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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.
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.
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.
Those things those other EU countries are doing to attract business are ILLEGAL under EU rules. The double Irish violates some pretty major EU rules and what Luxemburg was doing was grounds to throw them out of the EU.
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. Something that people have been warning about since it was founded. Almost all the EU's fiscal problems can be tied to this problem. Greece violated EU rules (and lied about it) while spending far more than they were allowed to. Ireland allowed companies to setup business and declare themselves not tax resident anywhere. The overspending in Portugal, Spain, Ireland and others that caused the huge bailout and austerity was precisely because of this problem.
The funny thing is that none of the solutions they've taken are actually solutions. They are band-aids over the problem. Until the individual nations are willing to hand over some significant banking and monetary control to the EU they are going to continue to have these problems. A system where Greece can basically create debt for German citizens isn't a workable solution in the long run and you see the problems it creates right now, which is a deep resentment between member nations.
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.
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.
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?
Ireland kinda is our Bermuda. Nice taxes, crappy to live in, just the weather ain't so great.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
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.
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.
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.
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.