back to article The voters hate Google. Heeeeyyyy... how about a 'Google Tax'?

As the tech news outlet of record has told us, UK chancellor George Osborne is preparing to bring in the “Google Tax”. Properly known as the Diverted Profits Tax, it is supposed to be a way of scraping tax revenue off those profits that the tech giants are diverting out of what should be righteously paid to HM Treasury and …

Anonymous Coward

Re: The voters hate Osborne

50%? Where is your VAT, mate?

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Anonymous Coward

more UKIP nonsense

The government is free to determine taxation, even if completely arbitrarily. It only needs to draft the legislation right.

For example, Labour in 1997 applied a 'windfall tax' to formerly state utilities deemed by them to have been making excessive profits after privatization. This is nothing to do with the EU.

There is no reason why legislation drafted properly could not apply a tax to Google, or anyone else, based on profits made within the UK. This is entirely legal, assuming you draft a law properly, as the government did in 1997.

If we're going to talk about pledges made to please the public with no possibility of succeeding, then I think claiming you can leave the EU and then get a deal to access the single market but without all the freedom of movement parts is a bigger lie. Switzerland has single market access even though it is out of the EU... but... it also had to sign up to freedom of movement, and it's even in the Schengen zone. If the EU won't give you this deal while you're in and paying the fees, only an idiot would believe that if you leave and stop paying the fees, they'll suddenly cut you the deal they wouldn't give when you were a paying member. It's bonkers. Leave the EU, leave the single market. Be honest about it.

I am a bit curious why the Reg keeps publishing this UKIP nonsense. My swivel-eye-o-meter starts clicking almost every time I visit the Reg site these days.

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FAIL

Re: more UKIP nonsense

Im curious as to why you seem to be responding to a completing different article than the one that was written, with not nearly enough !exclamation marks! for! FotW!.

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Re: more UKIP nonsense

cap'n,

I'm not sure your argument makes much sense. We can tax things that effect companies who are resident in the UK for tax purposes (Windfall taxes / bank taxes etc.). It's much harder to do that to companies that are resident in other tax jurisdictions. Particularly if they are using the rules of the Single Market to trade within the EU. I'm no tax lawyer and I haven't looked at this legislation, but Tim Worstall makes a decent argument as to why it may not comply, and will quite possibly end up being decided by the ECJ in several years time.

Having dismissed his argument, you then go onto some sort of attack, possibly on UKIP, possibly on Worstall, though you don't specify. And it's not relevant to the article.

It's possible that the UK, being the second biggest economy in Europe (although that may depend on how you measure it between us and France), has a lot more negotiating leverage than Switzerland. And can carve out a better deal. Particularly as we run a trade deficit with the rest of the EU (a surplus with the rest of the world) - and there would be lots of political pressure from big EU companies wanting to keep access to the UK market. Espeically as the only plans for Eurozone recovery seem to be based on exporting, rather than stimulating internal demand, and for that they need markets willing to import.

On the other hand, the irrationality of the way the negotiations are currently being handled with Greece suggests there's a second option, where the EU plays the rejected lover and decides collectively to punish the UK for the insult of leaving. Despite doing more damage to its own economy in the process than it does to ours. I believe if we do decide to leave, that the agreement has to be unanimously approved by all member states, the Commission and the European Parliament. There don't seem to be many genuine Federalist believers left in politics at the national level, but there are many at the EP.

It's interesting that Cameron has not even put it on his list of things to try to negotiate, any restrictions on free movement. He's decided it's just not possible, so there's no point asking, he's better to try to negotiate on things he can actually get. One of which is to try deal with the technical differences between benefits systems. Many EU countries have contributory systems, so poorer migrants have much smaller incentives to go to those places. Where as we have in-work benefits for which you don't need to have contributed beforehand. So that could be acting as an incentive for people to come here, and take low-paid jobs - and price down the wages of the lowest paid. There might be a deal there, as Germany has similar issues.

