Slashdot Mirror
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.
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?
"He probably won't be able to enforce this rule in the long run and he knows it..."
If its put into law the companies will have no option but to pay up or close their UK operations.
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.
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.)
He will do because its a big topic over here in the UK, and has been for a while.
Personally, I applaud Osborn for doing it - for once we aren't saying "hey, you know those rules we made for you to adhere to? Well, we have decided that there are these other 'rules' as well which we would like you to adhere to, and we will say nasty things about you if you don't. Are they legally binding I hear you ask? Well, no, but that won't stop us from thinking you should be restricted by our second set of 'rules'..."
Instead, we are actually getting something done about the rules under which companies should be paying tax. As a lot of people have said all along, fuck the spirit of the law, apply the actual law. If the law doesn't say what you want it to say, change it. Don't try and bully people into following your additional 'voluntary' rules which you want to make over and above the actual laws.
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 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.
He will do because its a big topic over here in the UK, and has been for a while.
He probably won't do, because the odds are very high that the Tories will be tossed out at this election. If you're going to elect a socialist government, you might as well vote for actual socialists.
Hidden taxes like corporate income tax really abuse the low income population. Alas, demagogues find it easier to pretend otherwise for personal political gain.
So how will taxing Google's profits abuse the low income population? Perhaps google will quadruple the cost of search in order to pass on the cost...
SJW n. One who posts facts.
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.
You don't understand. Many countries in the UK are competing themselves to death in being "tax-friendly" to extremely rich companies and individuals. Even American rock stars are "located" in the UK, the Netherlands or wherever they can avoid taxation the most. Off course, this contributes nothing to either countries. To make matters worse, it opens up the possibility of all kinds of incomprehensible constructs that may even be less legal. But who knows? You'd have to know all the laws and all the deals with the tax authorities (which are, even though there are laws of government openness, secret).
Tax paradises are not only located in Africa and run by dictators. Off course, that is what politicians try to make us believe. Tax paradises are in a lot of cases our own countries. It is therefore quite hypocrite for a UK politician to condemn tax paradises or rich companies using them after these companies were lured to the UK for being a tax paradise in the first place.
Nae king! Nae laird! Nae yurrupiean pressedent! We willna be fooled again!
They have a definition of "fair share of taxes". It's "giving all your money to the government, so we can blow it on public sector pensions and windmill subsidies".
countries in the UK
I meant many countries in the EU. There, fixed that for me.
Nae king! Nae laird! Nae yurrupiean pressedent! We willna be fooled again!
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?
So how will taxing Google's profits abuse the low income population?
Google will increase advertising prices to make up for the lost income, which will cause advertisers to increase prices to make up for increased advertising costs, which will cause the low income population to pay more for the things they'll buy.
Or, if they can't increase prices, their reduced profits will result in reduced dividends and stock price, so those low income people stashing away a few pounds a month in their pension fund will find it's worth less when they come to retire.
What do you think happens when the government sucks more money out of the productive economy? It's made up for with unicorn farts?
Osborn had to do something. The EU is moving to fix the problem and he doesn't like their solution, so this is an attempt to head them off. Plus the tabloids have been piling on the pressure. It's just before an election, he can make moves like this and then renege on them later, like they did before the Scottish independence vote. For anyone not keeping track, the first betrayal of that was about four hours after victory was declared.
The problem with budgets like this are that they are mostly electioneering. While some good stuff does come from them, you can't really bank any of it.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Labour were making the same noises about the same tax changes that Osborne just announced, so yes, it will happen.
I would love to know what you think constitutes a betrayal after the Scottish independence vote...
First of all it has to become law. Usually harebrained ideas like this are launched when you know that you get a lot of public support for it but have no chance in hell to get it past the parliament.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
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.
Only since the 1200's, for that particular position.
Tax avoidance is legal.
Tax EVASION is another matter.
Making the alcohol content under the clearly-specifed taxable limit is no different to making 1596cc cars (where the tax limits change at 1600cc). It's fine. That's not the problem.
The problem is that a company can make £10bn, and not pay £1bn of tax that would otherwise be owed, just by using a loophole. Sure, we can't make them pay it retroactively because the loophole was legal. But we sure as hell can close the loophole and force them to change their business practices and/or pay the tax.
Honestly, I judge the very person announcing these measures more (and all his predecessors on all parties). They allowed this loophole to exist and did nothing until it was caught upon by the media. If it instantly disgusts the public as soon as it's found out, it should never have existed in the first place and SOMEONE, SOMEWHERE knew about it and had allowed it to happen right under their noses for DECADES. Probably because of a backhander to themselves, but who cares what the reason is.
