New York Times:
As some in Europe call for multinational companies to pay more taxes, Britain on Wednesday proposed a new 25 percent tax on the local profits of international companies, including tech giants like Google that use complicated structures to reduce their tax burden.
The so-called Google tax, which would go into effect in April, is part of European efforts to force global companies like Amazon, some of which have faced criticism from local lawmakers for their aggressive tax-avoidance structures, to pay more tax in countries where they have large operations.
Google’s response:
A spokesman for Google declined to comment about the British tax announcement on Wednesday, but Eric Schmidt, the company’s executive chairman, wrote in The Financial Times in June that restrictions on companies’ tax structures would lead to “less innovation, less growth and less job creation.”
Tax incentives exist to bring corporate earnings to that locality. If you want Apple/Google/Amazon to funnel their money through your jurisdiction, you’ve got to give them a reason for doing so. If you raise the tax rate, they will move the shell game elsewhere.
Just pay your fair share. That’s all any of us want.
Stop being slimy and avoiding tax.
That goes for everyone.
Tax incentives are normally used to get a company to base manufacturing and jobs in a locality and are one off costs to a state. The company has a choice as to where things are manufactured. a company shouldn’t be able to chose in which state sales are recorded, they should be recorded in the state where the customer is domiciled.
Enough with the shell games. Pay your fair share. Modern capitalism seems to be about avoiding anything but accumulating the biggest pile.
But publicly-traded companies have far more motivations than any individual to try and game the system, hence the problem.
If you can pay “your fair share” at 10%, or pay “what is legal” at 5%, that’s going to have a massive impact on those billions of dollars in revenue.
More taxes aren’t any more likely to work unless you can close the loopholes that allow them to create these exercises in tax gymnastics.
As to “moving the shell game”… at some point you have to decide whether the wellbeing of your people trumps the ephemeral “job-killing” complaint. It’s fair to argue that reducing controls on the market would “solve” this issue; it’s also fair to say then, that all these incentives shouldn’t exist, since they are “interfering” with how the market would naturally operate.
“If you raise the tax rate, they will move the shell game elsewhere.”
Let’s not kid ourselves, the “Double-Irish with a Dutch Sandwich” is about making your tax rate negligible, not just low. Large portions of Apple’s international income are “tax resident in no country” which, if you ask any accountant, is MUCH different than taxed at a low rate.
The problem is the mess that is EU tax law.
EU tax law as currently written allows companies that operate in two or more member states to offset liability in one member state against the other allowing that company to pay the tax due in the lower rated member state.
This has allowed the situation where a coffee company can import its product from outside the EU into the EU and refine it in that country and pay import duty to that state, then sell the refined product to other EU member states at reduced rate. It also allows for that coffee company to establish its accounting HQ in a state with much lower corporate tax to process payment and act as a defacto HQ.
It is not the only multinational to do so. You will find large online resellers and auction sites that have defacto HQ’s in small offices in Luxembourg. When you buy a book from perhaps the largest online retailer in the world, you are paying their HQ in Luxembourg, that order may be sent from ANYWHERE but you are paying Luxembourg, and as far as EU tax law states that is where the transaction takes place.
It is an absolute mess.
I’m not arguing for their right to use these tax loop holes, far from it, but while these laws legally exist, you cannot stop them.
All this announcement from UK Gov will do raise legal issues in Europe, and as the law currently stands within the EU they will lose.
I don’t really understand the attitude of “just pay your share”. In my mind, the government needs to set rules about what gets taxed and what doesn’t, and the companies SHOULD be doing whatever they can to follow legal rules and pay the minimum amount of taxes necessary. Just like individuals. Paying more than they are legally required to just seems absurd.
I deduct my mortgage payments from my taxes, and in my mind it is a stupid deduction that isn’t really fair to renters. But there is no way that I’m going to voluntarily decide to leave the deduction off my taxes. I’ll do anything I can to reduce my tax payments, and I don’t think I am being slimy.
That is not saying that I don’t agree with your general point … it does seem that some companies may be getting off easy with their tax rates, but in my mind, the onus is not on the companies to voluntarily pay more … the government needs to look at its tax laws and close the loopholes to ensure that everyone is paying their fair share.
It is not on the individual or the company to estimate their tax due, the onus is on the Government to demand it.
If the laws are so full of holes that companies can avoid, you cannot stand-up and shout its not fair, change the law.
All the shell game depend on fees paid by subsidiaries to Parent Corporation on licensing patents, trademarks, and copyright.
All that Governments have to do is remove this protection.
They can collect all the taxes they want. but it seem puzzling
because the whole VAT will fix everything seems to no be working.
You need to have a look at EU tax rules. It’s a mess.
They can get away with it because they legally can.
“If the laws are so full of holes that companies can avoid, you cannot stand-up and shout its not fair, change the law.”
… which, incidentally, they’re doing.
The same holds to the US and its tax laws at the state level.
Less innovation, growth and job creation in what? Accounting ?
Taxation is how services are funded. Large corporations are the ones that that should be taxed the most. They can handle the burden far better than the individual, and frankly should be responsible for the bulk of taxes paid. If every jurisdiction imposed the same tax we would all have better funded programmes and slimy companies like Google would no longer be able to tax dodge.
The US Tax Code is hardly a model of clarity and succinctness.
This is not about wanting Apple/Google/Amazon to funnel their money through Britain. It’s about making them pay tax on the business they do in Britain, and not funnelling the profits elsewhere. It’s quite simple, really: if you want to sell stuff here, pay your tax like everybody else.