Re: Stop taxing profits
I totally agree that it's going to be impossible to raise all the tax that a government theoretically should be able to. They have set the target very low (so they're not unaware of this) It's just too complicated. I also agree that it's very hard to get the information you need to tax accurately, and companies can keep moving the goalposts (and the money) around. Finally I also agree that internationally coordinated action is far more likely to be effective at raising money, as well as being far more likely to do less harm than good.
But big corporations in the end do not set the terms of the debate. Governments do. In the extreme, if corporations make it impossible to get the information needed to tax them accurately, governments can just guess - and take any amount they want. Obviously that's liable to drive away business.
But Apples second largest market in the world is the UK. That gives the UK government a certain amount of leverage in the power-play against Apple. Should it choose to use it. I think the UK may only be third or fourth biggest for Google, but it's still many billions of profit a year. Even a few hundred million in taxes each year will not therefore drive them out of the market.
How powerful is public opionion? In the long term, quite a lot. Facebook could die in a matter of months if they truly piss the public off. They're a one-trick pony after all.
Google are becoming synonymous with tax-evasion and privacy-abuse. That's not good for the health of the brand. Look at Microsoft, they are dangerously close to becoming totally irrelevant in the personal computing market. Despite Windows Phone being rather good.
I said in my original post that it would be very hard to tax profit from global advertising (basically brand advertising from global companies). But anything that has a price in sterling, is from a UK only company, has a link to a UK sales site, or even a link to an internation sales organisation (but their UK arm), is going to be easy to track. And can therefore be taxed. If a company chooses to arse around with head-office charges, dodgy transfer pricing, franchise fees etc - then they can be tax audited to within an inch of their lives, and made to justify every single one of those charges, until it's cheaper to pay up. Or a law can be passed setting allowances for transfer pricing. Or a global company could be forced to provide a complete breakdown of their global books, down to every paperclip - and the Inland Revenue work out their liabilities and charge them for the privilage of getting say Ernst & Young to do the sums too. Governments can pass laws that say almost anything.
It's hard to know what this policy will lead to. It could just be a quick pre-election PR stunt. It could be the first part of a 20 year process (mostly involving inter-government negotiation), or something in between. And I'm sure that even if this is the first skirmish in a long war - it'll have a small effect. But it'll be interesting to watch it play out.
My point is that multi-national companies in recent years have taken unprecedented steps to avoid paying any tax. Instead of using loopholes and accounting to lower their bills - they seem to be aiming to have no bills. Part of that is the European single market rules being exploited in ways that weren't planned. I also suspect a good part of it is actually going to turn out to have been fraud (see the banking industry for examples). At one point Google were claiming all their advertising contracts were in Ireland, yet had a sales force based in England - I wonder how close to the wind they were sailing there?
I think it's partly cultural, and that may (or may not) change. In the 90s recession there was a medium sized non-retail bank got into trouble in London. Nobody knew about this until something like 2005, when the Bank of England admitted it. They've got everyone together, and hammered out a solution. That was possibly the last hurrah of the old boys network in the City. Culture changed, and that kind of cooperation went out the window. So when the inter-bank system broke down in 2007-2008, the players weren't able to get together and sort things out in an orderly manner. Everyone knew the shit on their books would have to come out eventually, but seemingly couldn't bring themselves to admit it, even in secret - amongst peers who were equally deep in the brown and smelly. That would have made the crisis a lot less painful, and was in their own best interests. But the culture of the industry no longer allowed it. Equally that culture has turned out to eb riddle with deception, fraud, stupidity, lack of risk control and short-termism. Re-building banking regulations is a huge task, and it'll probably be ten more years before governments finish constructing the system. Who knows how long it'll take for the industry's culture to change. But change is inevitable.
The question isn't why do you expect you can change things? Instead it's, why do you think things will stay the same in a system that's only been like this for a handful of years?