We’ve all noted the modern mantra. The tech companies have lots of money, we want it. We being those who would tax or regulate it off them - those who insist they know better how to create and dispose of human wealth than those who are actually successful at doing both. We should all also note the problems with the mantra:
And finally, we need to tax corporations more aggressively so we can all share the benefits. According to the European commission, global technology companies pay just 9.5% tax, compared with 23.2% for other companies. The irony is that they could easily afford to pay more. Most use their vast profits in share buyback schemes that inflate their share price. Buying your own shares is pure financial laziness.
Technical details first. The low tax rate is rather driven by the manner in which profits made and kept offshore were not taxable events for US companies. Now they are - that tax rate is going to rise as we see the next wave of published results. That is, that loophole is already closed.
It’s also laziness - or financial ignorance - to insist that those share buybacks are to inflate share prices. The idea of rewarding shareholders is what companies are for of course so it wouldn’t be a problem if that were all that was there. But as even casual observers will note tech companies tend to pay the staff in stock. Which must come from somewhere. That being the use of some of the profits made to buy in stock to then hand on to the staff.
Stock buybacks are, in part at least, the wages bill.
And to the conceptual error. We must tax so we share the benefits? Seriously, the only value to economic activity is the amount that can be extracted from it to pay for diversity advisers?
This is drivel, isn’t it. Sure, Zuckerberg’s got billions. And 2 billion people get to use Facebook. Larry and Sergey could climb to the Moon on their piles of money - and the rest of us gain a search engine of all of human knowledge. One recent estimate putting that consumer value of that engine at $18,000 per user per year. As opposed to the perhaps $50 or $100 in revenue it channels to its producers. Revenue note, not profit.
By far the greatest value of any organisation is that we get to enjoy the output of it. If you’re off to change the world and you don’t get that point then you’re not going to be able to reform very well are you? Even, not be able to reform coherently.