However I presume you were attacking UKIP rather than Cameron. Myself I'm no fan of UKIP, but I can understand why they've become a political force. If Cameron were to win the election, attempted to negotiate and got nothing, I'd be very tempted to vote to leave in a referendum. I don't buy the argument that our economoy couldn't thrive outside the EU - although the EU has some nice advantages. But there is a major democratic problem, and rather like Scotland, if people feel that the downsides of the political compromises required to stay in the union outweigh the upsides of the trade it promotes, then it's time to think about leaving. As democracy is really important. The Eurozone crisis proves that the voters of the EU do not feel that they are one people - whose taxes and laws should be shared - and that means if the EU pushes integration past a certain point, it will lose all legitimacy. UKIP argue that point has already been passed. On that, I think I agree with them.

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Re: more UKIP nonsense

Because this is about a Tim Worstall article where the author actually knows what he's talking about. Just because you don't agree, doesn't mean he's wrong. I know that's difficult for entitled communists everywhere to understand but overtaxed capitalists sure do.

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Re: more UKIP nonsense

Oh sod off.

I'm intelligent. I have yet to hear any cogent arguments from the pro-Euers that do not contain either insults or the the assumption that I am simply too stupid to realise how wonderful the EU is.

And you wonder why more and more of us are turning away from the idea of an EU.

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Anonymous Coward

perversities and details

Actually I doubt state aids would capture an exemption for small companies. There os already precedent for different treatment between large and small on both tax and reporting. Its a clear rule that applies to all.

Perversities may be more worrying. The big issue tends to be diverted revenue. There the issue is that the revenue is declared, just elsewhere, and claiming it back is country vs country issue not domestic taxation. Its in the rules as you say. The proposal is a diveretd profits not revenue which raises the spectre of HMRC spending all their time on companies that have declared revenue in the UK and becoming a negotiating threat for transfer pricing and related distributed cost bases in the single market. So basically as with most regulators they spend their time on the easy to regulate not the hard cases that take up the political debate.

The other interesting thing is that you are assessed on how much of 100% you have diverted - but there seems no way of defining what a 100% is other than the tax a company is already paying.

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"Osbo"...

"Mouth breathers"... "bleating"... pedantic quibbling over "it simply isn't tax avoidance"...?

Has TW been taking writing lessons from Matt Bryant?

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Re: "Osbo"...

You've got to admit that "UK Uncut" are really annoying - like "Jet fuel can't melt steel beams" level of annoying.

Now, a promotional box of Celebrations to the first person that can explain to me why bank bailouts don't count as State Aid.

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Worth thinking about

I do think that there is a germ of political reality in the idea of finding a way to stop multinationals hiding profits. The amount of tax not paid in the UK by Google, Amazon, Starbucks, and probably Microsoft is a real issue.

But I am not convinced that our politicians are up to actually doing something about it, and this particular initiative sounds like a populist gimmick rather than a workable idea.

The idea that any government prepared to sign up for TTIP expects to be able to get multinationals under their thumb is simply comic. But then, they are all clowns anyway, so what else would one expect!

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How is the small companies exemption different from the VAT rules?

"There's also a more minor point that can and should be made, which is that companies doing less than £250m in business are apparently going to be let off this"

While not a tax person, surely if this was a reason for an EU challenge the UK VAT rules would have been struck down years ago? They've got a threshold value for turnover and no-one is challenging them as state aid...

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EU dispute

Whilst I agree that I see the DPT running contrary to EU Law, its worth noting that the whole process of escalating this to a European Court could take a very long time. The way the tax works, with self disclosure, then very shot time frames for payment or dispute resolution, the boon to the Revenue could be quite quickly established. Of course, that will be hardest to measure - the whole point of the DPT is to change behaviour and win voter points. Companies will quickly adjust their tax returns so they pay only 20% tax on the sums in dispute.

When the DPT is finally undone by the EU, those adjustments pushed through the CT returns won't be eligible to be reclaimed by the taxpayer. It is a huge gamble for companies subject to the tax to simply pay up at the higher rate and hope that they will get it back in the future. To that end, I think that the tax will prove a success in the short term.

