Google, Apple, eBay shouldn't pay taxes - people should pay taxes
eBay is not paying enough tax in the UK because it sells everything through PayPal Luxembourg. So the Sunday papers tell us, adding to the stream of stories about how Starbucks ain't payin' enough tax, Google ain't, Apple isn't and... well, we're being taken to the cleaners as a nation, aren't we? We provide this lovely country …
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Re: I run a company....
Ever heard of 'knowing what the enemy is thinking"?
Doesn't hurt to have folks under your wing that are fully trained in the latest techniques of your enemy.
Plus if you remove the best folks they have that cripples them even further.
Not much of a strategist are you? Failed the Army Officer exam then?
Re: I run a company....
"I have a company and I've been paying tax"
You've not been paying attention though, have you? Tim's article is about who bears the burden of the tax. Is it your company or is it you the owner of the company? Clearly your company can't bear the burden because it's not a person - it's you because you own it (and possibly it's your employees because there's less money in your pocket to re-invest in the business).
You - like so many here - are confusing the entity who cuts the cheque to the Revenue with the people who bear the burden of the tax. For example, companies cut the cheque for VAT to the Revenue but is there anyone who seriously suggests that it's not the customer who is bearing the cost of the tax in the form of higher prices?
You really need to pay attention to what someone says and not just run off at the mouth because what the headline says upsets your world view.
Re: I run a company....
rubber & glue much???
so no tax means higher wages (yay for us!)
no tax means no govt spending...
fire insurance (thats just to put it out, not recover afterwards)
crime insurance (thats just to get a copper onsite after i have been robbed, not to recover afterwards)
heath insurance (thats just.....
education insurance (see above...
employment insurance (I'm sure you have spotted the patttern by now
retirement insurance
road tolls
having to learn to speak german/russian/chinese after the various invasions
getting (even more) fucked by the banks - no regulation
suddenly im not feeling quite so well off anymore.
but dave starbuck is minted so thats okay
Thanks Tim!
Finally a sensible article on tax. I don't agree with every point, but not having it all wrapped up in a load of hyperbole is a nice and refreshing change.
The main issue with this article is that it assumes that tax is the only issue at stake here (i.e. raising of revenue). The main issue as I see it is that, as the law stands today, a company that has the means to do this cross-country faffing about, is naturally more competitive than a smaller company that does not. The small companies, which do have to pay the tax, end up less competitive and they starve and die. Given that these small companies are the ones who employ the most of the workers in the UK that should be a worrying trend.
By all means we should change the law - corporation tax on large companies has to be a fair reflection of the global market and unless we change something they are all going to move overseas (many have already) - but until that point we need some means to defend the "little guy" or we end up with no tax and ever increasing unemployment as everyone buys things from "Luxembourg Plc".
Re: Thanks Tim!
One footnote to the effect that if any system does tax profits without taking into account where the money is spent any taxation system is doomed. These kind of "financial shelter corporations" don't need to employ people and are often little more than a mailbox. They can therefore relocate anywhere in the world.
Assuming "Country X" needs to raise an amount of money proportional to it's population, then a country with a low population count can naturally set an exceptionally low tax rate for any new companies it attracts, because it's overall financial burden in real terms is very low due to low population. It doesn't need to tax, and any tax it gets is "free money", so it can set a tax rate of only a few percent.
I think most readers are missing the point of Tim's article. He's not arguing for less tax (necessarily), he's just arguing that corporation tax is probably the wrong way to do it. Increasing sales tax would, for example, work just as well. It naturally applies equally to all companies, and takes into account location of sale, not location of the mailbox.
Re: Thanks Tim!
But that negates the agility of a small company to adjust to local trends and so out-compete a multinaitonal.
HP and Apple and Microsoft and Google were once all small companies competing with giants such as Rand, IBM and DEC. Mediocre is mediocre.
what nonsense
if you want a global economy, have a global government that regulates that global economy.
Oh, you don't you want that? Then you're just a corporate apologist.
Re: what nonsense
It's a shame sarcasm translates so poorly over the internet
Or rather...
Instead of trying to chase and tax those elusive profits that can be moved around internationally, just tax expenditure - don't allow claiming back of tax on certain goods or services... shop rent, ingredients, furniture.
