

[Anonymous Coward]

"Don't pay federal income taxes" and "don't pay taxes" are not the same thing.

Re:It usually works like this

[philip.paradis]

By living in a democratic country you have a guaranteed slice of control on the government and therefore there is some accountability.

This is a fallacy. With government as large as the combined federal, state, and municipal components that make up the bureaucracy of the United States, accountability to a single person or even any particular locale is diluted to the point of being nearly inconsequential. Larger government bodies tend to do what they want, with little actual oversight or consequences for their actions in such a climate. While those bodies are comprised of individuals, the personal responsibility and accountability measures of any single individual in such large bodies becomes diluted in a similar manner. Reference the TSA for practical examples of how this state of affairs comes to pass and the consequences for civil liberties.

With private entities, the accountability is only to the shareholders, which exclude most of the masses. That's in the best of cases, with a privately owned company, you don't even have access to that.

You fail to mention an individual's ability to leave a company should his or her beliefs and needs fail to be satisfied by that company. Apathy on the part of the population and a culture of "gimme gimme gimme, I'm owed everything I want" may reduce the tendency for people to exercise this ability, but it doesn't change its validity. You also fail to mention an individual's ability to start a business venture of his own that acts in a manner aligned with that person's beliefs; apathy and laziness tend to inhibit this as well, but that's the fault of the person, not the rest of the world. There has always existed a relatively small subset of the population that actually builds things and manages their growth, with the balance of the population largely filling what might be considered basic support roles in any given industry. Everybody isn't the same, and pretending they are accomplishes nothing.

The only difference at this stage is market pressure which address the "unskilled" bit of your rant. That should allow you to get a better service in theory. Of course there is the drawback that you need unskilled bureaucratic control to make sure the market is fair.

Would you consult an automotive mechanic for medical questions? Would you feel comfortable hiring a doctor with no background in information technology to act as the chief technology officer for a company you founded? What you're proposing is in fact worse than either of these options, and to say it's an inefficient proposition is generous at best.

TLDR: You make a very weak attempt at justifying the personal insult against GP in your second paragraph and trick slashdot moderators to mod you up.

People spend entirely too much focusing on whether somebody else might have his feelings hurt in the process of examining how things work. This isn't about personal insults; it's about reality, which has little to do with whether people get upset over seeing their personal vision of how they want life to work confronted with the unfortunate reality of a harsher set of terms. You appear to suffer from a common tendency to think that the way things work now, for better or for worse, is somehow new and different from how human society has operated for ten thousand years. You're mistaken in that, and I suspect you'll continue to believe what you want because it's more comfortable than facing reality. That is your problem, not mine.

Re:It usually works like this

[Anonymous Coward]

Hah! Dinner! Bribery need not be that expensive. See this Day-old sushi is enough to rig the financial markets.

Re:It usually works like this

[philip.paradis]

A whole bunch of the folks who aren't paying federal income taxes also aren't paying state income taxes. I see you've nicely dodged the point regarding people paying their fair share in general, though. Most people would consider fair to be a number greater than zero.

Re:It usually works like this

[Anonymous Coward]

actually, ove rhte last 30 years we have only decreased the relative tax burden of the poor. every tax code change has lowered poverty level's people effective tax burden to a very negative number now, even if you include payroll taxes they pay (but we are not negative enough yet to outstrip the employer contributions). And it isn't that hte poor are getting poorer, but even inflation adjusted, you are doing quite a bit better.

Why explain himself?

[cerberusss]

Why does this guy get to explain himself? In my country, the IRS just sends me a letter about me misbehaving, and says I've got 30 days to pony up the cash.

Why the flying duck does a company then gets to make apologies, when it's obvious by now that they're cheating?

Re:Why explain himself?

[Anonymous Coward]

You haven't got a lot of lawyers that can stall the process. Incorporate yourself and pay yourself through an offshore company that get's it's (your) money through another shell company. Then hire lawyers and tax accountants to sort it all out for you.

If you can do all those things then you too can be treated like google. It's a level playing field for all.

Re:Why explain himself?

[JustLikeToSay]

I'm assuming the question is rhetorical.

Re:Why explain himself?

[beelsebob]

"Explain himself" is british english for "to face a bollocking".

Re:Why explain himself?

[Captain Hook]

Why does this guy get to explain himself? In my country, the IRS just sends me a letter...

This isn't the HMRC, this is a special parlimentary committee who are trying to work out how the companies are legally avoiding tax.

The companies questioned (Google, Amazon, Starbucks + 1 other I can't remember off the top of my head - probably MS) were all choosen because they pay very little tax in relation to the turnover the companies are reporting in the UK, and are therefore either very badly run or are engaged in some very effective tax avoidance.

Some of the answers given by the executives were extremely funny, the Amazon executive especially didn't perform well, but Google actually came out of it looking reasonably good, they seemed to be quite honest saying they based most of their operations in Ireland because of it's lower Corporation Tax level and that it wasn't hiding anything while Amazon twisted and turned trying not to say the exact same thing about it's luxembourg HQ.

The Google executive is being brought back because it's now been shown that most of the Google operations are based in London, not Dublin and he was therefore telling porkies.

He's not being brought back in to explain his tax affairs, he's being brought back for lying to a government committee.

Re:Why explain himself?

[maroberts]

Also lying to Parliament is actually an offence for which you can theoretically be sent to prison.

Re:Why explain himself?

[IamTheRealMike]

Also, there's nothing really to explain here. Nobody is claiming the law has been broken or tax was mispaid. Hodge is just an idiot who wants to spend more money to make herself more popular and is holding "show trials" of companies who she believes somehow are too good at taking deductions. This is hilarious because she herself has a stake in a large company that uses exactly the same tax strategies.

Re:Why explain himself?

[beelsebob]

Actually, if sales staff are based in the UK, then sales are being made in the UK, and profits are being made in the UK, so tax is being miss paid. That's the issue.

Re:Why explain himself?

[Xest]

For the same reason newspapers get to "reject" the implementation of the Leveson enquiry.

Companies rule the government, apparently for corporations, the law is optional and something they get to decide whether they opt in to or not.

Meanwhile it's just forced on the rest of us which is a shame, because I'd also quite like to "reject" the digital economy act and RIPA just like the papers say they're rejecting legislation against their decades of abuse and illegal intrusion into people's private lives.

Re:Why explain himself?

[flyingfsck]

Yeah, well you see, the UK sales staff are totally ineffective and never managed to sell a durn thing, despite receiving lots of training from the Irish. They are only retained to help reduce unemployment in the UK...

Re:Why explain himself?

[Angostura]

Because in this case the large companies aren't actually doing anything illegal. In most cases they are using a very detailed understanding of the law to stay within the letter of it, if not the intent.

Much as I dislike the way Google, Apple, Microsoft et al operate in this regard, it is up to the legislature to create their laws precisely and carefully - and in this case clearly the tax laws need to be amended.

Re:Why explain himself?