The bigger question is how this sits with OECD BEPS work, whether the DPT will encourage mass unilateral action, create rampant double taxation and disregard all the progress the working parties have made thus far.

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Re: EU dispute

It's actually more worthy of note that if they were to win the election and offer the referendum then the public may vote to leave EU law and thus take the EU and its overriding laws out of the equation.

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It's an Aunt Sally, and a very useful one for the government right now.

No laws have been broken (whether or not the laws serve the purpose they were intended for is a matter for another debate. For example, I bet a lot of people here are affected by IR35 which categorically DOES NOT do what it was meant to do) but Daily Mail readers are up in arms, and the Chancellor of the Exchequer has to be seen to be doing something, no matter how ineffectual it may prove to be.

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It's the old political syllogism

Something must be done.

This is something.

Therefore, it must be done.

QED

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politics

It's interesting to look at the upvote/downvote ratios on this story. On most stories, a common-sense comment gets a big pile of upvotes an a stupid comment gets a load of downvotes. What we're dealing with here is basically a political issue so I'd expect people to vote along party political lines (tories in favour of the original article and lefties against). Hence a fairly even split of up and down votes.

We might not necessarily see it as party political, we each see our own view as common sense, but that's the nature of politics.

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Re: politics

As a fairly hard "leftie" I always enjoy Tim's articles, even if I sometimes disagree with his opinions (and he usually states what is a fact and what is an opinion - which is splendid). In this case I think his conclusions are correct.

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Too Simplistic

I think your conclusion is based on a too-simplistic view of how Amazon operates their retail business (the cloud is a wholly different pan of eels).

Whilst the customers order is taken on the web (just what country is that in? ), the order is delivered from a gigantic warehouse in the UK - it takes 5 minutes to drive past their warehouse outside Glasgow ON THE MOTORWAY. So the revenue is declared at the website operation, but most of the cost is incurred in Blighty. I daresay that sufficient revenue is assigned to the UK to cover operating costs, CAPEX depreciation etc., but not enough above that to incur corporation tax.

So the key here is how the revenue is assigned. If it were assigned to different centres in proportion to their (genuine!) costs, no taxman could complain; however it isn't.

Perhaps the real problem is that megacorp s.a./ltd/inc. can do this, but Bloggs the plumber (or indeed I.T. contractor or employee) isn't allowed to.

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Re: Too Simplistic

Amazon's situation is a little different. Those warehouses. Under the standard double taxation treaties warehouses (and logistics chains etc) are expressly excluded as giving rise to the creation of a permanent establishment and thus a corporation tax liability.

Amazon is still being cute, of course it is, but it really does have the express letter of the law on its side on this particular point.

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Re: Too Simplistic

So the revenue is declared at the website operation, but most of the cost is incurred in Blighty.

Do you honestly believe the majority of the cost of providing to you goods from Amazon is storing it in a warehouse and then delivering it to you? Nothing about purchasing the item in the first place?

Amazon actually have this sewn up, their sales are all from Luxembourg, which is where the risk occurs (they buy things; if they don't sell those things, they lose money). They set prices, they buy stock, they pay for fulfilment and they make the profit. Fulfilment sites don't make profits, they simply do their purpose at the most efficient manner possible.

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Re: Too Simplistic

"...the express letter of the law..."

I think that's the key point. It may satisfy the letter of the law but it doesn't pass the smell test.

Avoidance for me is when you start sailing close enough to the wind that you need to rely on the letter of the law. So:

Starbucks - I don't like the coffee but everything it's been accused of is basically straightforward business practice. One part of the group holds the rights and licences them to the other parts. They charge group members the same as to other companies and only reason they made the news is everyone knows the name.

Google - everything goes through Ireland? Really? So if I was to call and arrange an advertising campaign I'd speak to a guy in Dublin not London? If yes fair enough if no...well something's off.

