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European nations told to sort out 'digital tax' on tech giants by end of year

Peter2 Silver badge

Ok. So this proposal is for a 3% tax on revenues as all of the profit has been classed as revenue and passed out to tax havens such as Ireland and Luxembourg, who predictably are trying to oppose the existing arrangements changing as it benefits them to the detriment of everybody else.

I have two major objections. First is the timescale. 12 to 24 months seems a bit slow. I was thinking 12 to 24 days. It shouldn't take much longer than that to draft something and push it through both houses of parliament when both parties are likely to vote for it. Every country in the EU could have slightly differing legislation in place within a month or so if there was will to tackle the problem and legislation can always be amended in tidying up exercises later down the line if required.

My second objection is simply the numbers mentioned here. Services companies tend to expect a 20% profit, and retailers can make much, much more than this.

Assuming that 20% of revenue is profit:-

10% revenue tax would be equivalent to 50% tax on profit

5% revenue tax would be equivalent to 25% tax on profit

2.5% revenue tax would be equivalent to 12% tax on profit

At the moment UK corporation tax is 20% tax on profit. If there is a 3% revenue tax applied as suggested off in the article then companies are still going to be getting a tax discount compared to if they hadn't of gone evading tax to start with, or maybe be in a revenue neutral position. I think that this approach is seriously wrong.

My take on it is that after ~250 years of taxing companies on their profits if we are now having to come up with new laws to deal with a new generation of amoral pointy haired bosses who are scamming their tax bills down then the response should be sufficiently punitive to make it painfully clear for the next 250 years that it's not worth creatively exploring the limits of what is possible to scam the taxpayer out of.

I'd apply revenue taxes individually to companies that have taken the piss. In my view, the absolute minimum level of revenue tax that should be considered is 5%, equating to a rough rate of about 25% of profits going by my assumptions above.

Personally, my conscience wouldn't be troubled by taxing the companies involved at up to 15% of revenue (or higher) until Her Majesties Revenue & Customs have collected around 120%-200% of what they think might have been evaded by that company with creative tax arrangements, at which point I might be inclined to consider talking about considering returning to a percentage tax on profits for these companies if they are willing to stop taking the piss. It'd leave a lasting message that it's not worth pissing about and quietly dismantle the "don't pay tax!" industry.

What's the worst that could happen? The affected companies might struggle, but public services are struggling because taxes aren't being paid so my sympathy is rather limited. If we have a few billion extra in tax receipts then we can slip the NHS an extra few billion or start paying down the debt pile, repayments on which are comparatively larger than either the defense or education budget.

I doubt that anybody on either the political left or right is going to seriously complain about taxing companies that have not been paying their fair share of tax. Even if this level of tax is too high, and puts those companies out of business then what's the worst that happens? The companies smaller UK competitors who have been disadvantaged by paying tax end up picking up their former competitors market share which UK PLC then gets the tax money from there instead? Hardly sounds like a disaster.

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