[Anonymous Coward]

Not defending Google, but it's highly ironic that he's going to receive his bollocking from Margaret Hodge. Her personal wealth is mostly held within a family firm that, you guessed it, dodges UK tax using the very measures she publicly decries. Thus far she's refused to answer questions on the matter stating that she's only a tiny shareholder, despite her shares being worth many millions of pounds.

Re:Why explain himself?

[IamTheRealMike]

That's not how the law is written. The money that is being charged for the ads are paid to the Irish subsidiary. Therefore Irish taxes apply. There's no legal definition for what it means to "make a sale" in that regard and the location of the first person you talk to on the phone makes no difference. Otherwise if you call up a company and your purchase is handled by an Indian call center, is the sale suddenly taxable in India now even if you're a Brit and pay a British company? No, that's not how tax works.

If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

Re:Why explain himself?

[hairyfeet]

Because in case you ain't figured it out friend classism is alive and well in the 21st century, its just wealth has taken the place of birth titles. Its the same result either way, the peasants get one set of laws and the large corps and the wealthy get a different much nicer set.

Hell wasn't it the UK where we saw the MAFIAA altering evidence and they didn't even get a slap on the wrist, nor was the damages against the peasant set aside? if that would have been you then you'd be rotting in a cell right now with an obstruction charge but again because corps like the barons and counts in the old days are just "better class of people" than you they don't even get a slap on the wrist.

Re:Why explain himself?

[_Shad0w_]

The best bit is the court in that case is actually parliament itself; you would be called before the bar of the house. Although they haven't actually fined anyone since the C17th.

Re:Why explain himself?

[the real darkskye]

And yet lying in parliament is perfectly legal.

Re:Why explain himself?

[Anonymous Coward]

That's not how the law is written. The money that is being charged for the ads are paid to the Irish subsidiary. Therefore Irish taxes apply. There's no legal definition for what it means to "make a sale" in that regard and the location of the first person you talk to on the phone makes no difference. Otherwise if you call up a company and your purchase is handled by an Indian call center, is the sale suddenly taxable in India now even if you're a Brit and pay a British company? No, that's not how tax works.

If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

I thought the whole point was for the Parliament to understand what is happening, and use that to consider adjustments to tax laws to address some of the current weaknesses that allows extreme (but today legal) tax avoidance. That is not a matter for HMRC, that is what the Parliament should be doing.

Re:Why explain himself?

[BasilBrush]

A false smear from an AC, repeating the tax cheats excuses.

Margaret Hodge owns shares in Stemcor. Stemcor's effective tax rate over the last 5 years was 32%. Google's effective tax rate was 8%. Google's UK effective tax rate was 0.4%.

Re:Why explain himself?

[Anonymous Coward]

mainly as being polticians they lie when they open their mouths and when they close them, they cant agrre on a definition of lying

Re:Why explain himself?

[Anonymous Coward]

I thought the whole point was for the Parliament to understand what is happening...

Parliament already understands what is happening. Margaret Hodge who chairs the public accounts committee is involved in such tax avoidance schemes herself. Her family company Stemcor paid £157k in taxes on top of £2.1 billion in revenue due to some clever accounting tricks. Wikipedia article.

Re:Why explain himself?

[Xest]

These parliamentary committees exist to investigate issues in society. They have the option of summoning individuals or representatives of corporations to get to the bottom of those issues. If those individuals lie to them (as Google did in this case) then they have the right to recall them and question them hard about that.

Saying it's a waste of time and is guaranteed to achieve nothing is absurd, how the fuck do you think policy gets made if politicians aren't allowed to call in relevant people to explain how things work and to see if they can provide any justification for their position if they lie, or are perceived to be on the wrong side of public opinion?

The whole reason this committee has been pursuing these lines of questioning is to see whether the law needs to change precisely so HMRC can prosecute, but when companies like Google and Amazon come to the committee and either lie, or fail to answer simple questions, then it's not really surprising the committees push them a bit harder for justification is it? The point being that if even after all these chances, even after all this deep questioning they can't provide reasonable answers to questions such as "Why is your corporation tax payment so low, when you make so much profit here?" then yes, the law is going to change, and yes, if they persist after that, they will be prosecuted. The law can't change in an effective way however if MPs don't understand the problem in depth to make sure the changes work, and are relevant.

Re:Why explain himself?

[CadentOrange]

How is that a smear? Stemcor paid £157k in tax on revenue of £2.1 billion. Given that corporate tax in the UK is 24% on profits, this means that Stemcor made a profit of £654k. A £654,000 profit on top of £2.1 billion in revenue is laughable and utterly unbelievable.

Re:Why explain himself?

[jamstar7]

They're a corporation. A corporation has more rights than you do in the US. So be a good little meat citizen and worship your local corporation, and pray they don't figure out how to move your job to some Third World toilet to inch their profit margins up.

Re:Why explain himself?

[MrBandersnatch]

It is quite possible that they made a considerable loss in previous years and had offset this loss against future profits. I'm not going to dig through their accounts to see if this is the case, I'm just saying that the amount of tax paid in a given financial period doesn't tell the whole story.

Re:Why explain himself?

[jamstar7]

If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

That's because Parliament wants to look like they're doing something rather than upsetting their campaign contributers and actually doing something. We see a lot of that in Congress over here across the pond.

Re:Why explain himself?

[jamstar7]

How is that a smear? Stemcor paid £157k in tax on revenue of £2.1 billion. Given that corporate tax in the UK is 24% on profits, this means that Stemcor made a profit of £654k. A £654,000 profit on top of £2.1 billion in revenue is laughable and utterly unbelievable.

Stemcore in the movie business? To hear the Hollywood studios talk, they haven't made a dime in profits in over a hundred years.

Re:Why explain himself?

[Ash Vince]

Why does this guy get to explain himself? In my country, the IRS just sends me a letter about me misbehaving, and says I've got 30 days to pony up the cash.

Why the flying duck does a company then gets to make apologies, when it's obvious by now that they're cheating?

Because that is if you break the law. Google are not breaking any laws here, they are just making sure they pay as little tax as legally possible.

Big international companies always have the ability to declare their profits in whatever country they see fit by rigging the rates that the parent companies charge for use of the brand name, this is perfectly legal, if the government want to stop this they can try changing the law. Even if you changed this law though it would be tremendously hard to prove if the fees being charged for use of the brand name were over the top or not.

This is just that the government has to be seen to be doing something as we have local elections today and the ruling coalition is going to take a bath at the hands of smaller parties and desperately want to be seen to be doing something on tax avoidance.

The truth is that the government has already done something, they have lowered the rate of corporate tax to the same level as Ireland to make us competitive as a nation in the race to the bottom. Simply lowering the rate of corporate tax in response to corporations avoiding tax smacks of surrender and weakness though so they do not exactly want to draw attention to this.

Re:Why explain himself?