Of course the article is right in one respect... corporations never pay tax... any tax they pay (such as on goods or services) will be reflected in a rise of the product they sell - customers will pay it.
Perhaps we should forget taxing corporations at all and simply focus on removing their rights - removing rights to be treated as 'people', removing rights to own 'intellectual property' (make them license it from the original creator-person), for a start.
Re: Or rather...
No, it will be reflected in three things: the price customers pay, in the wages of the employees and the returns to the shareholders of the company. The mix of who bears the tax will vary depending on the market, the bargaining power of the employees, etc. Given that who pays is a fairly random happenstance, taxing companies is a very blunt instrument indeed. Surely if you want to hit employees or hit shareholders or hit customers, it's best to shape something to achieve that directly rather than hope the random tax incidence is what you wanted?
Good article
I notice few people who decry the article actually have any sensible facts to deploy.
Must try harder.
Re: Good article
Looks like we've got massed hordes of Daily Mail and Fox "news" commenting and downvoting any comment not conforming to their opinions.
Err
"removing rights to own 'intellectual property' (make them license it from the original creator-person),"
This already happens. Patents are issued to a named person. Who then licenses it. Usually, for $1 to the corporation that's been paying his wages for a decade.
Re: Err
I think that commentard meant "make it impossible to assign IP to a corporation, and make sublicencing illegal".
In other words, the original inventor/creator human(s) can (and often would) license it to their employer for the nominal 1 penny, but that employer cannot then sublicence it to any other entity.
It's an interesting concept, although it will never happen because too many corporations (Disney et al) are dependent on the current way that licences can be bought and sold.
Re: Err - Err, no
Whilst that is the case in the US, it isn't in the UK. In the UK intellectual property created in the course of employment generally belongs to the employer. Other countries will have there own rules.
Re: Err
Minor correction for patents in a European context: The inventor needs to be natural person. The applicant - who owns the patent - can be a corporate entity and in most cases is, e.g. Art. 58 of The European Patent Convention.
So why these companies don't pay better salaries then their competitors?
If it was true, those companies should pay much higher salaries to their employees than companies that have to pay local taxes. They don't, and often they pay even lower ones, while offering worse work conditions. Because their are built not to offer more to their local workers - while shareholders are often not local - but to move money away as much as they can. Product prices are often kept low more because of lower running costs, than because they don't pay taxes locally.
Moreover the article fails to notice several things, for example salaries are a cost from the company perspective, and thereby are not taxed at the company level (taxes are paid by the employee, not the company). thereby there is no correlation on company taxes and salaries.
Anyway I think government should start to charge more for utilities used by company who don't pay tax locally. Do you need water for your coffees? Ok, it will cost you more. Do you need roads and vehicles to deliver your products? Ok, it will cost you more. Do you need police to patrol and firefighters to ensure your datacenter is not destroyed? Ok, it will cost you more..
Re: So why these companies don't pay better salaries then their competitors?
No:
"If it was true, those companies should pay much higher salaries to their employees than companies that have to pay local taxes."
It doesn't work that way. Imposing tax on returns to capital means that less capital is invested in the economy. Less capital invested means lower productivity thus lower wages.
It *does not* work at the company level but at the level of the whole economy.
Re: So why these companies don't pay better salaries then their competitors?
"...should pay much higher salaries to their employees..."
Which is actually the root o/t problem. Salaries are the first post of taxation. E.g. In Belgium taxes on salaries start from about 40-45% while taxes on business profits start about 25%. So you'd better keep the money IN the company and let tsome profit flow back through other means, like bonusses, company paid assets (cars, houses etc..). Unfortunately these things don't filter through the common work-floor but get stuck on the upper management floor.
And then somebody 'leak' an article saying how corporation 'avoid' taxes while it are the money-hungry governments who should learn to make ends meets with the resources they have!
Re: So why these companies don't pay better salaries then their competitors?
They're serving their shareholders not their employees.
Re: So why these companies don't pay better salaries then their competitors?
Who would you charge more for these taxes? The company that has £10billion revenue but makes a £1 billion loss, or the company with £100,000 revenue and £50,000 profit?
Re: So why these companies don't pay better salaries then their competitors?
Do you seriously think that other people far smarter than you haven't actually considered and then rejected these points? What is it with people today that think that expertise and a lifetime's study count for nothing compared to the "I reckon" witless opinion reached in mere moments?
