UK Announces 'Google Tax'

mrspoonsi points out that the UK has announced a "Google tax" on corporations that send a significant portion of their profits overseas to avoid local taxation. Any "economic activity" that is pushed to another country would face a 25% tax. George Osborne, the Chancellor of the Exchequer [said], "We will make sure multinationals pay their fair share of tax. We will introduce a 25% tax on profits from multinationals here in the UK which they artificially shift out of the UK. Today we're putting a stop to it. It's unfair to British people." ... [C]orporate taxes are still low, because the system does not tax sales, it taxes profits. And those profits are fiendishly difficult to pin down. Intellectual property payments to holding companies, the movement of sales activity to lower tax jurisdictions and the cost of licensing fees to holding companies all confuse the picture and allow firms with very mobile business models (such as in the technology sector) to be highly tax efficient.

Comments

Great

[Roodvlees]

Sadly it has to be done this way. Because countries refuse to stop giving the ridiculous tax benefits.

Re:Great

[Lawrence_Bird]

Because countries refuse to stop giving the ridiculous tax benefits.

Well there you have it. Exactly what is wrong with the left. A lower tax rate is considered a "benefit" as if the government is tossing a cookie out and patting the corporate (or individual) dog on the head and saying "good boy!"

The government has no inherent natural right to take money from anyone.

The far better way to view it is "companies are shifting assets and income out of our country because of the ridiculous tax penalties here."

Re:Great

[dave420]

The companies profit because of the stable economies and societies countries create through spending the tax the countries have collected. Why shouldn't governments try to recoup some of this? Google can choose to not do business in the affected countries if they want.

Re:Great

[visualight]

And you have no inherent natural right to electricity, plumbing, roads, safety from murder/rape/robbery, etc. Society gives that to you in EXCHANGE for your taxes.

Next, try to separate Society from Government to continue your argument. Then I'll just call you you a Liar, because you do actually understand the manipulation you (will) be making.

Or, you have another, more fair, method that results in every member of Society contributing to the whole, let's hear it. But if you think you should be allowed to live here and profit from our infrastructure and then not pay for it you can get the fuck out you communist free loader.

Re:Great

[deKernel]

You make it sound like they don't recoup any money which they do. The question is how much is fair.

Re:Great

[CrimsonAvenger]

The government has no inherent natural right to take money from anyone.

Nonsense! Governments have the normal natural right to take money from anyone - the Army and Police.

Or do you really believe that there's any difference between modern governments and medieval ones, other than the method of picking the rulers?

Re:Great

[Roodvlees]

Exactly what is wrong with the left.

The only where it matters who says it is when you are wrong and unable to argue the point.

A lower tax rate is considered a "benefit" as if the government is tossing a cookie out and patting the corporate (or individual) dog on the head and saying "good boy!"

When that tax rate is lower than the one people have to pay over their income and it's only paid over the profit the company makes (unlike personal taxes which are paid before basic life maintenance) - yes it's a benefit because it means people have to make up the difference on their personal taxes.

The government has no inherent natural right to take money from anyone.

Of course not, but lets be realistic how else will it pay for services?
If you really don't want to pay tax you can always move to Yemen.
But you want a police force to reduce crime, fire department to put out fires, etc...
Taxes are necessary to make those things happen.
I want everyone to pay their taxes so nobody has to pay an unfair amount.

Also I think most companies will be happy to pay their taxes, so long as their competition also has to, because they benefit from government services just the same.

companies are shifting assets and income

That's so broken! These companies enjoy roads, an educated population, etc, they should not be allow to 'move' income from the place they earned it.

Re:Great

[gstoddart]

You know, corporations have no inherent natural right to anything. Corporations are a construct created and regulated by governments.

Corporations have no such thing as natural rights, because corporations are not a natural thing. They are a legal construct, and nothing more. They aren't some protected species.

So, yes, when you incorporate to get certain benefits from the government, you do it under their terms. And that has a pretty good chance of including paying taxes.