[jamstar7]

Much as I dislike the way Google, Apple, Microsoft et al operate in this regard, it is up to the legislature to create their laws precisely and carefully - and in this case clearly the tax laws need to be amended.

You don't think the corporations bought the law just like they did in the US?

Re:Why explain himself?

[jamstar7]

I thought that case was in Scandanavia someplace. Sweden, IIRC, which struck me as ironic because Sweden was the home of The Pirate Bay...

Re:Why explain himself?

[BasilBrush]

Stemcor trades steel. Big old fashioned, heavy to transport, unglamorous steel. In a country where British Steel made losses for decades. And 2011 was in the depths of a recession. Just how much profit do you think they should have made? It's admirable that they made any.

Note that the Telegraph article that you are probably referencing, directly or indirectly says: "However. it is not known whether the company â" which made profits of £65m â" used similar controversial tax avoidance measures criticised in the past by Mrs Hodge."

If it's "not known", and based purely on looking at revenue rather than profit, then it is indeed a smear.

Google on the other hand IS KNOWN to use tax avoidance, and we KNOW they made huge profits on which they paid very little tax, cheating people in countries all over the world.

Re:Why explain himself?

[Anonymous Coward]

Maybe she thinks Google is still better at dodging taxes than her own company, and needs some pointers?

Re:Why explain himself?

[Anonymous Coward]

You don't use an army of accounts and lawyers to create companies all over the world with the pure reason of tax avoidance, taking advantage of each tax law. I'll also wager you don't like the pockets of politicians and civil servants to look the other way.

Re:Why explain himself?

[squiggleslash]

For what little it's worth (warning, anecdotal evidence follows):

I met Hodge's daughter at University, she was involved in the local student union and was one of the worst scheming, back-stabbing, everything-is-office-politics people there. It was one of those eye-opening experiences where you learn the disconnect between the self-described view of politicians being people trying to get into governing positions in order to ensure what they think is right is what is done, and the reality, where it's just a bunch of nasty sociopaths trying to get power over one another, with no aim in mind beyond the pursuit of power for its own sake.

It seems unlikely that Hodge's daughter was anything other than a product of her parents, I suspect she's exactly like her mother, especially based upon what I've seen of Hodge's political style.

Google, well, I'm kinda biased towards them, they give me lots of great free stuff (nothing specific to me, just, you know, email, a mobile OS, that kind of thing. Pity they keep foisting their crappy search engine on me though), so I know I'd be inclined to take Google's side anyway, but it certainly does help convince me there's something there that Hodge is the one leading the witchhunt.

Re:Why explain himself?

[CadentOrange]

I confess I do not understand what you're complaining about? I do not know how much profit they should have made, but if you're saying that they made £65m profit and they paid only £157k tax, that's an effective tax rate of 0.24%.

This does not condone Apple/Google/etc and the schemes they run. If Google are breaking the law, throw the book at them. If they are not, leave them alone. If you don't like the amount of tax they're paying, change the law. Absolutely no one be they individuals or corporations will pay more tax than is legally required.

Re:Why explain himself?

[Anonymous Coward]

Did you read that link before posting it? It links to this:

http://www.telegraph.co.uk/finance/newsbysector/industry/9740964/Margaret-Hodge-MP-apology.html

I think you mistook The Torygraph attacking a Labour MP for the hell of it for real actual factual reporting.

Re:Why explain himself?

[gdr]

"The Google executive is being brought back because it's now been shown that most of the Google operations are based in London, not Dublin and he was therefore telling porkies."

Google claim that their UK operations are in marketing and advertising, sales are negotiated and finalised in Dublin. So far no conclusive evidence has been found that Google UK staff are negotiating and finalising sales.

The PAC are just trying to distract attention away from the fact that the tax laws that are being explioted were designed by incompetent politicians like themselves. You can't blame companies when they are following the law. If they are not following the law they should be in court, not before the PAC. As IamTheRealMike said in an earlier comment, this is a show trial.

Re:Why explain himself?

[Captain Hook]

The article linked in the summary showed Googles own job titles and descriptions for the London offices as being Sales, and one of their own clients saying all the sales contact he has with Google is based in London... with the exception of the address on the invoice being Dublin.

OK, it's not 100% proof, but it is certainly enough to ask whether Google were truthful last time around.

Re:Why explain himself?

[IamTheRealMike]

Because I don't believe MPs are really in need of random company executives to teach them how their own laws work? And this is random - lots of companies sell into the UK, have offices there, and book profits in some other, including one that Hodge is herself involved with. So how are these people picked ... well, by how well known their brands are. So Hodge can look tough in the tabloids. I am struggling to see what other rationale there could be.

I agree that they need to learn about the issues in order to construct well thought out changes. If Margaret Hodge is confused about how corporation tax works, she could go talk to the experts who work for HMRC and they will happily talk to her all day. Or alternatively just spend some time reading articles about it on the internet.

Re:Why explain himself?

[BasilBrush]

I do not know how much profit they should have made, but if you're saying that they made £65m profit and they paid only £157k tax

I'm not saying any such thing. The Telegraph is.

Absolutely no one be they individuals or corporations will pay more tax than is legally required.

That's disingenuous. Corporations such as Google play all the countries and their tax systems off against each other, to dishonestly avoid paying tax. The ordinary person can't do that. Ordinary people should not be paying more tax than rich corporations, it's stupid and immoral.

Re:Why explain himself?

[Xest]

But obviously the laws aren't working are they? That's precisely the point - the vast majority of the public and MPs do not believe the law was ever intended to be such that companies could avoid paying corporation tax in the ways they do so the whole point in the committee is to find out why the law is not working as it was intended to so they can see if there is actually a real problem, and hence whether new laws are needed or the law needs to change, or whether companies are in fact not paying as much tax as should be expected for genuinely fair reasons.

"So how are these people picked ... well, by how well known their brands are. So Hodge can look tough in the tabloids. I am struggling to see what other rationale there could be."

Have you considered it may be because they're some of the worst offenders? Google for example is one of the largest companies in the world, and the UK is one of it's most profitable markets, yet oddly the corporation tax paid here doesn't even come close to the proportion of the profits it reports in it's stock market listings relative to the size of it's business in the UK - obviously they're telling the tax man one thing, that they don't make enough profit here to pay much corporation tax, yet they're telling their shareholders that yes, we're going to carry on in the UK because it's one of our most profitable markets - obviously those two things don't add up.

The fact you had to link to The Register though perhaps explains your problem - you're getting your information from sources that are known to regularly get things wrong, not understand the situation, and in some cases, to outright lie. The Register has basically zero credibility as a reliable news source precisely because of this fact, and yes, I've even read the article you linked, and yes, it's one of those many Register articles that does have it wrong, either intentionally because it's authors are clueless, or maliciously because they have a vested interest in lying.

At least start with credible sources if you're going to learn a bit more about the situation, and what these committees are for and do.

Re:Why explain himself?