Amazon - Legally warehouses don't form an establishment. I can see how that would work - you've overseas customers so you ship over a local stock of goods so fulfilment is quicker. You then restock in bulk from your home base. Whereas I reckon a lot of what Amazon sells comes from UK suppliers and I can't see how a crate of books from a UK printer magically goes to Luxembourg when put on a shelf. Lets face it, legal or not, it reeks.

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Re: Too Simplistic

Actually, Amazon as a global entity has made hardly any profit since its inception. They have significant surpluses, but these are all invested back into the business (building server farms, warehouses, etc). So even if they were wholly and solely a UK operation, there'd be relatively little liability for Corporation Tax.

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Re: Too Simplistic

Tesco controls about 25% of the supermarket trade in Ireland - there are hundreds of Tesco stores all over the place.

Tesco pays various Employer PRSI contributions, Rates, excise duties on the diesel used In it's local delivery trucks, etc, in Ireland but it pays no corporation tax in Ireland, because the profits that Tesco stores make in Ireland belong to Tesco in the UK, and are taxed in the UK.

Why should Amazon be treated any differently than Tesco?

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Re: Too Simplistic

Re: Why should Amazon be treated any differently than Tesco?

The major difference between Tesco and Amazon is that Tesco relies on brick's and mortar locations versus Amazon being able to easily move revenue/profits between locations.

The problem isn't so much moving the profits between countries, the problem is moving all profits to the country with the lowest tax rate in the EU - Luxembourg benefits while other economies suffer.

The Google tax will probably fail (either not raise any additional money or be challenged in court and fail) by which time the EU will probably have addressed this in some way (i.e. by setting a minimum tax rate across EU members and maybe a cross-border tax that favours physical companies over virtual ones).

There is also the question of whether consumers want the big companies taxed - the companies pay less tax and their goods become cheaper because of it. However, it damages local businesses (who struggle to compete on price and range) which in turn damages local communities (less jobs and less money in the local economy). Does the economy benefit from this in the medium to long term?

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Re: Too Simplistic

Really? I'd have thought that a supermarket would constitute a permanent establishment as it's "a fixed place of business through which the business of an enterprise is wholly or partly carried on". (OECD model convention article 5 para 1)

Amazon's get out is that exempt are "a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;" (article 5 para4).

A perfectly decent exemption which made sense before the business of the enterprise took place in a data centre (which isn't a permanent establishment either).

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Re: Too Simplistic

@theblackhand

"The major difference between Tesco and Amazon is that Tesco relies on brick's and mortar locations versus Amazon being able to easily move revenue/profits between locations."

Maybe you're having difficulty grasping all this complicated stuff - Tesco has hundreds of Brick and Mortar locations in Ireland, but it doesn't pay any Corporation Tax in Ireland on profits made in those Irish stores, because Tesco is headquartered in the UK, and it pays Corporation Tax in the UK, not in Ireland.

It's no different to Amazon in this respect.

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Tax Tax Tax Tax

Always demands for more not less and always an attack against someone. The greed involved to try and steal from these companies because they are 'big bad companies' while demanding they give more money, employment opportunities and services to us is staggering. How about reducing the tax on these companies to encourage them to bring the money here. To invest here. To make our lives better here.

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Going after big companies while exempting small

See also recent coverage of the UK's tax exemption for small cider makers, which the EU is likely to determine as amounting to illegal state aid.

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Re: Going after big companies while exempting small

Yes, excellent point, and it also speaks to the VAT exemption point made above.

The EU is saying that you can have a zero rate of duty for small producers. That's not a problem (you can even justify it, how much does it cost in taxmen to collect a few hundred/thousand pounds a year each in a new and different tax from 500 farms?). But what you're not allowed to do is say "cider pays duty but we'll ignore the small fry".

Much the same as the VAT exemption: it's in law that turnover amount so that's fine. With te DPT they're not putting the exemption down on paper, just saying they'll not bother.

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Its easy to spot

Just get the financial report from the New york stock exchange listing and see where they are making a profit.