So, your status as a corporation isn't some magical, inherent thing in the universe. It's not an objective fact. It's not defined by physics.

Governments keep giving tax breaks to corporations and the wealthy under the lie that this will create jobs and stimulate the economy. And the they destroy jobs, and sit on record high piles of money and not do anything for the economy.

From what everyone who isn't a corporation can tell, giving tax breaks to corporations has NONE of the claimed benefits. All this has done is put more money in the hands of the few, and leave the rest of us begging for scraps.

But don't think for a minute that a corporation is in any way entitled or has some inherent natural right to make money which isn't taxed.

Because that's complete bullshit.

Corporations do not exist without the permission of governments. Which means it's corporations which don't have any natural rights in this equation. And they certainly don't have some inherent right to not be taxed.

Re:Great

[thaylin]

Companies do not create jobs, demand for goods creates jobs, companies fulfill that role of producing. If that company was not there the job would still be there. That is a myth created by the right.

Re:Great

[Des Herriott]

As the parent poster stated: "in EXCHANGE", or in other words you're paying for it. You can't rebut an statement if you've only bothered to read half of it.

Parent poster is right: western nations with higher tax rates generally do offer more stable, safer, societies, and corporations are all too happy to take advantage of that without making their contribution to that society.

And yes, governments do have the right to tax you. You can bleat about libertarianism all you like, but elected governments get to make the laws, and you can either abide by them, or piss off somewhere else without any pesky laws. I understand Somalia is nice at this time of year.

Re:Great

[Kierthos]

People don't give up their natural rights when they form a corporation, but that does not mean that the corporation has all those same rights.

Re:Great

[Opportunist]

Well, let's look at a country without any kind of sensible government system in place. Let's take, say, Somalia. Now imagine you're doing business there. Ponder for a moment how much you'd pay to be protected from looting, to have your workforce protected from being mugged, to create and maintain an infrastructure so you have gas, water, power and transportation, ...

Then you know what's fair.

Re:Great

[Opportunist]

Sorry, no. Jobs are to a company a necessary evil. No company in their sane mind creates a job for the sake of creating a job, only if said job generates more revenue than what the worker costs that job will be created.

I create jobs. I buy goods and services.

Re:Great

[qbast]

Automation doesn't destroy jobs, it increases the amount of goods that a single worker can produce, making everyone richer..

Except for the worker who gets fired.

Re:Great

[Obfuscant]

Ponder for a moment how much you'd pay to be protected from looting, to have your workforce protected from being mugged, to create and maintain an infrastructure so you have gas, water, power and transportation, ...

Except that those employees ALSO pay taxes to create and maintain the same infrastructure so they get gas, water, power, and transportation. In fact, because those employees are employed and earning income they pay MORE than people who are unemployed.

So the government is double dipping here. Tax the company who creates the jobs that allow the people to pay more in taxes, and tax the people who exchange their time and labor for money.

The real issue is not whether there should be corporate taxes, but whether a corporate tax rate of 25% is reasonable when a company earns that money someplace else. Great Britain has no business taxing multinationals for money earned abroad, and even less business threatening them with an exorbitant penalty when they don't free pay up on those external profits.

Re:Great

[Opportunist]

Ok, let's use a fictitious country since Somalia might have a negative connotation. In this country you don't get anything from the government, you need to pay for everything yourself. In return, no taxes are being paid. EVERYTHING is privately owned and run for-profit because, well, you have to run it for-profit because there is no other way to do it sensibly when there ain't nobody going to back you.

What remains is that you need to hire security (and I mean 24/7 security, since nobody would give a shit about anyone breaking into your place), and pay them rather well because they need to have an incentive to have that job still tomorrow instead of simply using their position to sell off your belongings themselves. You should also take care that you have some firefighters and other technical emergency services on your payroll, at least if there are any assets that you don't want damaged in case of an emergency.