[Steve Hamlin]

The fact that Google went to lengths to say the sales were negotiated and finalized in Ireland, and that UK Googlers were just there to provide marketing 'support', undermines your assertion.

Because in fact, the UK employees have titles like "Sales manager", and publicly describe their roles as negotiating sales, making sales, closing deals.

If that is true, then the sales occur in the UK, regardless of the fact to whom the invoice payment was addressed.

Google is being asked to explain the discrepancy between their testimony before Parliament (sales are negotiated and closed by Google Ireland employees), and the apparent contrary facts (sales are negotiated and closed by Google UK employees).

Perjury before Parliament is a right matter for the Parliament to investigate.

Re:Why explain himself?

[hairyfeet]

Honestly it doesn't matter where it is because borders may as well not exist, multinationals get better treatment no matter where you go. Again just like the barons of the middle ages or the robber barons of the 1800s there is one set of laws for them, a different set of laws for you, and things that would have a peasant thrown in PMITA prison gets swept under the rug or just plain ignored if it involves one of the new ruling class.

Re:Why explain himself?

[thetoadwarrior]

Because the government likely won't have the balls to go through with it and punish them but they have to put on a show.

Re:Why explain himself?

[shutdown -p now]

It is not a trial. It is an investigation on how the laws need to be updated to make the currently legal, but nevertheless unintended and undesirable, tax avoidance schemes illegal.

Re:Why explain himself?

[cerberusss]

Exactly, and that's what makes me sick.

Re:Why explain himself?

[IamTheRealMike]

So what is wrong about the article? Because I learned quite a bit from reading it, and when I checked into some of the things it said, they appeared to be accurate.

Time to start taxing revenue instead?

[Lincolnshire Poacher]

Corporation Tax is, of course, only levied on the profits disclosed by the company's annual return. So only profitable companies have to pay 23% of their net as tax.

But this encourages the Big Boys to simply shift their profit to other, overseas, divisions, through 'franchise payments' and other mechanisms.

Perhaps it's time to say that any company making over 1 million in annual revenue will pay, say, 5% on its revenue above that level. No discussion of profits. It is much easier to determine how much money a company took-in. What money landed in its UK bank accounts is what is taxed.

Re:Time to start taxing revenue instead?

[beelsebob]

That would help defeat companies like Starbucks, but it would have no effect on google or amazon. They'd simply move the bank account that's paid into to ireland. Of course what would potentially work would be to put the tax on money paid by people in the UK, to the company, no matter where that money goes to.

Re:Time to start taxing revenue instead?

[tonywestonuk]

They already tax revenue. its called VAT, and for every £100 of takings, 16.6p is sent to the govenment.
 

Re:Time to start taxing revenue instead?

[tonywestonuk]

I meant £16.66 ! lol

Re:Time to start taxing revenue instead?

[91degrees]

Google is very tricky to deal with because they do operate essentially on the internet. They can genuinely operate anywhere in the world. they might need a few servers in or near the UK, but they can easily do most of the work from any other European country. Switzerland and Gibraltar both have very low taxes, and few barriers to business with the EU.

Not sure I agree this is the same with Amazon. Amazon do, at least, have to have warehousing in the UK. Claiming it's a foreign transaction when you pay in UK pounds, and have an item shipped from a UK warehouse to a UK address is a lot harder to justify.

Re:Time to start taxing revenue instead?

[xelah]

Consider a company which owns dairy farms, a cheesemaker and shops. They'd pay 5% of the final selling price (which would, of course, ultimately come from customers). Now consider a set of independent farmers, selling to a number of independent cheesemakers, selling to a number of different shops. Those people don't pay 5% of the final selling price, they pay more because they pay several times, and need to collect the extra from customers. So, you've just created a competitive pressure which favours large vertically integrated businesses over small or horizontally integrated businesses. I don't think that's a good thing. This is why VAT is charged on value added, not sale prices.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

Not for books from Amazon - no VAT on books in the UK

Re:Time to start taxing revenue instead?

[iserlohn]

Which probably Google isn't paying either. This is because most people buying services from Google are VAT registered businesses, and the entity processing the sale is based in Ireland. Under EU VAT rules, the place of supply is based in the UK (where the customer is located), so the whole transaction is under the reverse charge and hence no VAT is charged either in the UK or in Ireland.

Of course, the idea is that the VAT is charged when the business sells the product to the end-user, which is probably in the UK, but for advertising Google isn't being taxed on any of that.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

We have a tax like that already - VAT

Re:Time to start taxing revenue instead?

[dnaumov]

So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

Re:Time to start taxing revenue instead?

[iserlohn]

Talking about just the sales tax angle, that's exactly the same issue faced in British Columbia with PST due to it being a cascading tax. The major businesses are all vertically integrated to avoid paying PST on supplies again and again. This was eventually replaced by the HST, which is a tax combining the federal GST with the provincial PST, but is a value-added tax as opposed to a cascading tax.

Interestingly enough, the voters rejected the fairer HST last year and opted to return to the PST because people were complaining that more things are being taxed to make up for the shortfall when the province moved from PST to HST a few years ago.

Re:Time to start taxing revenue instead?

[beelsebob]

Which probably Google isn't paying either. This is because most people buying services from Google are VAT registered businesses

Note – this means that google is paying it, they're just probably also claiming a proportion of it back when they purchase items from other companies.

Re:Time to start taxing revenue instead?

[_Shad0w_]

Unfortunately that fucks over a lot of companies. In fact most companies that have high overheads; we had an income of over £80m last year. Only £3m of that was profit.

Re:Time to start taxing revenue instead?

[SternisheFan]

Had to google 'VAT', do I now owe the U.K.?

From Wikipedia, the free encyclopedia

For the UK tax, see Value Added Tax (United Kingdom).Taxation:

A value added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.

http://en.wikipedia.org/wiki/Value_added_tax

Re:Time to start taxing revenue instead?

[91degrees]

Honestly though, if a company decided to shift profits to another company in order to avoid paying shareholders, this would be considered outright fraud.

For some reason tax evasion doesn't have the same criteria.

Re:Time to start taxing revenue instead?

[iserlohn]

For an example is how prevalent this practice is, look at how Pepsico structure it's operations in the UK. They sells crisps (ie. potato chips) in the UK under the Walkers brand. There was an article no long ago in one of the major newspapers that described how they are able to effective transfer all the profits away from the UK part of the business to avoid paying tax. They did it by assigning all the potatoes that goes into the making of the crisps to be owned under the Swiss subsidiary. These are processed and made into crisps in the UK owned plants, which makes almost no profit in its operations. The finished product, still owned by the Swiss subsidiary is sold, and all the profits make are accounted for under the Swiss operation.

The problem with is that in the EU, we have the free movement of goods through economic union, but there is not overriding political union to plug the loop holes. This needs to be addressed somehow, or otherwise, we are just subsidising Switzerland, Luxembourg and Ireland through tax loopholes.

Re:Time to start taxing revenue instead?