Then buy shares, and demand to know why Google UK has never ever made a profit, indeed why is Google inc. subsiding an operation in a country that it makes no money from.

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If you want big corps to stop avoiding taxes you need to close the loopholes that allow them to do that.

However the government will not close these loopholes because most of the MPs will be taking full advantage of them to avoid tax themselves.

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It would make this whole area of discussion a lot easier (and more pleasant), if people could lay off the childish point-scoring crap. MPs don't pay corporation tax, nor are most of them likely to operate across international boundaries. So they'd personally be much more likely to take advantage of loopholes in personal taxation law. Sure there are some MPs with outside business interests, who will be involved in this. But the big problems here tend to be large global corporations, who by definition operate very complicated structures across many international boundaries. And even if they were trying to pay as much tax as possible, would still have very complicated tax affairs.

Having some juvenile dig at MPs does not help matters.

In this particular case, one of the major problems is that there is almost no way a single parliament and/or government can address this issue. Even if we weren't in the EU and the Single Market, we still couldn't please ourselves on this law, as it's all subject to international tax treaties. We're plugged into a global economy. Mostly that's a good thing, and makes us all better off. But it has some downsides. There now looks to be an international consensus that corporation tax needs fixing, but even if that goes full speed ahead, and every government in the world shared the same political beliefs, it would still take years to get all the agreements hammered out and implemented.

Plus we're in the EU, which severely limits our freedom of action. As the article discusses.

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"If you want big corps to stop avoiding taxes you need to close the loopholes that allow them to do that."

As Tim has been trying to explain, paying corporation tax in your home country is not a loophole.

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>, paying corporation tax in your home country is not a loophole.

It is when your "home country" is a brass plaque on a lawyers office in the Caribbean.

Perhaps I should rent a server somewhere offshore loop my remote desktop through there and stop paying tax because I am clearly "working" from Sark or Lichenstein.

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It is when your "home country" is a brass plaque on a lawyers office in the Caribbean.

That might be so. But when you operate in the European Single Market, you only have to set up your legal entity in one of those states, to then be able to operate in all the others. That's how the system was designed, and that does convey economic benefits. There are also downsides though, and this tax issue is one of them. On the other hand, it makes it harder to tell what's being done for the purposes of tax avoidance, and what is being done becuase it's the most efficient way to run an organisation.

There will never be a perfect solution to this problem. Something will always be left to individual interpretation of what's "right" or "moral", or what the law means. Since we try to make everyone equal before the law, that means it'll go to court, and be decided on the letter of the law. And that may create political pressure to change that law. But whatever we do, someone will either be disadvantaged by an unintended consequence, or find an unintended way to profit from one of the exceptions created to avoid disadvantaging someone else. Such is politics.

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So it perfectly reasonable and indeed the goal of the european union - that IKEA, the well known Dutch Antilles charity should pay zero tax on 40Bn euros of sales?

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I have no idea what the tax position of IKEA is, I know almost nothing about the company.

However I think it very unlikely that it's due to pay corporation tax on €40 billion.

€40bn is its sales. Corporation tax is paid on profits. That's likely to be a much smaller number - and therefore look far less impressive. There is a rather enormous difference between the two. It's like the mythical £6 billion Vodafone tax bill that they supposedly avoided paying. When that number appears to have been plucked out of thin air, and much of the story seems to have related to the profits of the German company they'd bought. Where whatever tax was due, was probably Germany's.

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Flame

MP's Outside business interests

ARE the reason the tax code is full of holes that MPs will not shut down.

Because the employers of the MPs (as outside contractors/advisors/paid lackeys) will instantly stop funding any MP who comes up with the idea of reforming the tax code so that big companies(and little ones) can not massage their cash flows to make it appear to the inland revenue that they are making no profits.