Re: So why these companies don't pay better salaries then their competitors?
By the way, it's a standard finding that multinationals do pay better than purely national companies.
Re: So why these companies don't pay better salaries then their competitors?
It *does not* work at the company level but at the level of the whole economy.
It *does not* work at all - i just read it here on the back of my box of fox-o-flakes breakfast cereal.
there fixed it for you
Would raising personal taxation work?
I can understand the argument, sort of. What's the solution? Removing rebates and raising taxes on dividend income? Would that work?
On a side note, something needs to be done about companies not paying realistic wages and expecting to public to make up the short fall in tax credits and benefits to low income households. There's something twisted about hugely profitable companies whose employees need state benefits to survive.
Re: Would raising personal taxation work?
"I can understand the argument, sort of. What's the solution? Removing rebates and raising taxes on dividend income? Would that work?"
One logical structure would be to simply abolish corporation tax altogether and then tax dividends and capital gains to investors in companies at standard income tax rates.
Re: Would raising personal taxation work?
"One logical structure would be to simply abolish corporation tax altogether and then tax dividends and capital gains to investors in companies at standard income tax rates."
Perhaps, but those companies are not headquartered here, so we can't do that and we'll get zero benefit. I think that a sales tax might work.
Re: Would raising personal taxation work?
You can, Frank. Any investors in these companies in the UK would be taxed on their investments in the UK. The same would apply to other countries.
No matter how many layers you put between yourself (as the investor) and the investments, eventually, you as the individual need to pay tax. Not drawing down on your investment goes against what an investment is supposed to be... taking your assets (money) and making more.
:-)
Re: Would raising personal taxation work?
The burden of the tax falls on shareholders, employees and customers in a varying mix. If you want to tax these groups, then do it directly where you'll know what the impact will be rather than let the happenstance of the structure of any particular marketplace choose where the burden falls. Yes, that might mean dividend taxes (though Tim covered this in the 'deadweight' argument).
As to the "realistic wage" - what exactly is this? Wages aren't set so that we can all enjoy X-boxes and a three bedroom house. They are set based on the economics of what is produced by the job. If the value created is low no company would every pay a high wage. If the market for the skills is tight then the employee can capture a large share of the economic value (look at premier league football where the employees - the players - have captured the lion's share of the value).
Investment raises the economic value of an employee. One who drives a forklift is much more productive - and the value much higher - than several who manually lift sacks. If the return on investment is low then there's no money to buy a fork lift and the wages for sack-lifters is low because the value each creates is low. Taxing investment retards investment which stops productivity growing which retards the value produced by an employee which retards the growth in their wages. This is what Tim was talking about.
Re: Would raising personal taxation work?
Except you don't want to tax investment: it's what produces economic growth which makes everyone richer. You want to tax what has the least deadweight cost.
Tax isn't there to punish groups of people, it's there to raise money for government to invest in things that couldn't otherwise be invested in by private individuals or collectives.
Realistic wage
Surely by paying benefits to make up for low paid jobs reduces the value of those jobs further?
IE if there were no tax credits or benefits to make up for the income gap then these employees wouldn't be able to afford to work there, the company would in turn find it harder to recruit and then would in turn be forced to increase wages.
Am I being naive here? I didn't study economics.
Re: Would raising personal taxation work?
But they can move to the most favourable juristiction in the EU. If there were not corporation tax in the UK then this would incentivise them to move to the UK, as that would offer a better return.
Re: Realistic wage
your grasp of economics is just fine.
where you miss out is by not being a nazi :-)
Curse you! GODWIN!!!
*checks map*
...
...
*double checks map*
...
I can't seem to find Bermuda in the EU, can someone point it out? Is it near Luxembourg?
Companies should pay tax
Companies should pay tax where there headquarters are or base of operations are. Regardless of where that is. This constant tax avoidance by locating them self into tax havens has to stop.
Companies should and need to pay there fair share as the public does. Everything else is just unfair and is going to increase the tax burden on the rest of us. Everywhere.
Re: Companies should pay tax
You didn't understand a word of that article. Did you even read past the headline?
ERR
"Companies should pay tax where there headquarters are"
But that's what the EU system is, as I've described it. If Facebook Eire sells an ad in the UK then it pays the tax on that in Eire, where it's based.