[_Shad0w_]

Unless they're e-Books, because it's worded in such a way that it refer exclusively to printed works, which is annoying.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

Companies don't get big by having a net profit margin of less than 5%

Also, we don't want big companies, we want many medium-sized ones. That way the companies don't have the power to strong-arm cities and nations. Taxing could be one way to make sure that mid-sized companies get an advantage over big ones.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

Google is very tricky to deal with because they do operate essentially on the internet. They can genuinely operate anywhere in the world. they might need a few servers in or near the UK, but they can easily do most of the work from any other European country. Switzerland and Gibraltar both have very low taxes, and few barriers to business with the EU. Not sure I agree this is the same with Amazon. Amazon do, at least, have to have warehousing in the UK. Claiming it's a foreign transaction when you pay in UK pounds, and have an item shipped from a UK warehouse to a UK address is a lot harder to justify.

You can say that about Google's consumer facing services. But Google's business is to be an ad sales company, and they have a significant local sales force operating in most of the countries they do business.

Re:Time to start taxing revenue instead?

[N1AK]

Another pretty obvious alternative result would be that companies would increase prices to make up for any tax increase, like they've done with tax increases in the past. You're also missing the point that this would be instead of a tax on profits so if the total amount of money raised was the same then any company which isn't currently avoiding taxation would end up paying less tax. Some issues aren't simple black and white; think a little harder about likely consequences when you think it really is that simple.

Re:Time to start taxing revenue instead?

[dnaumov]

So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

Companies don't get big by having a net profit margin of less than 5%

Tell that to Wal-Mart, Amazon, Glencore, etc etc

Re:Time to start taxing revenue instead?

[BasilBrush]

Did it change? Last time I looked it was 20%. Or are you averaging with non-VATable items?

Re:Time to start taxing revenue instead?

[fnj]

There is somebody who didn't know what VAT is? Not a criticism, just an expression of abject amazement.

Re:Time to start taxing revenue instead?

[fnj]

Companies don't get big by having a net profit margin of less than 5%

OK, let's look at S&P 500 net profit margins by sector. The S&P 500 comprise some pretty big companies.

Consumer discretionary -> autos and components: 4.2%
How about Consumer discretionary -> retailing: 4.0%
Food and consumer staples retailing: 2.9%
Health care equipment & services: 4.7%

Most people think net margins are gigantic. In some sectors they are substantial, up to 20% sector-wide, but in other very important sectors they are extremely modest. Even the S&P overall is 9.0%. That means plenty of S&P 500 companies overall are below that figure.

Re:Time to start taxing revenue instead?

[KramberryKoncerto]

Divide 20% by 120% and see what you get.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

but the people that work in those UK plants pay tax

Re:Time to start taxing revenue instead?

[Anonymous Coward]

Honestly though, if a company decided to shift profits to another company in order to avoid paying shareholders, this would be considered outright fraud.

No, it would be called Hollywood Accounting http://en.wikipedia.org/wiki/Hollywood_accounting

Re:Time to start taxing revenue instead?

[BasilBrush]

I'm so glad I don't get involved in the sharp end of selling things.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

There is somebody who didn't know what VAT is? Not a criticism, just an expression of abject amazement.

There are so many acronyms in life to know, can't blame someone if they're not up to speed on every one.

Re:Time to start taxing revenue instead?

[Xest]

The problem is that this hurts companies that are genuinely making a loss through a genuine need for restructuring and so forth.

What really needs to happen is to reorganise the way in which profits are calculated and at what point tax occurs.

Right now, the problem is that tax is taken after every other possible deduction on revenue has been calculated. The key is to move it up the chain of importance (but not all the way up to revenue). Realistically tax should come after genuine expenditure like staff wages, but before things like royalty payments which are heavily abused. This would keep royalty payments purely for what they're intended, as there'd be no reason to make them up arbitrarily for tax dodging purposes.

Tax shouldn't be pretty much the last thing (or in many cases, the last thing) to be calculated, it should be forced to be prioritised higher, and should come after only real expenses. This would also force companies to have sane policy on royalty payments and such because it wouldn't help them avoid tax, but would have a real impact on their real actual profit.

Re:Time to start taxing revenue instead?

[iserlohn]

Under EU tax rules, if the supplier is in a different EU country than the customer, and both are VAT registered in their respective countries, then the supplier does not pay or claim for VAT. This is called the reverse charge.

It was clearly explained in my post. I don't know how you missed that.

The only reason they would pay VAT would be if Google's Irish subsidiary registered for VAT in the UK as well as in Ireland. But why would you want to do that when you could keep all that revenue away from HMRC by not registering for VAT in the UK?

Re:Time to start taxing revenue instead?

[iserlohn]

But it isn't fair to a UK based company making crisps locally to be sold in the UK. Not everybody can afford to set up a corporate office in Switzerland or Luxembourg to avoid tax.

Re:Time to start taxing revenue instead?

[khallow]

The problem with is that in the EU, we have the free movement of goods through economic union, but there is not overriding political union to plug the loop holes. This needs to be addressed somehow, or otherwise, we are just subsidising Switzerland, Luxembourg and Ireland through tax loopholes.

Subsidizing countries with relatively low tax burdens sounds far preferable to overriding political unions. So I'd have to disagree on the "need" for such things. As I see it, competition at the country level helps curb government abuses.

I think this is classic free lunch thinking. You want a free lunch from Pepsi. Pepsi moves their lunch to Switzerland where they are treated better. Lunch is no longer free. Something must be done. But the obvious solution is not "clean up my act so that Pepsi will come back", but rather "let's destroy the sovereignty of Switzerland".

I imagine you'd be a bit upset if Pepsi had a monopoly of soda drinks. But why aren't you similarly disturbed by the possibility of a government monopoly over all of Europe? Last time that was tried, 70-100 million people died.

Re:Time to start taxing revenue instead?

[91degrees]

The studios should be charged with fraud as well though.

Looking at the examples, it seems the studios often settle or lose when they are sued.

Here's a techdirt article on the practice. I think the main reason it's still happening is that usually, those with the resources to sue are also savvy enough to ask for a percentage of gross.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

Likewise Starbucks, who (now well publicised) get all the coffee sold in the UK from a well known coffee producing country: Switzerland. Despite opening a gazillion stores and having I dunno how many droids walking around carrying their sweetened, short-on-flavour 'coffee' around, Starbucks claim they make no money in the UK. If that's true, then fuck off and leave us alone.

Re:Time to start taxing revenue instead?

[xaxa]

That doesn't work very well in practise. Luxembourg can take a tiny amount of money from lots of essentially foreign businesses to subsidise their 500,000 residents. With over 100 times the population, Germany, the UK or France simply need much more money to pay for infrastructure.

I've been to Luxembourg. It's tiny, about 70km from top to bottom. The whole country is perfectly maintained, like the very nicest areas in London (like Knightsbridge, where a house costs £10M). There's perfect paving, new everything, no litter or dirt at all, everything is perfectly maintained.

