Reply to: Google tax

[VectraMan]

From 1 April next year companies will be required to tell tax officials if they believe they may be liable for the levy based on how they channel money out of the country.
The 25pc diverted profits tax will apply when a company does not have a permanent UK establishment but supplies goods and services to British customers. It will also apply to companies that do have a permanent UK arm but avoid corporation tax by paying fees to other subsidiaries within the group outside the country.

For instance Google's 'double Irish' arrangement would meet both conditions. It has a permanent UK arm and large London staff but pays very little corporation tax because its British sales transactions are made by an Irish subsidiary. The profits are then shifted to another subsidiary in Bermuda as fees for using intellectual property.

If closing down the London office was all it took to avoid the tax, then surely they would. But that'd hardly appease the Daily Mail reading British tax payers; everybody would still moan that they're "doing business in Britain", whatever that means.

The whole Bermuda thing is screwing the Irish out of their share of money made in Britain, but that's their problem.

[Batcher]

I thought it had been proved that Google had a large team in London selling advertising to UK companies but had some sort of convoluted system so that the tax was due at HQ in Dublin?

[d000hg]

I thought in these cases the issue were companies doing business in country A, then diverting the money to country B... your example seems to suggest nothing much artificial.

[VectraMan]

But in your example, is your invoice coming from Eire, in Euros? Or is it an Irish call-centre, or something else?

Presumably it's an Irish salesman, in Ireland, but targeting UK businesses and so invoicing in pounds.

[d000hg]

The US can get tricky in some cases, I've had to fill in stupid forms before

But in your example, is your invoice coming from Eire, in Euros? Or is it an Irish call-centre, or something else?

[VectraMan]

I don't think it's unreasonable that Google is taxed on the income generated in ear territory

But where is the income generated? Starbucks is pretty clear, but if Google phone me up from Ireland and sell me some advertising, is the income generated in Britain? And if it is then does that mean I can't make a one off software sale to the US without registering for and paying US taxes?

[d000hg]

I don't think it's unreasonable that Google is taxed on the income generated in each territory, according to the local laws (if it can be enforced). When Carlsberg sell their lager in different countries, it costs different amounts and is marketed and even branded in different ways based on many factors.

If UK companies end up paying more then the solution would be to offer concessions to those companies. I can't see "you shouldn't fix one problem because it might have a knock-on effect" is a good argument. If something is broken, fix it. If this causes a new problem or has a knock-on effect, fix that too. And so on. "It's all tulip but on average it sort of balances out" doesn't seem the way to go

[VectraMan]

Companies can put prices up if they wish to, regardless. Saying "we shouldn't make them pay tax because they'll raise prices" is hardly a great argument. It potentially means they're not able to undercut local companies which could promote more competition (OK not too many competitors for Google but they're only one company).

I suppose it possibly is good for UK search engine-advertising business (didn't someone on here do something like that?), but the far greater number of businesses that might use Google for advertising are having to pay a higher price than their foreign competitors because the UK is the only one with a Google tax. If Google just pass on the tax then it's a tax on the UK's hi-tech IT industry, which the government are always going on about promoting.

The problem is the internet means people like Google are genuinely global, so talk of local taxes are futile. What it needs is for the international community to come together and agree how companies like Google should be taxed.

[Zero Liability]

True, they might just reduce returns to their factors of production instead. If this is about getting them to pay for services rendered to them, itemise them and send them the bill. That'd be an amusing exercise. In fact, they should do that at all levels. Osborne made some headway on it. We'll see how many of these 'services' are then valued to the extent that the government believes they are.

Irrespective of how they cope with it, it will have an impact on their operations here, and that is all that is being pointed out.

[d000hg]

Companies can put prices up if they wish to, regardless. Saying "we shouldn't make them pay tax because they'll raise prices" is hardly a great argument. It potentially means they're not able to undercut local companies which could promote more competition (OK not too many competitors for Google but they're only one company).

[Zero Liability]

And if they just relocate or up prices as a result it is that much more immediately obvious what detriment it has to the economy. IR35's is better disguised; perhaps FLCs will 'fix' that.

[MicrosoftBob]

WHS - transfer pricing is already illegal, although proving it is tough.

But if you can't prove they are engaging in transfer pricing - you can't prove they are shifting profits offshore - as one is effectively the mechanism for the other.

They don't need to prove it, they just to need to deem it in a hypothetical non existent arms length contract between companies i.e. IR35 for multinationals

I bet HMRC haven't the guts to go against people who will fight back though and have deeper pockets

[centurian]

We don't need more tax laws, we just need the ones that we have to be applied. Either Google et al are already moving profits offshore for the express purpose of avoiding tax, or they are not. If they are not, then STFU, and if they are, then prosecute under existing tax laws.

WHS - transfer pricing is already illegal, although proving it is tough.

But if you can't prove they are engaging in transfer pricing - you can't prove they are shifting profits offshore - as one is effectively the mechanism for the other.

[meridian]

http://www.bbc.co.uk/news/business-30420571

So only £360m estimated to raise, any calculations are at the discretion of HMRC (cue long and protracted arguments between tax lawyers), and raises the spectre of UK companies being taxed higher elsewhere - with Double Tax treaties thus reducing the overall UK tax take.

Nothing to see here, just more empty words to appease the Daily Mail readers.

We don't need more tax laws, we just need the ones that we have to be applied. Either Google et al are already moving profits offshore for the express purpose of avoiding tax, or they are not. If they are not, then STFU, and if they are, then prosecute under existing tax laws.

[Zero Liability]

I fear they'll just leave the country. Either that, or pay the tax and put their prices up to compensate.

Oh but then they get to bring out another favourite toy of theirs - price controls... and perhaps that other "free market" Tory favourite of capital controls. Mind you, they will probably reserve the former of those for the possibility of the various QEs around the world beginning to percolate through "main street" and/or should they need to contain the deflationary collapse their debt addiction has precipitated.