Living your life the tax-avoidance-free way

In the wake of the shrill pronouncements by Mags Hodges on Google UK's tax affairs, the Guardian has a delicious article on how to stop using Google in your everyday life, in order to feel virtuous. It turns out that it's not entirely straight forward, though:

This [social media] is slightly more tricky, from an ethics and tax standpoint, than it seems. Twitter and Facebook both seem to be setting up the same sort of revenue-routing through Ireland that has UK taxation experts fuming.
I think real UK taxation experts are working with UK companies to help them minimise tax paid in the UK, just like the US based firms mentioned in the article. I suspect the article's author is talking about populist clowns like the Tax Justice Network whose starting point is that however much tax companies pay, it can never be enough.

This is the real danger, incidentally. Once we start talking about "fair shares" of tax owed we quickly move from the legal obligations of companies which can be clearly defined and tested in court, and go to a subjective measure which companies can never be sure that they are meeting to the satisfaction of those in power. Politicians will always take more tax from anyone if they think they can get away with it - money is power, and politics is always about power. They may even spend some of that money wisely. But if a company cannot know in advance how much tax will be due, how can it plan its financial affairs? A country becomes a shake-down artist, randomly hitting up companies for more money on a whim. If you want to know how this ends up, look at Russia.

I had a look at the Google FY 2012 results. On $10.7bn of operating income they paid a net $1.5bn in tax, which is about a 14% tax rate (an 18% effective tax rate for Q4) - not super-high, but pretty reasonable. That was more than double what tax they paid last year, on $9.7bn of operating income. Apple, for comparison, on operating income of $55bn made provision for $14bn of tax which is a tax rate around 25%. I assume this difference is primarily due to Apple making and selling a lot more physical things than Google, but I'm not a tax expert. Apple takes the same kind of approach that Google, Facebook et al do - the Apple operating presence in Eire is substantial, and I'm sure it's not just because they like the weather there.

Just checking here - is this the same Guardian Media Group who apparently avoid millions in tax through a Luxembourg-based company? Oh, sweet irony.

1 comment:

  1. It's also the same Guardian who censors any comments questioning their tax avoidance policies as "not relevant". Oh, irony indeed.


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