If both Luxembourg and the UK had similar tax rates, Luxembourg would tax actual companies there (not that many, for 0.5M people) and the UK would tax companies based here (somewhat more, for 68M people).

Re:Time to start taxing revenue instead?

[Anonymous Coward]

They already tax revenue. its called VAT

VAT is not booked as revenue for VAT-registered companies, it is a tax on the consumer and should not be included in net revenue.

Re:Time to start taxing revenue instead?

[khallow]

That doesn't work very well in practise.

For you. It works quite well for others.

And if it's so easy to avoid paying those taxes, maybe the UK should tax things that aren't easy to avoid? This seems a lot like using the legal system in the US to enforce *IAA business models.

If both Luxembourg and the UK had similar tax rates, Luxembourg would tax actual companies there (not that many, for 0.5M people) and the UK would tax companies based here (somewhat more, for 68M people).

And why would that be a good idea? As I see it, all that wealth still remains in the EU and the UK gets a portion of it through both taxes from employees in the UK as well as trade with Luxemborg and the corporations that declare profits there.

Re:Time to start taxing revenue instead?

[Anonymous Coward]

Erm...

"Pepsi moves their lunch to Switzerland where they are treated better."

The whole point of the Parents example was that the factory WASN'T moved to Switzerland... they just shift paper around so it looks that way.

The factory is on UK land and run by UK staff, supplied by UK roads, powerlines, water and gas pipes.

Oh and it's the "overriding political union" that enables this "Subsidizing countries with relatively low tax" rates. If not for the EU we would tax the profits/potatos as they entered/left our borders.

Re:Time to start taxing revenue instead?

[iserlohn]

Maybe because it violate the basic tenants fair play? There is a reason for tax and a large part of it is to pay for the upkeep of the physical *and* social infrastructure in a country. What you are advocating is that we should let differences between the tax regimes be taken care of solely by market forces, and by extension the rapid downsizing of the state in a race to the bottom.

I guess if you sold it *that* way, it doesn't look half as attractive does it?

Re:Time to start taxing revenue instead?

[iserlohn]

Actually the EU is a very very loose political union that was developed after the economic framework was developed - originally the European Economic Community which you may know as the "Common Market". The EU is the result of the economic cooperation - it was determined that there needs to be some political structure in order to co-ordinate the common market. What you are seeing in the past 5 years the result of too much economic integration without the requisite fiscal integration (which is highly political). So you have 2 choices -

Roll back economic integration
Speed up political integration (especially on the fiscal side)

So if you roll back economic integration, you have to suffer the economic consequences, and if you speed up political integration, you have to suffer the political consequences. This is the dilemma and obviously most of Europe has already decided that in order to see it through there needs to be more fiscal integration, especially in the Eurozone. This doesn't exclude the possibility that some countries would roll back economic integration, however, they seem to be holding on (eg. Greece, Cyprus, Ireland, Portugal, etc. are still in the Eurozone).

Re:Time to start taxing revenue instead?

[khallow]

Maybe because it violate the basic tenants fair play?

And what is that for a multinational corporation? Keep in mind that the real problem is that you want more money out of these sorts of businesses from a particular, obsolete taxation scheme (here, the VAT). Rather than fix the tax or replace with something that works better, you propose to widen the area of its effect via a kludge, a broader government.

What you are advocating is that we should let differences between the tax regimes be taken care of solely by market forces, and by extension the rapid downsizing of the state in a race to the bottom.

That's how it worked in the past, right? And yet we somehow still have governments. Having a monopoly on force in a location is a very powerful and lucrative advantage.

Re:Time to start taxing revenue instead?

[khallow]

The factory is on UK land and run by UK staff, supplied by UK roads, powerlines, water and gas pipes.

And they pay a lot in taxes and user fees. If that's not enough, then maybe those should be increased rather than trying a value-added tax (VAT), which allows Pepsi to hide its profits in a lower VAT country.

Re:Time to start taxing revenue instead?

[khallow]

Oh and it's the "overriding political union" that enables this "Subsidizing countries with relatively low tax" rates. If not for the EU we would tax the profits/potatos as they entered/left our borders.

Oops, I was going to comment on this as well. I think the original poster's plan was that the greater political body would appropriate some of Switzerland's taxes and transfer them to the UK in a "fair" manner. In other words, it would restore the situation that the UK originally had, but at the European level.

I think that's highly dependent on the fallacy that the resulting government would be sufficiently responsive to give a fair share of such tax revenue to the UK rather than just squander it in the usual ways. Needless to say, I'm not so optimistic.

Re:Time to start taxing revenue instead?

[iserlohn]

You and I are talking about different things. The issue with PepsiCo is not based on VAT, but corporation tax on the profits. The VAT still has to be charged (and remains in the UK) as the seller of the product is the supermarket or corner store.

They don't pay that

[Anonymous Coward]

No, they don't pay that. They merely add it to their bills and collect it on behalf of UK.gov.

That's a good idea sort of

[Anonymous Coward]

Suppose instead a company was liable for corporation tax based on the *portion* of its revenue that comes from the country. So if UK is 8% of revenue for Google, Microsoft or whatever, then they asses that 8% of their revenue as liable for corporation tax in the UK.

Re:That's a good idea sort of

[KiloByte]

Trivially avoidable by separating companies into per-nation parts and having one part buy services from the other. With happens to be what most are already doing.

There's no obvious way to stop that without breaking cases where these companies are genuinely different entities, ie, the majority of trade.

Tax avoidance vs evasion

[Anonymous Coward]

How to tell the difference?

Activity A is subject to tax.

You can avoid paying the tax by not doing activity A

If you do activity A and perform other acts solely to get around paying the tax, that is evasion.

Simple.

This is the same Margaret Hodge...

[Anonymous Coward]

... who owns shares in her family's business which is tax advice for large corporations.

Re:This is the same Margaret Hodge...

[TheMathemagician]

Actually the family business is the steel-trading company Stemcor of which she owns about £15m worth of shares via a trust fund in the names of her children and other family members in order to avoid paying tax.

Simple solution

[Anonymous Coward]

Stop companies for counting funds stashed overseas on the balance sheet.

That way if they don't bring the funds home (and pay tax) their operating capital and profits are 'accurate' - and the share price will plummet because teh value of the comapny s vastly decreased.

Put that in perspective, if google had money in say Cypres, is it really 'profit' ?

Google's real motto

[Required Snark]

Pay No Taxes

Re:Google's real motto

[Anonymous Coward]

Its not theft at all, atleast not my law, that your own moral standards differ from society at large is a problem only for you.

Also note that we wouldnt have roads and many other forms of public services without taxes. And taxes on transaction would just increase hundred fold giving you the same end-result anyway.

Re:Google's real motto

[Anonymous Coward]

"Taxing income, profits, wealth accumulation, savings is:
1. theft of private property, so it's immoral.
2. bad for the economy, as instead of investing more, people are more concerned with ways to avoid taxes."