Depending on what kind of company you have, you will also have to find someone to pipe some water your way, along with someone to transport off your sewage. And unless you want to keep it or treat it yourself, find a treatment plant to enter a contract with you. Put aside a bit of money every year to pay for the necessary inspection and maintenance of the pipes. Or, of course, pay someone to do it for you. Since you will probably not find anyone else willing to share a pipe with you unless you pay him handsomely to use his pipe (after all you'd have to rent it from him, and like I said before, everything in our fictitious state is for-profit, and so is access to this pipe), you will want your own pipe, so expect to pay a bit more than you'd do in one of these "socialist" countries where the sewage is bundled. How else do you think the treatment plant could find out how much to charge you if they can't measure your amount of poop?

Same goes of course with your waste. Find someone to dump it for you or drown in it.

You will probably also have to do with a relatively lower qualified work force. Since only people who come from a well off background can afford education, the pool of educated people is smaller. Unless you just need menial workers, this may mean that you have to pay more due to supply and demand. Of course, if you only need monkeys you'll get by paying peanuts since that pool would certainly grow correspondingly. In general, the less training you need to give your work force the better, since fluctuation can be serious. Especially if work related injuries can be an issue and if your workers cannot afford medical care they might stay deformed. Whether this is a crippling problem for you too or just for them depends of course on the kind of work you offer. Though as experience has taught us, workers in jobs where injury is likely are also easy to replace because such jobs usually need no lengthy training, so I think you should be ok without having to implement any worker safety precautions. It's not like there's a government that would pester you with such, if you come up with something like that it would only be in your interest, and as long as workers are easy to replace (remember monkeys and peanuts from above), there is no pressing urge for this.

And so on. It would be interesting to find out whether it would be cheaper or more expensive to produce in such a country. One thing is certain, though, I would not want to LIVE in such a country.

Re:Great

[Dr_Barnowl]

Yes, you need robot makers.

But the whole point of automation is to reduce costs or increase productivity or quality.

If you robotize McDonalds, you're not going to increase the number of people who eat there ; that's pretty much determined by the size of the restaurant and the capacity of the kitchen. Quality is pretty much set by the quality of the ingredients, and is not the reason people eat in McDonalds.

The kitchen labour is flexible - McDonalds go to great pains to have people on contracts that mean they can have them work as little or as much as they need. So the thing they are making flex is labour, not production. Add robots, and you have less human labour. If you don't, there is no economic reason to do so - you don't need more production (or they would be having problems recruiting, not trying to keep their workforce lean).

If robots cost more to make and maintain than your human labour, you don't use them. Therefore robots mean fewer dollars in the pockets of human labour. It creates SOME jobs higher up the supply chain, sure, but not the kind of jobs that McDonalds kitchen labour can do - these guys are by and large, on the lower half of the bell curve for ability, as you point out. But if you need to spend more dollars on robots and engineers to handle them, you're doing it wrong. Therefore more money departs from the labour end of the economy (the customers of McDonalds) and into the pockets of the owners (the customers of 5 star restaurants).

Extend this to every low-skill employer and you have a vast underclass of unemployed people who i) need supporting ii) can no longer afford to buy goods and services that they previously would have afforded.

Lower demand means less economic activity which means more push to increase productivity and decrease labour.

Before long, robots are making the robots. The only guy with a job in robotics is the guy who maintains the robot maintaining robot. Sooner or later they realise that if they make another robot maintaining robot, they can make him redundant too.

At this point you can go one of two ways :

i) The 0.1% own all the robots and don't see why they should share their wealth. The remaining human population compete for an increasingly small pool of non-automatable jobs, the unemployed are herded into basic subsistence camps (by robot "peacekeepers").
ii) Everyone realises that the robots are made of materials from the Earth, and powered by energy from the Sun, that the Earth should be owned by all of us equally and that we should be striving for universal human happiness, and that if we cooperate we can all have a living standard that exceeds the definition of "comfortable" by some large margin, since all these robots made everything so gosh-darned productive

If You Had An Electronic Currency

[Greyfox]

You could just tax every transaction made with that currency at a fairly low percentage of the total transaction and do away with all the other taxes. Credit card companies figured this out decades ago.