That's actually what people are complaining about.....
There should be a FLAT tax rate, and corporations and people pay that rate, regardless of income (above a set minimum). That's it. Administration easy. Rich will end up paying more because they have less incentive to avoid a flat tax.
Also the flat tax rate should be low. Tax is slavery. If you reduce the tax to half, then you only need to work a 3 day week.
If the government needs too much money then it should reduce the size of the public sector and cut the huge salaries and gold plated pensions therewithin. And private the socialist bbc parasites.
The gold plated pensions for all public sector workers is a myth though.
moron
on so many levels
read a book, any book would be a start, then when you have done that a few times, read one on economics.
Depends really
Personally I'm all for companies with operations in this country not paying taxes as long as they are paying decent wages to the staff. Unfortunately many companies that make a great deal of money here are dead set on shipping all the work overseas, and in some cases paying such low wages that their staff are reliant of working tax credit, housing benefit etc.
corporate tax should be paid by the people at the top
so everyone in the company earns kinda the same amount overall.
the first rule of pyramids is you can cut the top off and they still work
Tax the people not the machine..
Ok I get that, but it's when obscene profits appear as a result...
There should then be an annual points of percent tax on total global profits paid to each country hosting a branch. Giving it to the govt means it's sure to get spent somewhere more creative.
Cash hoarding corporates or wasteful governments?
Great system...
Re: Tax the people not the machine..
Obscene how? Obscenity is subjective.
Re: Would raising personal taxation work?
Dividenst already GET taxed.
In fact in Belgium earning on intrests get taxed from 15% (upto 2011) to 21% (from 2011) (which is an increase in taxes of +30%) and above a certain amount of interest you pay 24% taxes!
Don't believe the propaganda that rich people pay no taxes at all. They do. But as taxes increase gradually with their big income they try to avoid these increase.
In my example salary taxation in Belgium starts at about 40%. So if you earn 2000 euro gross in wage your net salary would be 1200 euro or 60% of your gross wage. If you earn 5000 euro gross then taxes are about 55% and your net salary is about 45% or 2250 euro. Gross wage is 2,5x yet net salary is LESS then double.
THAT is the problem. If I'd earn 5000 euro gross then I expect to have 3000 euro net (60%/40% divide) not the other way around. So it's obvious that I will find ways to get that +700 euro back that should have been in my wallet instead of in the wallet of our prime minister.
Plus there are so much things that have taxation. Even if e.g. you get your company car. The company or the employee has to pay road-taxes, taxes on petrol, VAT on repair and maintenance, yearly mandatory car inspection etc...
So in the end it doesn't matter if the corporations seem to avoid paying the big corporate tax, in reality they pay a dazling amount of small taxes (like all of us do).
Don't believe all the propaganda. Especially not on El Reg ;-)
Clearly the solution is european fiscal union with unified tax arrangements (at least as regards intra-EU trade). Presumably we're all in favour of that?
I disagree
This is the mentality that allows politicians to flip houses by renting them to each other. It's not specifically prohibited in the rules so therefore it's OK. There's a spirit of the law and a letter of the law, and just because a company or a person is rich enough to be able to operate out of Luxembourg doesn't mean it should be allowed.
The fact that the EU continues to allow it just shows what an insidious organisation it is. Being on the referendum.
The tax bill for the small company I work for was £69,000 for last year (and that was a very quiet year). That's up to two salaries being eaten up by taxes. If Starbucks, Google, etc paid more of their fair share maybe smaller companies could finally be given a break on taxes.
I suppose the counter argument could be that if Apple, Amazon, etc started paying more they would have to increase prices which would negate any additional spending power afforded to employees, but given the obscene cash reserves of these companies and the vast sums the executives earn it seems they could easily afford to sacrifice some profit margin.
Don't get me wrong, I'm not the socialist type who thinks taxing everything is the answer. I'd much rather see lower taxes overall than the current mentality of taxing everything that moves. However, there are rules on taxes and I want to see them obeyed fairly across all businesses, rather than the current situation where large business can afford to avoid all tax responsibilities increasing the burden on smaller business.
The point that is missed so many times is the fact that the tax laws suits the large companies who have bases in numerous countries.
This puts the smaller companies based in one country at a disadvantage.
So a UK company selling furniture is going to be at a disadvantage to someone like IKEA.
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