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Re: MP's Outside business interests

Boris the cockroach,

You don't appear to understand the British political system. Almost any bill that affects the tax code is going to be written by the Treasury. Probably with mininmal influence from back-benchers. You might get some input from the treasury select committee. But the efficient way to lobby on the tax code would be to offer future employment to HMRC and Treasury officials. Or I guess the Chancellor himself (if you're feeling ambitious).

On the other hand, Gordon Brown has been the cause of a lot of the recent extra complication in our tax rules. And the introduction of various incentives (which often become loopholes). And for all his faults, I think he did it because he wasn't very good at his job as Chancellor, and becasue he has a tenedency to focus on detail. This made him a great electoral tactician, but not a very good Cahncellor or Prime Minister. I wouldn't put it down to corruption.

Quite frankly I'm sick and tired of this lazy cynicism about politics, as some sort of replacement for critical thought. The answer is more likely to be cock-up than conspiracy on almost any topic. It's basically a bollocks argument.

British politics is by any global standards very clean. Our biggest recent scandal has been about a few million quid paid out on excessive expenses - which was basically done as a dodgy backroom deal in order to avoid the bad publicity of giving MPs pay rises. But our politics compares favourably in these terms to US, French, German, Japanese, or anyone else in the G20 (with the possible exception of Canada, which I don't know anything about). I've not even mentioned Italy, Spain or Greece, let alone Russia/China etc. I bet the Scandinavians are better than us, given they place higher than us on Transparency International's list. You'll never get totally clean politics, because power attracts (and affects) money - but a fair analysis of the limits of our political system is much needed from the electorate.

Oh, and the subject of this article was about avoiding tax due to the rules of the Single Market. Which is a problem at a European level, that MPs have even less influence on.

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Alert

<brainstorming> Total blue-sky thinking

The nub of the problem seems to be that the second transactions happen "outside the jurisdiction", it becomes very difficult to administer any system to monitor the transaction ...

I'm idly wondering if there is a mechanism to lever the currency - sterling - such that transactions in sterling can be taxed. Wherever they happen in the world.

Not really sure *how*, but it's worth a sideline that until recently, OPEC insisted all oil was bought/sold in US dollars, which acted as a boost for the Federal Reserve.

(Side-sideline, the first country to unilaterally stop using USD was Iraq. Followed by Syria, North Korea, and Iran. Curious how these countries were very much Dubya's "axis of evil" .....)

</brainstorm>

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Taxing at the wrong end

A foreign company can sell 10 choccy bars to a customer in the UK for £10 because he pays no tax here, a UK company has to sell the same choccy bars for £12 because it has to give the taxman £2.

If you taxed the customer the £2 then both the foreign company and the UK company would pay no tax.

The Government would get £2 for every £10 of choccy bars sold irrespective of the location of the seller.

The reality is that the tax avoiders are the UK customers.

A Land Value Tax is the answer, if you exclusively occupy a piece of land in the UK you stop any other UK citizen from utilising that land, for that benefit you should pay compensation to everybody else.

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Re: Taxing at the wrong end

"A foreign company can sell 10 choccy bars to a customer in the UK for £10 because he pays no tax here, a UK company has to sell the same choccy bars for £12 because it has to give the taxman £2."

But ForeignCo does still have to pay tax to ForeignHMRC. That might be £2. Or maybe £3 or £5 or £1.50 or 2½p. Whatever rate ForeignGov decides is appropriate (and I think £0.00 as you claim is very unlikely).

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Anonymous Coward

Re: Taxing at the wrong end

You've just rehashed the "corporations don't pay taxes" issue. The only solution to that is to force you to keep a receipt for every penny you spend and, at the end of the year, pay 20% of that to the tax man.

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Re: Taxing at the wrong end

For four paragraphs you made a logical argument. Then you went smoked something not even legal in Holland.

Land Value Taxes have their place in government taxing systems. But they have the same problem that all taxes except the VAT and to a lesser extent progressive income taxes have: modern governments spend entirely too much money to raise sufficient revenues that was.