There's nothing immoral about expecting people to pay a fee for the services rendered. I suppose you could give people the opportunity to opt-out of those services, and then they wouldn't be obliged to pay. They could avoid walking or driving on any public roads, put their own house out if it catches on fire, defend their own property from criminals, defend the borders of the country from invasion, ensure that their food and water are not contaminated, educate their children, deal with fraud or other business crimes on their own, etc. With all the money that they would save by not paying taxes, I'm sure they could cover anything they did need by paying private businesses, and society would be better off overall, just like it is in low or no-tax parts of Somalia.

Hint: there's a reason why almost every human civilization going back thousands of years has had taxes of one sort or another. Even if I agree with you that it is "immoral" it's a technical point with no value because taxes are a necessary evil unless you're an advocate of no government at all. There's no free lunch. If you want government services at all, then you're going to have to pay taxes of some kind to fund them. You can hide it in euphemisms like "user fees", but it's pretty much the same thing if everybody pays those fees out of necessity.

It's also debatable whether individually collecting user fees from people that use a government service is any more economically efficient than collecting a blanket tax and budgeting within that revenue

Re:Google's real motto

[Anonymous Coward]

Tax transactions, that's where taxation belongs ... Taxing income... is theft of private property

While I'm all for listening to fairtax proposals, we've got enough problems with companies thinking that buying labor is somehow divorced from all the other laws of economics without people claiming its not a transaction. I bet you figure buying stock is not a transaction either.

Re:Google's real motto

[oh_my_080980980]

Move to Somalia hippie...

Re:Google's real motto

[Anonymous Coward]

Don't lecture people on immorality when you advocate the abolition of any sort of democracy, you fascist roman_mir sockpoppet.

VAT does not work like that.

[tuppe666]

We have a tax like that already - VAT

VAT does not work like that. VAT is paid by the Final Customer, The businesses in between don't pay. What you may be getting confused over is the HMRC *collect* the net of incoming VAT and outgoing VAT until it is finally paid in full by the final customer. Businesses essentially pay nothing.

There is a nice explanation and example at wikipedia http://en.wikipedia.org/wiki/Value_added_tax

Re:VAT does not work like that.

[serviscope_minor]

VAT is paid by the Final Customer, ... at the point of purchase, which in Amazon's case is an offshore subsidiary with lower tax. So basically they get to sell goods nearly tax free to UK residents where as local retailers have to pay full tax.

They pull the same trick in the US with sales tax too and it looks like congress are finally fed up enough (i.e. other retailers have lobbied enough) to close that loophole.

Re:VAT does not work like that.

[Anonymous Coward]

nope doesn't work like that, in EU VAT rate is based on the buyers location unless it is from another EU country and the seller has very little sale to that country then it is the sellers location

buy something from outside the EU and it is always buyers location

so the system can't be gamed like in the US

Re:VAT does not work like that.

[Anonymous Coward]

That's not exactly true. VAT is an escalation tax. First sale is lowest, incurs least VAT, supply buying it marks it up and sell, VAT value is now higher. Add in a couple of layers and a final customer, VAT is now significantly higher than the original value. Each VAT return will account for VAT costs and VAT collected, more often than not the latter is the surplus you send to HMRC. Not all items are subject to this. E.g. you cannot claim VAT back on improvements to property until you sell that property.

Not all companies use this method off accounting, a lot on the EU use their codes to avoid paying it up front, rather than claiming it back. Here in lies a lot of cross border fraud. Codes cannot be verified until filing and there is no central look up service available to businesses to determine whether an EU VAT code belongs to the company placing an order.

Re:VAT does not work like that.

[jittles]

VAT is paid by the Final Customer, ... at the point of purchase, which in Amazon's case is an offshore subsidiary with lower tax. So basically they get to sell goods nearly tax free to UK residents where as local retailers have to pay full tax.

They pull the same trick in the US with sales tax too and it looks like congress are finally fed up enough (i.e. other retailers have lobbied enough) to close that loophole.

Amazon actually wants to start forcing sales tax to be charged to online purchases. They're a huge corporation now, which can easily handle keeping a database of tax rates for all cities, states, and counties. Online sales tax hurts the small companies, not the large ones. It will force more small companies to switch to Amazon marketplace, or to pay Amazon and other large corporations for sales tax information. It does not hurt Amazon in any way, shape or form. Remember that you pay the sales tax, not Amazon.

They're not paying their taxes in Ireland either..

[Anonymous Coward]

http://businessetc.thejournal.ie/explainer-irish-corporation-tax-715761-Dec2012/

Books should be VAT free.

[tuppe666]

VAT is paid by the Final Customer, ... at the point of purchase, which in Amazon's case is an offshore subsidiary with lower tax. So basically they get to sell goods nearly tax free to UK residents where as local retailers have to pay full tax.

That is nothing to do with Amazon. In the UK books rightfully are vat free, but ebooks aren't. That is just wrong. The fact that throughout the EU ebooks are inconsistent...and Amazon take advantage of the fact is just an aside.

James Bridle "Ebooks are not exempt from VAT, being classed as, I believe, ‘electronic guides’ rather than ‘books’"

Re:Books should be VAT free.

[serviscope_minor]

That is nothing to do with Amazon. In the UK books rightfully are vat free, but ebooks aren't.

Well, good job amazon only sells books, then.

Re:Books should be VAT free.

[FireFury03]

That is nothing to do with Amazon. In the UK books rightfully are vat free, but ebooks aren't.

Depends what you mean by "rightfully". The VAT laws are incredibly inconsistent and arbitrary in the UK.

VAT was originally _supposed_ to only apply to "luxury goods", which is why cakes (which are presumably a bare essential) are tax free whilst sanitary towels, incontenance pads, etc (which are clearly luxury items) are taxable.

Similarly, a flapjack (i.e. a bar made out of cerial, fat and sugar) is VAT free whilst a cerial bar (which is, instead, made out of cerial, fat and sugar) is taxable.

So as you can see, the VAT rules are completely clear, consistent and intuitive with no chance of ambuiguity or misinterpretation.

Re:Books should be VAT free.

[FireFury03]

VAT was originally _supposed_ to only apply to "luxury goods"

Oh, and I should add that keeping yourself from freezing to death and being able to get to work are also luxuries, as fuel has VAT charged on it. I'm not sure what happens if you decide to chuck VAT-free cakes on the fire and use them as fuel...

Re:Books should be VAT free.

[jimicus]

It's even worse than that. Cakes are VAT free.

Biscuits (cookies in US parlance) are VAT free unless they are covered in chocolate. If they're covered in chocolate, they're a luxury item and therefore VAT'able.

Jaffa Cakes are small cakes. So small, in fact, that they are the shape and size of a biscuit. They're covered in chocolate and sold in packs of about 20-odd in the same aisle as the biscuits for about the same price. They're not VAT-able because they are classed as a cake.