You cannot have businesses with £10bn of UK coming in paying virtually NOTHING in tax to the UK. That's just ludicrous and poor financial policy.
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.
Actually, what used to happen with higher tax rates was the rich didn't get richer as fast and the money was more evenly spread about, actually driving the economy through spending and benefiting more people.
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.
Depends on how that money is spent. In a more socialist setting it would most likely be spent on a social program to help take away some of the cost of living on the low income population thus freeing up the money to spend on the increased prices of the companies... Even someone with a rudimentary understanding of economics knows that government spending does help to spur the economy if spent on the right thing.
Now if they take that money and blow it on military invasions and other money sinks with low RFI for the population, then it does hurt overall. Bottom line turns into, which ass hole do you distrust less the businesses or the government?
There's a variable missing from your equations: Government Efficiency (or lack thereof). Self-motivated people are almost always going to be more efficient at figuring out how to do things than a government that's spending everyone else's money, at least for governments that don't have balanced-budget and/or term-limited constitutions. Add the additional variable of "Social Justice" into the metrics and it gets even more messy.
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.
I totally agree with you and you are absolutely wrong.
The "Google tax" law that Osbourne wants to enact appears to be little more than saying "any money stream we would like a piece of, we're gonna take". As far as I've been able to find out there really isn't much more to it than that. That's not a law, that's bringing back the reign of kings. It's been obvious for a long time now that the Tories have no coherent theory of how they want the global tax system to work. They just want more money.
It's not even clear why they need one. They already passed the General Anti Avoidance Rule (GAAR) which basically says "anything a reasonable person would find unreasonable is illegal", i.e. it suspends tax law entirely in the UK and replaces it with the whim of whoever is running the Revenue at the time. Given that they did the GAAR a few years ago already it seems they're implicitly agreeing that the arrangements of these companies is reasonable and legal but they want to undo it all the same.
The big problems this tax is going to run into are both legal and fundamental. The legal issues are that simply grabbing money in violation of the existing systems violates tax treaties. The UK is potentially setting itself up for a world of hurt if other countries decide it's now open season on British companies. Bear in mind the Tories have lowered corporation tax to attract companies from other countries to London. If, say, France, decides that a company is "diverting profits" out of France to the UK and pulls the same shit then the country could find itself ending up with less money than before, not more.
The second problem is that what it means to "divert profits" is left undefined. How do you carve up a company like Google across national borders? When someone clicks an ad in the UK, is that profit made in the UK because that's where the user is? Or California because that's where the ad system was developed? Or Germany because that's where the datacenter is? Or Ireland because that's where the sale was made and where the advertiser sent the money to and had the contract? Or all of them? Currently the system is it's Ireland because that's where the company with which the contract was signed is.
It gets even more convoluted. What if a British user never clicks ads and so is a net loss for the company. Do you then offset all those users against the revenue generating ones? How much does it even cost to serve the search result to a British user? They're using global, shared resources, so do you divide up the global costs by population? By usage? How do you even calculate profit by product when it's all integrated, let alone by country? And how do you stop the red tape required to calculate whatever arbitrary metrics are used from becoming overwhelming?
How will they even collect that tax? What if Google and Facebook shut down their UK offices?
The Tories have answers to none of these questions. They have no thinking behind this deeper than "let's grab some foreigners money and use it to buy off pensioners". The Treasury admitted they are assuming zero businesses will pull out of the UK because of these changes. How this will impact the global tax system, the costs of it, the chances of blowback? Unstudied.
The whole thing is an astonishing abandonment of a system of rules and laws.
"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.
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.
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
Alright, if you're so keen on mob justice then go for it. Just don't go crying when someone plucks an arbitrary unfair number from the air and makes you pay it, on the grounds that they just don't like you. What goes around comes around.
Except that he has very little power to change the rules, given the EU laws and the single market system. Basically, what he is suggesting is illegal and most likely just posturing for elections.
The government provides the country?
The citizens make the country. The government just collects money from the people.
What's to stop a company from relocating to a lower tax country?
Can't get any taxes off that.
The UK gov is trying to push a thread.
It's quite simple, the money is made at the point the product is consumed, we are living in a consumer society after all.
Everything else falls apart when the consumer stops buying (or looking), if Starbucks or Google want the favourable tax agreement from Luxembourg to stand, then that counts only for profit on sales made to the people of Luxembourg.
Wannabe nerd.
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