What fun can be had with the Murphmeister

Ritchie spends a decade on corporate tax.

Trying to entirely dodge the UK tax system no longer works. There’s also all that political pressure to be paying more. The thing is, that deductibility of foreign taxes paid is still there. As far as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is concerned now, it’s going to have to pay taxes somewhere. Might as well pay more to the UK for that bill is then a deductible against the American one.

Sure, this is all a bit long-winded, but it’s necessary to get to the point. Only when that background is understood can we consider the effects on investing in Big Tech of that movement toward higher taxation of those varied companies. Which is, that movement to gain more tax isn’t going to have much effect. We don’t really have to worry about what the rest of the world does, it’s all already taken care of in the revisions to the US tax code.

Trump’s changes mean that the foreign profits of US corporations are already taxed whatever. So, a rise in European taxation of such profits leaves the companies just the same – the deductibility of foreign taxes means little or no change in the total taxation bill.

Electing Donald Trump solves his problem.

4 comments on “What fun can be had with the Murphmeister

  1. As far as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is concerned now

    This made me laugh. Perhaps the fat one didn’t think we could also Google what Google’s Nasdaq ticker was?

  2. Sure, this is all a bit long-winded, but it’s necessary to get to the point.

    Makes a change.

  3. Under DT relief you end up paying whatever the higher rate is. If the US system works as the UK system does then it would make a difference if UK rates rose.

    Say it’s a US company and $10m profit is made in the UK and $10m in the US

    If primary taxing rights were in the UK on the UK profits, with a rate of 17% and secondary in the US at 20% then you effectively end up paying 17% in the UK and 3% in the US on the UK profits and 20% on the US profits. Total tax bill $4m

    But if the UK rate were 25% you’d pay 25% on the UK profits but you couldn’t offset the ‘extra’ 5% above the US rate against your US tax bill. DT is restricted to the US rate on the UK profits.

    So your tax bill would be $2.5m + $2m = $4.5m.

    Also there could be a problem with comparable taxes. If the tax doesn’t exist in the US it might not be covered by the treaty.

    There is usually a fall back that it all else fails, the foreign tax can be taken as a straight P&L deduction.

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