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

[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

[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.

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?

[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!!

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.