@RichardJMurphy doesn\’t really understand tax law, does he?

The fiction that these companies play by the rules has been exposed in one afternoon as a fairy tale.

Absolutely no one at all is suggesting that any of these companies have done anything illegal.

Thus they are, by definition, playing by the rules. Agreed, they\’re not the rules as Richard J Murphy thinks they ought to be but that\’s a very different matter. They\’re also not the rules as I would like them to be either. But at least I\’ve not got the astonishing ignorance to claim that the rules as I\’d like them to be are the rules we in fact have.

Despite it being almost four years now since I started work on exposing Google’s tax affairs, all three companies seemed utterly unprepared to answer simple questions about why they are avoiding corporation tax due in the UK.

But as above. No more corporation tax is due in the UK than is currently being paid. Thus there cannot be any tax avoidance. How can you avoid something that is not due?

For Amazon things were much worse. Their rep could not justify how an order made in the UK for a product in a UK warehouse, shipped by UK staff through the UK post and with a bill enclosed printed in this country could somehow have anything to do with Luxembourg when so very obviously it hasn’t.

Because European Union law says that it is just and righteous that matters work this way. Freedom of establishment and the Single European Market. It\’s really not that difficult to understand. Our Lords and Masters in Brussels have deliberately and specifically set up the system to work this way.

But that was not the worst moment for them: credibility was lost when Amazon admitted they would not disclose on a country by country basis where their profits arise.

Because European Union law is deliberately and specifically set up this way. That freedom of establishment and Single European Market stuff again. A company is supposed to treat the EU as one market: the clue\’s in hte name of the damn fucking project.

So what did we learn? Maybe five things. First, if this committee could tear these companies to shreds so easily why HMRC are letting them get away with these fables is hard to imagine.

Because that\’s what the law is you ignorant buffoon!

There is an international conspiracy amongst some governments (including, maybe, ours) to align the interests of states with the interests of corporations to make sure that tax is not paid by companies. That means it is paid by ordinary people instead.

And all tax is paid by ordinary people. Any and every tax means less money in the pocket of some live human being. The study of whose is called \”tax incidence\”. A concept which, if you\’re going to play around with the design of tax systems, you really, really need to grasp. Fool.

28 comments on “@RichardJMurphy doesn\’t really understand tax law, does he?

  1. Just why does he need to grasp tax incidence?

    He is being paid a more than adequate sum in his comfortable Norfolk retirement, has legions of adoring followers, is consulted by the probably-soon-to-be-powerful, appears as a guru on national TV … All without grasping the basics of what he is commenting on (and without going anywhere near necessary complexities like international differentials in institutions, misaligned incentives etc.)

    You still think he is doing all this for the common good?

  2. It’s not free market economics – that’s the spin. “All the fault of the evil capitalist baby-eating banksters and their Old Etonian lackeys.”

    It’s the “rule of law” versus “the anger of Joe Public”. Just as with Abu Qatada. Except he has less of a PR machine.

  3. Public accounts committee hearing was a joke.. Nothing more than a muscle-flexing exercise from purportedly our elected representatives.. who to a man (and woman) seemed to know less about tax laws than I do (which isn’t much, though at least I have the excuse that I didn’t make them).. and the irony of Hodge saying the issue of tax avoidance was a moral one wasn’t lost on me..

  4. I’m getting slightly pissed off with all the media comments saying things like “he openly admitted that the choice of Ireland was due to its favourable 12.5% corporation tax rate.”

    Sorry – that’s a bad thing? Openly admitting that you’re doing your job (as your shareholders expect)? To me an ‘admission’ would be siting your HQ in Paris, despite the uncompetive tax rates, because you had a string of mistresses there.

    The thought occurs that in much the same way that commuters all become selfish bastards when it’s raining (self included) so everyone becomes a moralistic sanctimonious little shite now the economy’s not experiencing double digit growth. There should be some kind of law that says if you weren’t whinging about this all the way through the boom, you’re not allowed to now.

  5. Tim – take a look at the list of attendees at the BBC Climate Change seminar where it was decided that the Climate Change Science was “Settled” – the list that the BBC has spent £x00,000 suppressing; it’s just been published on Guido Fawkes.

    There’s a wally from the NEF there!

    What the hell do those numpties know about the science of climate change?

    I’ll let you review the other usual suspects: the UEA, Greenpeace etc…

  6. @ sam

    Agreed. But the curious thing about Google and Ireland is that that they do have other credible reasons for being there (relevant skilled workforce, proximity of various other tech giants etc.). Their chap did say this, along with saying that tax was a reason, but I guess that’s not getting reported.

    I wonder how many of those moralising MP’s would choose to live in House A, when living in House B would be the same in all meaningful circumstances except that it would make them materially better off?

    Oh, wait, they’d just live in both and bill the taxpayer.

  7. Let’s for a second imagine that the dear Murphy is swept into government on a tidal wave of public approval. He’s put in charge of the Inland Revenue and told, “sort it out!”. The public stand by in anticipation of rapacious Starbucks and Amazon being slapped with massive taxes.

    What happens next?

    Answer: Nothing. He cannot change European union law. The companies are obeying the legal framework of operating in the European single market.