Why tax profits, why not income?

[trout007]

Individuals aren't taxes based on their profit but income. Corporations should minimally be held to the same standard. After all there is a huge benefit to incorporating which is limiting liability of the owners. Tax the income at a much lower rate of 5% or so. Think of all of the productivity lost moving money around to optimize tax payments. If your profit margin isn't high enough to cover this tax then you shouldn't incorporate.

Re:Why tax profits, why not income?

[CrimsonAvenger]

Umm, no.

Your "profit" is the difference between the price you sell your labor for and the cost to produce your labor. Since it doesn't cost you $50, then your "profit" isn't zero.

Theoretically, the "standard deduction" (if you don't itemize) is supposed to approximate the cost of your labor. It hasn't for a very long time, but theoretically it did.

Do note that when the Income Tax was proposed and passed, the intention was to tax people who made tens of thousands of dollars per year (at the time, that kind of income was in one-percenter territory), and that virtually no normal worker would pay any of it.

Inflation, of course, put paid to that idea three generations back.

Re:Why tax profits, why not income?

[jabuzz]

Show me anyone outside the 1% and even 99% of the 1%'ers that would choose to make less money because they where being taxed too heavily on it. That is a complete fallacy.

Re:Why tax profits, why not income?

[rabtech]

Tax income, and they have reason to make less. Why go get the new job that pays a tad more when 25% of your raise goes to the feds?

This has to be one of the dumbest arguments of all time and I can't imagine anyone who actually has money ever actually operates this way or they're headed for ruin rather quickly.

Of course you take the job; 75% of the extra income goes into your pocket. A business that decides not to sell more widgets at a 75% profit margin because they'd have to spend 25% to sell the widgets (taxes, overhead, etc) is a business headed for bankruptcy.

The only programs in the USA that lead to less overall income when you get a raise are ones for poor people like Medicaid where making one extra dollar can cut off your benefits.

Algorithm

[countach]

I'm not sure what Britain has in mind, but I've long argued for a system like this. Say Apple does business in my country. Say they do 6% of their global business and revenue in my country. OK, then whatever profits Apple makes world wide throughout their empire throughout all associated companies, you've got to pay tax in my country on 6% of it.

If you want to argue that for whatever reason the product mix of sales in my country is lower margin than your global business because the product mix is different, ok fine, but the onus would be on you to demonstrate that, and the level of proof required would be high.

Re:Algorithm

[admiral snackbar]

For me the real problem isn't that some corporations don't pay taxes in some countries, its that some corporations hardly pay taxes anywhere. That is the real problem. I don't mind Starbucks not paying taxes in the UK, as long as they pay a fair share of taxes somewhere. What I would do is this: I would demand from all corporations operating in the country an overview of the corporate income taxes they pay anywhere in the world. If this is the same or more than the national corporate income tax rate, I would not add any tax. If it is lower, I would take cut of the lower amount equal to the percentage of total business they do in the country. Example: Apple makes 10 billion profit a year and pays 500 million in corporate income tax (anywhere in the world), while the corporate income tax is 25%. So they should have paid 2.5 billion in taxes, a shortfall of 2 billion. If they have 50% of their revenue in the US, the US should take 50% of the shortfall, i.e. 1 billion. This way, you avoid double taxation and you still force corporations to pay a reasonable tax to some country at least. In your example, theoretically Apple could have shifted all their profits to the UK and paid a regular 30% (or whatever the corporate tax rate is there) corporate income tax, and then also be forced to pay in the US over their revenue share (if the US implemented your system)

Re:great name

[Anonymous Coward]

Absolutely correct!

Google doesn't sell anything or make any money in the UK.

Doesn't sell apps through the play store, doesn't sell any Nexus devices, doesn't sell any advertising, not a sausage.... Well, not profitably anyway, it's a strangely expensive business to be in, as there are all these funny fees and license payments they have to pay, all to other google subsidiaries in Ireland/Luxembourg/Netherlands/etc.

