Ritchie on multinational taxation

It is just exquisite how he fails to see that one of his arguments entirely destroys another of his arguments.

Well, I do not agree: an intangible asset only gets a value because a product to which it relates is bought. Intangibles have no value without sales. It’s as simple as that: anyone who argues otherwise has never been in business. So income needs to be taxed where income is earned.

Excellent.

Therefore Vodafone should be taxed in Germany on the sales it makes of phones and services to Germans. No UK tax should be payable on any such profits.

Glencore should pay tax on copper in the countries where it sells copper. The UK, US, China, wherever: not Congo or Zambia where it mines it.

He\’s just destroyed the entire system of taxation that he himself argues for.

13 thoughts on “Ritchie on multinational taxation”

  1. That is indeed what he implies on Voda.

    On Glencore, that’d only be true if the copper leaving Zambia was worth nowt, which it isn’t.

  2. The copper miner isn’t selling in Zambia, though, he’s selling in China. So that copper sitting in a warehouse in Zambia is actually worth nowt, unless there’s a tribesman who wants to lay a hundred miles of phone cable.

  3. James (#4), only because someone in China is willing to buy it from Glencore.

    Which is the same as IP. People will pay lots for valuable IP, but only because they think they can make money by selling the products.

  4. Matthew: no, I’m pretty sure I’m not (?)

    James: if Glencore didn’t want to buy the copper, then someone else would, in Zambia. For less money, but still for more than $0.

  5. The point is, though, that no sod in Zambia is willing to buy it off of Glencore, ergo no income is earned there. In effect, Zambia is just Glencore’s supplier.

  6. The Ritchie quote is referring specifically to intangible assets. Copper in’t an intangible asset.

  7. Tim, are you quite sure Ritchie is not actually arguing for taxation at BOTH ends ? After all, all money really belongs to the state ?

    THAT would be more true to character !

    Alan Douglas

  8. tory boys never grow up

    It is one thing to argue against Ritchie’s muddle headed thinking that transfer pricing should be ignored – however I don’t see how that translates into the view that all is well in the world of transfer pricing, especially with regard to the use of fees for brands and other intangibles. Perhaps rather than playing silly games with Christie you might wish to come up with some proposals that are more sensible than the current mess.

  9. Indeed. The amount of intellectual property whose ownership rests in the Grand Duchy of Luxembourg suggests either that we should follow that fine state’s lead in stimulating our own creative and scientific industries, or that some people are playing silly buggers.

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