Typo

[Anonymous Coward]

Actually, I meant to say net income the second time.

So 8% of their revenue is from UK, so 8% of their GLOBAL NET INCOME (i.e. profit) are taxed by the UK.

To avoid double taxation problems, you would structure it so they pay only the excess to bring it up to UK taxation levels. Companies paying UK equivalent corporation tax in their home country, would pay nothing extra, companies dodging tax like crazy would pay the full UK part of the 8% of their net income.

The Belgians have a rule that any arrangement to reduce or avoid tax can be challenged and voided, simply on the basis that its only there to reduce tax. That could be done too, to prevent any fake corporate shell games that might result from this change in corporation tax.

Small companies usually pay full tax anyway, so this would not affect them. Only the large tax dodgers would pay more.

Shame on Google!

[Anonymous Coward]

Who do think they are not paying tax, UK Politicians?

So what?

[Anonymous Coward]

Thomas Jefferson said it.

Whoop-de-doo.

That was before incorporation and the stock exchange, right? Before Standard Oil and Mama Bell, right?

I guess it may have been right in his day, but we've seen what "the invisible finger" is doing to us since then.

Then salaries should not be tax deductible

[Anonymous Coward]

If the payment of taxes on the salaries of the workers (the company, by the way, gains all the benefits and more of the things paid for by those workers' salary taxes, so why the hell should they not pay for it too?) is counted as "we're paying taxes" for the corporation, then the salaries should NOT be an expense for tax reasons for the corporation.

Did you forget about Apple

[tuppe666]

Google on the other hand IS KNOWN to use tax avoidance

Apple on the other hand IS KNOWN to use tax avoidance, and we KNOW they made huge profits on which they paid very little tax, cheating people in countries all over the world.

Here is a quote from the Guardian "Apple is estimated to have avoided more than £550m in tax in Britain in 2011. Its latest accounts show UK turnover at just over £1bn and profit at £81.3m, generating a tax bill of £14.4m." http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/9829894/Apple-shelters-almost-1bn-a-week-from-US-tax-man.html

I believe your favourite mega corporation right now famously borrowing money specifically to avoid paying tax :) iBonds I believe they are calling them.

Re:Did you forget about Apple

[tlhIngan]

Apple on the other hand IS KNOWN to use tax avoidance, and we KNOW they made huge profits on which they paid very little tax, cheating people in countries all over the world.

Here is a quote from the Guardian "Apple is estimated to have avoided more than £550m in tax in Britain in 2011. Its latest accounts show UK turnover at just over £1bn and profit at £81.3m, generating a tax bill of £14.4m." http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/9829894/Apple-shelters-almost-1bn-a-week-from-US-tax-man.html

I believe your favourite mega corporation right now famously borrowing money specifically to avoid paying tax :) iBonds I believe they are calling them.

Don't confuse revenue with profits, even though there's some horrible scheming going on. First, Apple UK had revenue of £1B, and a profit of £81.3M. They paid £14.4M in taxes, for a tax rate of 17.8% (because it's paid from profits). Of course, the scheme is Apple Ireland is overcharging Apple UK for product, so all the profits are hidden inside Apple Ireland.

As for iBonds - yes, that's because the interest rate on bonds is so low, borrowing is cheaper than repatriating the cash. First, Apple's one of the few companies with zero debt, so they can take on debt and be like most other companies. Second, interest rates are horrendously low. Third, repatriating the cash would mean paying taxes on that money, and the tax rate is higher than the interest rate. Thus it's cheaper in the long run for Apple to take on debt and pay a piddly amount of interest, than the repatriate the cash and pay more to remain out of debt than what they'd pay on interest.

Unfortunately, there's no easy way to fix it - most companies do this because it is cheaper in the long run to take on debt in the US than to repatriate cash.

You'll love it in China then

[Anonymous Coward]

Parks & beaches -- entrance fees.

To get a drivers license, it costs roughly $800-$1000 USD depending on your circumstances.

Every year to keep your car on the road, you have to pay road fees, bridge fees and clean air fees. These fees do not cover highway tolls.

There is no such thing as free checking or savings bank accounts. You have to pay fees to get online banking, fees for your atm card, fees for your passbook. If you forget your PIN code or password, it costs money to change it.

Your home -- you only get a 60 year lease. Right now it costs about 10% to transfer the lease of an existing home. New construction is about 2%. What happens when your 60 years are up? Hopefully you will get the chance to purchase the lease again. But if some big developer decides to pay a higher price for all the leases the building to demolish it all and raise new buildings, you are out of luck.

On the otherhand, almost nobody pays income taxes. I don't believe there's an inheritance tax either.

Nah, try again

[poetmatt]

they used Microsoft.

As in, why they gave Microsoft a pass on tax dodging and are focusing specifically on Google?

it's called vested interests.

Re:Nah, try again

[oh_my_080980980]

Yeah you don't work for google *eye roll*

Re:Nah, try again

[Anonymous Coward]

Hey everybody look, it's poetmatt - and he's got Google's dick in his mouth again!

Everybody wave!

Re:Nah, try again

[poetmatt]

oh hey guys! look! it's a troll!

if I worked for google why the hell would I be posting here?

Re:Nah, try again

[thetoadwarrior]

It's not just about tax dodging which most corporations do but the fact that google is possibly lying and not legally paying minimal tax. Can you give a reason to believe Microsoft or anyone else for that matter is doing the same?

Re:Nah, try again

[Anonymous Coward]

Um.. what? Who cares? Why are you so upset that a multi billion dollar advertising company is forced to submit some documents..

Man... the anti-ms trolls have to bring microsoft in to distract people from criticizing google every single time. I guess it never gets old...

One person's tax avoidance ...

[shugah]

is another person's prudent planning. Unless there is a law being broken, an accounting principle being misinterpreted or other such wrong doing, I don't see the problem here. Google is just doing what every company (and individual) does, or should be doing - structuring their business to be tax efficient. Google sell ads on the Internet - which in inherently borderless. Tax codes in most jurisdictions are ill suited for eCommerce and revenue hungry tax agencies are constantly looking for ways to get a piece of this business. If Google were actually doing something illegal, this would be an HMRC investigation rather than Parliamentary grandstanding.

Re:One person's tax avoidance ...

[BasilBrush]

No one's saying it is illegal. Plenty of antisocial and even evil things are not illegal. But they are still cheating the people in every country that they do this deceitful practice.

Should be doing? That says more about you than it does about Google.

Tax should be paid where the buyer is

[thetoadwarrior]

If you do something that is illegal in your country but legal on the server where you are doing it then you get in trouble because you're in the country where it's illegal. You've committed the act in that country. It only makes sense then the purchase, if made in the UK, is UK revenue and therefore UK tax should be paid on it. Just treat the corporations like you'd treat your citizens.

you little liar :)

[tuppe666]

Apple UK had revenue of £1B, and a profit of £81.3M

Apple is famous for their .813 Profit Margins *rolls eyes*

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