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UK Chancellor Confirms Introduction of 'Google Tax'
mrspoonsi sends this report from the BBC:
Companies that move their profits overseas to avoid tax will be subject to a "diverted profits tax" from April, the chancellor has said. In his final Budget before the election, George Osborne said firms that aid tax evasion will also face new penalties and criminal prosecutions. The so-called "Google Tax" is designed to discourage large companies diverting profits out of the the UK to avoid tax. "Let the message go out: this country's tolerance for those who will not pay their fair share of taxes has come to an end," Mr. Osborne said. In 2012 it emerged that internet giant Google avoided tax on £10bn UK revenue in 2011 by doubling the amount of money put into a shell company in Bermuda. Doing so helped it avoid £1bn in corporation tax. Under the new tax regime, companies with an annual turnover of £10m will have to tell HM Revenue & Customs (HMRC) if they think their company structure could make them liable for diverted profit tax. Once HMRC has assessed the structures, and decided how much profit has been artificially diverted from the UK, multinationals will have only 30 days to object to the 25% tax.
This is going to put many a libertarian in a hissy fit.
You know, your typical 100K/yr libertarian that has no chance of ever getting hit by a tax like this.
The typical libertarian who wants complete deregulation of *everything* but complains when Comcast is their only broadband choice.
The arbitrary nature of this opens up a whole lot for corruption and mistakes. It would be much better if they can establish actual calculations rather than arbitrary distinctions.
He's just making noise before UK elections. He probably won't be able to enforce this rule in the long run and he knows it...
...to give us a distraction like this while they're busy stealing our money.
We have lost Trillions in tax revenue due to tax dodging.
FTFS "companies with an annual turnover of £10m will have to tell HM Revenue & Customs (HMRC) if they think their company structure could make them liable for diverted profit tax"
If you're diverting tax, wouldn't you choose a loophole that doesn't trigger this? Your accountants are either complying with tax law or their breaking it. It's a bit like asking if you have any firearms or explosives in your carry on luggage - if you're doing it on purpose, you're not going to tell the screener.
Is it just my observation, or are there way too many stupid people in the world?
But if we look beyond this what about companies that sell to their citizens but have no location within the EU, how will they enforce this? They can't they are just grasping at straws because they screwed up their own economy with poorly written regulations and ignorant legislatures.
Essentially, companies will avoid having anything to do with the EU just because of this in many cases. Larger companies will not but many internet based firms will vehemently avoid them. I think it's time for WWIII
Hidden taxes like corporate income tax really abuse the low income population. Alas, demagogues find it easier to pretend otherwise for personal political gain.
But is the 25% tax lower than what they'd pay if they hadn't diverted profits? Equal? More?
To actually discourage diversion of profit, wouldn't the penalty have to be higher, or at least equal to, what they're avoiding?
And does anyone not think that this will lead to tech companies having field trips to Hollywood to learn their style of creative accounting?
I like you, Stuart. You're not like everyone else, here, at Slashdot.
For this to work, they need a definition of "fair share of taxes". If they have such a definition, then why not simply change the tax code to match it?
following press announcement and Churchill speech for our brain dead attention craving politicians - i think most people expect this one to be shot down you may be able to do something about bermuda BUT the real issue is diverting profits within EU.
It is just impossible to actually work - we are part of the EU and the rules are clear. Also we can never leave the EU - it is the flow of money through london that keeps it alive.
If this is addressed done it needs to be at EU wide level.
complete. utter. morons.
On one hand, the EU wants to be more like the US: Create an EU internal market (http://en.wikipedia.org/wiki/Internal_market). Open the borders for trade and business. Let companies set up shop in a single EU state and sell to anyone in any other EU member state without having to do a mess of paperwork, currency conversions, or taxes (aside from VAT). On the other hand, some EU states see other EU states doing things to attract business, and they see their tax revenues going somewhere else, and they want to fix that. EU seems to be in this situation where it has competing goals and competing feelings on how taxes should work and I'm really interested to see how they reconcile that. Either each country needs to be able to operate and tax independently, or they need to work together as a single cohesive union and stop trying to perpetuate their pre-union tax schemes. In many respects this feels like a US state getting upset that a company in the next state over is selling to its people and the other state is getting all of the income tax revenue. Can you imagine what it would be like if you had to deal with income taxes in every US state in which you did business?