You can argue for a sales tax on the basis of economic efficiency and taxing the correct person. You can argue for a flat income tax on the basis of fairly distributing the risk of government abusing its citizens. But ultimately the problem boils down to government spending too damn much money, regardless of which side of the pond you live on.

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Re: force you to keep a receipt for every penny you spend

Nope. You hit the person up on each transaction (essentially the seller collects the tax on behalf of the government). But you'll find that at 20% tax evasion becomes an insurmountable problem. I think the max rate at which people pay sales taxes is 12%.

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EU Tax Law

"Quite apart from anything else, we're governed, within the EU, by EU tax law"

Whist this is technically true states can in fact create their own taxes and set their own rates.

Actually as it happens if you start from the position of it's workable and it'll be enforced (and I realise that's a huge ask with the HMRC) it actually makes a fair bit of sense.

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Re: EU Tax Law

It's workable as long as all members have similar tax rates - as soon as some members have a significantly lower corporation tax AND the ability to easily alter where an item is purchased (i.e. websites) this changes.

Now that the EU playing field has changed, we just need the politicians responsible to come up with a solution. There are many possible solutions (i.e. I believe there has been a significant shift to a consumer based economy so increasing the VAT on "non-essential" items and lowering income/corporation taxes would remove some of the advantages of the web giants over local business and tax consumers in a way that was difficult to avoid).

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I suspect that cash will be raised in the short term, though it's possible that much of it will end up being refunded. As the Treasury uses cash accounting, that will look good for now.

There are a number of possible challenges to the DPT but, regardless of their technical merits, as Benedict-Hope has pointed out this sort of challenge takes time - and the proposals would require the tax to be paid up front. Different firms take different attitudes to this sort of thing, but I'd be surprised if they withhold cash that is demanded under what is at that point statute law.

As for the situations it addresses not being corporation tax avoidance: that is fairly simply dealt with, as the DPT isn't looking at avoidance of corporation tax . It's a separate tax from corporation tax (though I'm fairly sure the corporation tax bods at the large firms will be looking at it), so there's no particular requirement to import CT concepts like the correct attribution of profits to a permanent establishment into it. It's looking at situations that might reasonably be considered to be corporation tax avoidance if you were to apply different rules (like assuming that certain costs are inflated and discounting them by 30%: this is not something you can do for CT purposes, you have to work out an arm's-length position).

I'm not familiar enough with EU law on state aid to make much informed comment on that front, but it does strike me that there are a lot of areas where SMEs have been treated more favourably than large companies without contravening the rules - transfer pricing exemptions, R&D, Senior Accounting Officer, and so on. So I'm unsure as to how strong that sort of argument is.

Neither am I all that familiar with the details of the EU treaty, but I'm also not sure that the principle that any EU company can sell across the EU is contravened either. The UK can levy what taxes it likes on companies, so long as it does so even-handedly - and DPT applies to UK companies as well as non-UK ones. You can't levy new turnover taxes, but I'm not aware of any other restrictions that would kill this off.

I don't like this tax - it's an extra layer to paper over perceived holes in the underlying tax law, and I'd rather see those perceived holes dealt with (partly by fixing holes, partly by fixing perceptions). But I do think it could potentially raise cash.

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FLAT TAX! No more loopholes.

The world needs a flat 15% income tax on all companies or persons that are based in that country.

The tax laws need to be changed everywhere to remove 100% of the loopholes. In fact, throw them all out and start with all new legislation guaranteed to be understood by even the most ignorant among us. It only needs to be one sentence long.

As it stands now, almost all corporations pay an insignificant amount of taxes because of loopholes and accountants. Once corporations pay their fair share, the individual tax rate could be decreased.

The upshot being that a huge increase in disposable income would be able to spur economic growth.

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Re: FLAT TAX! No more loopholes.

If you put a 15% income tax on companies most companies would go broke as they simply don't make enough profit. Companies are taxed based on profits not income because some businesses run with very low margins. People are taxed on income as the only 'profits' they could make would be savings, and we have enough trouble getting people to save without taxing them at a high percentage.

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