All seems above board to me!!

Get rid of corporate taxes totally

[Chirs]

I know it sounds crazy at first blush, but I think it would make sense to totally get rid of corporate taxes. (Replaced by other forms of taxation.)

The basic idea is that a corporation is nothing but a bunch of people owning it, so instead of taxing the corporation you tax the individual owners (owners, shareholders, etc.) instead. Since corporations wouldn't be paying taxes, you could then get rid of all of the tax breaks/writeoffs for corporations, which would significantly simplify corporate accounting and reduce the incentive for large corporations to shift money around to avoid tax.

Some references:
http://www.dailykos.com/story/...
http://www.theatlantic.com/bus...
http://www.vox.com/2014/8/8/59...

Why not abolish corporate taxes entirely?

[Chirs]

The basic idea is that a corporation is nothing but a bunch of people owning it, so instead of taxing the corporation you shift the tax to the individual owners (owners, shareholders, etc.) instead. Since corporations wouldn't be paying taxes, you could then get rid of all of the tax breaks/writeoffs for corporations, which would significantly simplify corporate accounting and reduce the incentive for large corporations to shift money around to avoid tax.

Re:Why not abolish corporate taxes entirely?

[Rich0]

++

Corporations love to socialize the risks and privatize the benefits. If some Pharma company releases a drug that kills a bunch of people, I don't hear the libertarians calling for liability for anybody who had money in a 401k that was partially invested in a mutual fund that had .5% of its shares in the company 5 years ago when the decisions were made that led to the problem.

And this is why corporations make short-term decisions. The person making the decision gets his bonus today. The shareholders get their dividends today. The consequences (if any) come for the shareholders 5 years from today.

There is no single "fair" value.

[Chirs]

How much is "fair" depends on the culture the company and government are operating in.

You could have a libertarian society with minimal government involvement and minimal taxation, but where every individual has to pay for everything they do. (Roads, fire protection, ambulance, medical, police, education, utilities, garbage collection, etc.)

On the other hand, you could have a more socialist society with high taxation and high government involvement, but where most of the services are paid for by the government.

Both are viable solutions, with different tradeoffs.

Re:There is no single "fair" value.

[tnk1]

Services paid for by the government *are* services paid for by individuals. I pay a significant portion of my paycheck in taxes. Please don't tell me that I'm not individually paying for government programs.

What you mean is that the government ensures that everyone has individual services irrespective of their ability to pay for them. They make that happen by charging individuals with those means to pay for people who do not have those means. If I am poor and want fire services, under a libertarian system, I pay let's say $100, but under the government, I pay $10, $1 or even zero. If I am not poor, under a libertarian system I will still pay $100 for fire services, but under the government, I pay $150 (or more).

Unless the government is an entity that generates its own operating expenses from the sale of a service or product, it is not anything other than individuals being forced to pay for services. It's just not all individuals at the same rate.

Don't get me wrong, I am not necessarily arguing for the existence of the a la carte ultra-Libertarian state. The government exists for a reason and I happily pay taxes for those services that government is well designed to manage. What I don't like is when the government becomes an engine for wealth redistribution, forced charity, or social engineering experiments.

Re:Google should leave

[ledow]

Yeah, that kind of attitude goes down really well.

Hence why Microsoft kowtowed to the EU requests and paid millions of dollars in fines, etc.

Pulling out of one of the top two world markets (depends what you look at exactly, but Europe and the US are either 1st or 2nd in almost any product/industry), especially over a sales tax, is corporate insanity and will see stockholder lawsuits within seconds.

And, to be honest, there are countries that survive just fine without Google. Google is only really the top search engine in English-speaking countries. And Google Maps? What about it? I can name ten different companies producing maps accurate enough for almost any purpose. You think ONLY Google get the mapping and aerial photography data of a country? Maybe StreetView (because they're the only ones really doing it seriously), but maps? No.