(Granted, this is somewhat independent of the whole Bermuda thing, but usually when people complain about these tax avoidance schemes it's about Ireland or something.)
"Let the message go out: this country's tolerance for those who will not pay their fair share of taxes has come to an end," Mr. Osborne said.
Yes, England has always been too lenient with those who refuse to pay taxes. It's not like they've ever gone to war with any of their colonies or anything.
What's the value of the UK government to Google?
It prevents the Google offices and datacenters from being raided by SWAT teams in the early hours. A very valuable service.
How inappropriate to call this planet Earth, when clearly it is Ocean.
They changed the abv of Budweiser by .02% to avoid taxes in the UK. link: http://www.dailymail.co.uk/news/article-2090136/Taxbeater-Stella-Budweiser-cut-alcohol-levels-bid-save-millions-pounds-duty-hikes.html
They provide a country in which Google can make over 10 billion pounds a year. That's something Google should pay towards helping, surely. It's not grabbing their money, it's taking back the money they asked for and were not paid, by Google moving some numbers around between banks, in a direct, purposeful attempt to keep as many of those numbers as possible, to the detriment to the markets in which they made said money.
But I guess bitching about governments is more fun.
i think you are over glamorizing ma bell and not remembering clearly. there was almost zero innovation in the phone world while ma bell had everything. with the exception of the movement from rotary dial to touch tone dial... i can't think of anything.
It is a lot easier for Google, or other online companies to operate in a different country from their operations though. Unlike Starbucks, who, at the very least need outlets in the UK to sell coffee here, Google could run everything from a single location anywhere in the world, yet still trade with any other country.
Unlike Starbucks, who, at the very least need outlets in the UK to sell coffee here, Google could run everything from a single location anywhere in the world, yet still trade with any other country.
Except Starbucks UK Ltd can presumably buy their coffee from Sunbucks Bermuda Ltd (no relation, honest), and make a loss in the UK.
The fundamental problem with taxing corporations is that corporations are much smarter than governments. After all, if you were smart enough to make a lot of money in business, why would you become a politician?
Organized crime bosses make the same deal. "Nice business you have there. It would be unfortunate if anything were to happen to it. If you pay us for protection, we'll make sure your business doesn't get burned down."
A government does not "provide" a country.
"Let the message go out: this PARTY's tolerance for those who will not pay their fair share of taxes has come to an end"
The country has always had zero tolerance for this, the government is heading for elections and they are pulling out all the tricks.
Welcome (somewhere else)
I wasn't aware that the United Kingdom of Great Britain and Northern Ireland has chancellors. I thought only Germany has chancellors. I learned something new today.
It's not like austerity is based on anything more than spreadsheet errors (intentional or otherwise), and it's not like it does anything positive for a country.
If you have a family on a fixed salary living within your means is almost always a good idea, at least unless your fixed salary is high enough that you can use Trumponomics.
If you are running a country lowering spending also lowers the GDP (movement of money) and revenues (taxes). Austerity cuts off money you need resulting in more austerityt. You do NOT want to run a country as you run a country or a family budget. Note that this is the reverse of trickle down. Money will get to rich people one way or another but the more steps it takes the better your economy does.
The people pushing austerity, the very rich and the bankers, are not doing this for the good of the countries implementing austerity they are doing it so that they can take money from those countries.
Taxing profits properly, that is making sure that tax on American income is paid in America and tax on UK income is paid in the UK, benefits close to everyone. The only question is the company doing the paying and they potentially benefit from better infrastructure.
You got me into this! You were the ideologue! I'm only a poor assassin! - Twenty evocations, Bruce Sterling
Except Starbucks UK Ltd can presumably buy their coffee from Sunbucks Bermuda Ltd (no relation, honest), and make a loss in the UK.
It's actually Starbucks Coffee Trading Co., which is a Swiss company, I believe.
It's actually Starbucks Coffee Trading Co., which is a Swiss company, I believe.
I was talking hypothetically, though I guessed they probably did something similar already.
Companies will find another loophole or reduce their actual business presence in the UK to 0 (resulting in zero tax revenue, rather than a 'less than fair share' they're currently getting). Stupid idea: lower the tax rates to the point that it's not worth the cost of avoiding them. Then, they would literally loose money not paying 'their fair share'. Why do politicians always want to use the stick instead of the carrot?
