People are still very confused about the Google tax story


As a masterpiece of tripping over your own argument we think that this from The Observer takes some beating:

Recent wrangles between the European Union and the US on tax show how difficult achieving international consensus can be when competing interests are at stake. But it is possible: the EU is the most successful example ever of international co-operation.

Opinions obviously differ on how good the EU is at international consensus. But to use this argument when we are discussing Google's tax affairs does take some sort of chutzpah, possibly even ignorance:

Last week, the government chose to play both David and Goliath. George Osborne declared the deal UK tax authorities struck with Google to cover a decade of tax liabilities “a major success”, despite the fact that some estimates suggest this may represent an effective tax rate of just 3%.

The 3% number is nonsense of course. It is calculated by looking at the revenues that Google gains from sales in the UK and then applying their global profit margin. But if that's the sort of nonsense that people wish to use then why not humour them. And then ask, well, what rules are they that allow such a tax rate?

The rules that allow this are of course the European Union's own Single Market rules. Which give an absolute right for a company in any one EU country to sell in all EU countries and pay tax where the company is resident, not where the sales take place.

Some success in international co-operation and international consensus then. The organisation which is being praised is the one producing the initial problem being complained about.

Our own view is as we've said before. Corporations used to be a useful proxy as a place to tax the returns to investors, even with the unfortunate side effect of some of the economic burden falling upon workers. They are clearly no longer such a useful proxy so we should give up the pretense. Just abolish corporation tax altogether and simply tax people in their incomes and or consumption. At which point tens of thousands of tax experts have to go do something useful with their lives.

Such a pity, eh?