    What does Richie do then, when he is exposed as a fraud?

  8. The scientific credentials of:

    The Church of England
    The US Embassy
    Tearfund
    The CBI and
    a couple of non-Beeb TV producers

    are also somewhat dubious. All very nice people, I’m sure but hardly “the best scientific experts.”

  9. @ Stuck-Record

    He doesn’t want to sort anything out, he wants to sit around and snipe at anyone and anything that he doesn’t agree with.

    He’s like the school bully who picks on you for having unfashionable trainers. He doesn’t want you to get better trainers, he just wants to make you look bad, and himself look clever, in front of his little sycophants.

    His hatred for any worldview other than his own is ingrained far deeper than any desire to make the world fairer for the people he purports to be fighting for.

  10. @ TTG

    He’s like the school bully who picks on you for having unfashionable trainers. He doesn’t want you to get better trainers, he just wants to make you look bad, and himself look clever, in front of his little sycophants.

    You’ve just cheered my afternoon considerably. This is an absolutely perfect analogy in pretty much all respects.

  11. I’ve got a tax idea for Starbucks. Stop paying the royalties and source the coffee directly in the UK. I calculate that saves them between £3m and £4m of tax in the Netherlands and the US combined on the royalties and £300k of Swiss tax on the coffee without any additional UK tax (as they still have losses).

  12. Was it the way the Beeb edited the proceedings or did all these corporate execs all sit there meekly taking their punishment, looking like guilty schoolboys caught smoking being hauled before the headmaster. Did they even try to make any of the points posters here have done, or are they all in damage limitation mode hoping to ride out the storm, and not pour petrol on the flames by confronting some of the MPs with their own ignorance.

  13. @ Ian Reed

    The Google guy was very assured and impressive throughout, Mr Strabucks knew his stuff, but found it a little more difficult to impose himself on the proceedings. Mr Amazon wasn’t as well prepared as he should have been, and was least capable of all of them of getting his point over. He’s been unfairly maligned for ‘not knowing’ information that he simply couldn’t share in an open forum on grounds of confidentiality. The committee chose to mock him, rather than respect his position.

    It would have been pretty easy to edit up a sequence to show the corporates getting their arses handed to them, but it would have been just as easy to edit up one that exposed the comittee for a bunch of financially illiterate goons.

    Only the Google guy seemed happy to be ‘matter of fact’ about why decisions were made, and perhaps that’s one reason why he was the best of the three. All of them, clearly, were trying to do the appropriate PR thing of staying calm and polite, despite the questioning. There were moments when a couple of them would have been within their rights to tear into the ignorance of the questioner, or simply get up and walk out.. demanding that the committee go off and find someone qualified to question them on the issues at hand.

  14. There were moments when a couple of them would have been within their rights to tear into the ignorance of the questioner, or simply get up and walk out.. demanding that the committee go off and find someone qualified to question them on the issues at hand.

    This was the case with Tony Hayward at the Macondo hearings. I fear it is likely the case whenever a politician questions somebody from the world of work.

  15. @ Martin Davies. I’m sure given the annual savings two group companies can come to an amicable agreement. The Dutch, Swiss and US tax authorities may not be too enthusiastic though. But at least Ritchie and Hodge will be happy. ..

  16. Martin – the stated alleged abuse is the royalty payments, the inter company profit on the coffee beans and the interest payments. If you disregard all of these totally from Starbucks UK results they still make heavy losses so there’s still no UK tax even adjusting for those items. However, they’ve said the royalties are taxed at moment in the Netherlands and US at a combined rate of 16% and the coffee profits in Switzerland at 8%. So if Starbucks cancelled the royalties and sourced coffee locally there wouldn’t be any income to tax overseas (so there would be a tax saving) and the UK position would effectively be the same (losses but reduced). Hence doing what Ritchie suggests would actually reduce Starbucks global tax burden.

    The case against Starbucks is nonsense and the UK already has adequate rules to protect its revenue in this particular case.

  17. I think John K is technically right here, but ignoring the inter-group loans that actually account for losses (the business makes an operating profit) is a trifle misleading.

  18. Does Amazon UK really ship everything from the UK? Here in Russia when I order English books from Amazon.co.uk 90% of the time they are shipped from Germany. I’d be surprised if they have a special warehouse in Dusseldorf for expat history buffs.

  19. John B,
    I’m not sure that’s right as their accounts (back to 2006) show an operating loss every year apart from 2007 (although you may have meant gross profit). It’s also not right to say that the intercompany (i/c) loans create the loss. These are the figures:
    2011 Overall loss before tax £32.9m, of which i/c interest £2.0m
    2010 Loss £34.2m, interest £4.6m
    2009 Loss £52.2m, interest £6.2m
    2008 Loss £26.3m, interest £3.9m
    2007 Loss £1.4m, interest £1.3m
    2006 Loss 6.5m, interest £1.1m

  20. Widmerpool: most likely, it’s cheapest to ship from the UK to Russia via Germany. The vast majority of UK English stuff is indeed warehoused in the US.

    John K: interesting, ta. I’m sure the figures we looked at here the other week showed positive EBIT, but I haven’t dug up the accounts from CH.

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