Why do politicians always want to use the stick instead of the carrot?
Because most Western politicians are sociopaths who believe everyone else must do what they're told OR ELSE?
I read an interesting news article recently about an African nation which had decided that, instead of their 30% tax rate, they'd offer people the choice of paying 3%. Their motivation, apparently, was that they actually only managed to collect about 2%, so if people agreed to pay the 3% tax instead of evading the 30% tax, they'd collect more money.
Drop the income tax, make it a flat tax on consumption (both products and services).
Ahh, another person who thinks that everyone paying the same amount means everything is fair. Flat taxes are inherently regressive which means that while everyone is paying the same amount of tax for a given purchase, the impact on their lives is not remotely the same because incomes are not uniform.
You pay tax on raw materials and collect tax when you sell.
This is roughly what a value added tax is. There are advantages and disadvantages to this taxation scheme just like any other.
you can make 100m$ and pay no tax until you spend it
Sounds like a great deal for the millionaires of the world. However for those of lesser means they don't have a lot of disposable income to hold on to it kind of is meaningless.
it would make it easier for everyone to understand, it would be easy to track as tax would happen when money changes hands.
I am an accountant. I think you have no comprehension of the administrative burden you are proposing. Currently my company pays zero sales tax because pretty much everything we sell is resold by someone else or incorporated into another product. This means we also don't have to spend money tracking, a bunch of transactional costs and remitting payments to a government. Tacking a consumption tax onto every transaction we make would cost us a small fortune both in administrative overhead (salary) and needless changes to procedures and software. The conversion cost alone is frankly prohibitive.
You think it is easy to track every transaction and I can assure you that you are wrong. While it is achievable it is very much not trivial to administer.
Which is fine, but don't forget to pay import taxes. Oh, and you're moneylaundering too.
I draw a line on the floor. I say you're not allowed to step over this line, your actions will be punished if you do. Then you find a clever way to get on the other side of the line without actually stepping over the line. This is what these companies are doing. They're getting on the wrong side of the law. The fact that they found a crack to squeeze 1 billion pounds out without actually breaking any laws doesn't change the fact that they escaped without paying tax on a billion pounds. What they did is simply tax evasion. They should be punished accordingly, for tax evasion. Their accountants should be punished as well and their lawyers that approved of this kind of lawlessness.
What I dont get is, why call it "Google Tax", didnt apple and microsoft did this first and have moved way more money than google?
> it's taking back the money they asked for and were not paid
Wow. That was artisan obtuseness.
Google does not make that much money in the UK because of the UK. They are pulling in revenue from other places. That's the point. The UK was their tax shelter and the UK did see some benefit to it. Some. Now that they want a bigger cut of the pie, what do you think is going to happen? Yup, google will just play the game somewhere else and you can wave goodbye to a good chunk of business.
They never have and they never will.
Corporations collect money from their customers, pay the necessary expenses and pass the residue on to their shareholders.
If the "residue" is not large enough to satisfy the shareholders, and expenses cannot be cut further, the prices go up.
Any attempt to tax a corporation results in increased costs to the consumer.
That is the way a consumer economy works.
This is why the so-called "Value Added Tax" actually ends up being more equitable. Money collected in a country stays in that country, and the corporation has no additional cost to pass on to the consumer, beyond that tax on the value they add.
"Google" is ultimately just a collection of people and assets. The assets are inert objects, they just exist and don't owe anyone anything. The services the UK provides only apply to people living in the UK, and their employees who live there already pay for those services via their own income taxes, VAT, council taxes and many more.
If you accept the bogus logic that the British government "provides" Britain to multinational companies and thus those companies should "help" then basically any country could apply the same logic to any company and demand any amount of money. It's entirely arbitrary. Google already helps the UK tremendously by providing its services, it doesn't also need to subsidise whatever random vote buying gimmick Osborne has come up with this time.
I really can't believe how foolish so many Brits are being about this. What happens when America turns around and observes that ARM makes a killing from phones sold to Americans that contain its microchips. As the US Government so nicely "provides" the American people who indirectly buy its products, it's only fair that ARM pays towards helping for it. Perhaps the tax can be 30%. That leaves plenty for when China, France, Germany, Greece and Russia come along and propose the same deal.
The tax system the world has settled on works the way it does for a reason. It's not something to just be torn up to try and buy a few quick votes in the runup to an election.
Because power >>> money.
if you were smart enough to make a lot of money in business, why would you become a politician?
Because you can then make a lot of money from the people making a lot of money in business without bothering to be in business.
In that case, Starbucks UK gets taxed because there is a part of the company with a presence in the UK. And it's quite obvious to everyone that the arrangement only exists in order to dodge taxes. The profit is clearly being made in the UK.
If I send money to a company that exists entirely online, for all the difference it makes, I could be a sole trader living and working in Micronesia. If I sell online services to British companies who are they going to tax? My customers? I guess they can, but I think most people would agree that my company is genuinely and legitimately operating in Micronesia. Just the same as if I was exporting Micronesian bananas.
give up more and more of their earnings to pay for non-workers' benefits?
Except that that tax is for the benefit of the company and their worker's too. Without it none of the country's infrastructure would exist for their workers to live in and the company to exist in.
It is not a government-created monopoly when the economics of doing business means no return on investment for the second party to enter a market.
In many markets it is literally illegal to be a second provider; like the Highlander, there can be only one cable company.
DSL is kind of an alternative, but mostly sucks in comparison...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Where a the sales revenues of the company and connected companies from all supplies of goods and services to customers in the UK are no more than £10 million
Ok, now define connected.
If you break them up right they really are independent. What do they consider connected? Whatever that definition is, you can game it if determined,
Of course, with a company like Google, it seems pretty hard to to anything to break it up to divide profits, since so many profits are from a single source (search ad revenue).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
What the EU has discovered is that a united monetary and economic union doesn't work when individual states get to set tax and spending policy.
What they've actually discovered is that eventually you run out of other people's money to spend.
Until the individual nations are willing to hand over some significant banking and monetary control to the EU
We will never get home until we hand over the car keys to the drunken madman in the back seat! He can drive REAL FAST.
The more money flows to a disconnected central authority, the worse things get for everywhere connected to said central authority. This has been true of every country under every model of government. Isn't the EU a little tired of being demolished? Wouldn't they like to have at least a hundred years of so of prosperity in a row? Guess not.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Great editing, guys.
Why become a politician? To set the rules/tax breaks your next job will have to follow.
You're suggesting that there aren't enough rich business people in government? O...k...
And ... just to point out, it's inertia and the dangers of tinkering with the tax system that prevent tax innovation, not lack of business acumen on the part of the govt.
Why are you consuming clothing? Libertarians are weird...
The vast majority of the costs associated with those 10 billion pounds of revenue are incurred in other countries. Google has no large datacenters in the UK. And, while Google has a London office, the vast majority of its 50k employees are located in other countries. That said, none of those costs are incurred in Bermuda (or whatever tax haven) either, so clearly current tax law is not creating reasonable outcomes.
This is in fact exactly what google is doing and what this set of laws are supposed to ban, but since they could just change trick it is more general than this. In effect any deliberate ruses are also banned, if HMRC decide that you are playing games then they bill you in full at the higer rate and you then have a limited time to appeal (to them) to ask them to charge you less, and to provide evidence that you are not "cheating".
Of course the exact details are as yet unclear and several companies are already trying to claim that this is illegal. The shell games that they are playing make a literal mockery of tax law however and judges take a dim view of being laughed at, so I estimate a near zero chance of winning any such case even if they are right.
because depending on the country, you can make a lot more money if you run the country and can allocate jobs, public assets etc to friends and family.
The government provides the country?
The citizens make the country. The government just collects money from the people.
SWAT being government employees... so, they're the mafia?
I see nothing foolish, my taxes provide, a police force, heath care, education, public transport and roads, energy, water, etc. all of which contribute to a stable society where were business can flourish.
Google takes advantage of the police force, health care (by default fair enough), education, public transport and roads, energy, water and a society that enables enough wealth for people to have a disposable income.
They are quite welcome to move their operation to the Congo or Syria and see how well their corporate HQ runs. I'm sure they will get a great tax rate. Here they can pay tax the same as me.
Wannabe nerd.
Why not tax on revenues, instead of profits?
Casteism