And Ritchie doesn\’t get the point either

So Google billing UK sales from Ireland when they’re sold by people in the UK reflects wgere genuine economic activity takes place, does it? Or Amazon billing sales from UK warehouses from Luxembourg does the same? What do HMRC think we are? Gullible, or just stupid?

No, we think that these companies are being tax compliant. Not even tax planning and certainly not tax avoidance. For this is exactly what the European Union desires and intends companies should do. The EU is a single market. The clue\’s in the description: Single Market.

You are thus not only allowed to but actively encouraged to have one base and one base only within the EU. From which you sell to all of the EU. And you get taxed on where your base is. Not where your sales are, not where the warehouse is but where the brass plate is.

This is not an aberration of the system, a misuse of it. It is the purpose and aim of the system. Companies are doing exactly what the setters of the law intended they should. Even in MurphWorld this is tax compliance.

Murphy bangs on about tax compliance all the time. Then complains when people are tax compliant.

19 thoughts on “And Ritchie doesn\’t get the point either”

  1. from Luxembourg to the UK…..
    and France and Germany and Spain and……

    No, Mr Murphy, it is not HMRC that thinks you are gullible and stupid….

    The reality (which is not one I lik, for different reasons) is not what you seem to think it is.

    He should join the UKIP, as the only party which advocates a future sovereignty under which he could actually propose his measures.

    Not lefty enough? Get to work on the Labour Party then. Out of Europe. Little Englander National Socialism Party. Yeah!

  2. It is amazing that this issue of multinational companies not paying much tax has taken so long to become a popular issue.

    Why does everyone think that Google and Amazon were head-quartering themselves in Dublin and Luxembourg in the first place ? Let alone Intel, Dell, Coca Cola etc etc.

  3. Richard Murphy is a fucking idiot, but the more he bangs on like this, and the more the general public, idiots that they are, begin to realise that the EU is not an unalloyed force for good, the more power to the elbow he can’t tell from his arse.

  4. Why not just scrap corporation tax entirely and raise the revenue on dividends instead? From what I’ve seen of the tax laws*, a great deal of time and effort is spent trying to identify creative ways to minimise one’s corporation tax bill.

    (*I’m not an accountant. The closest I’ve come is sharing a flat with a trainee accountant, whose books I occasionally perused.)

  5. Interested,

    I don’t think that’s the message the ‘general public’ are getting from the WGCE’s continued utterances. You’ll note that he doesn’t ever say “it’s all the EU’s fault”. No, it’s the fault of those evil baby-eating, in-the-pockets-of-international-banksters, tax-avoiding Tory bastards. Elect milliwhatever and it will all be a glorious return to the prosperity of the mid-1970s*.

    * Noting that many of his most fervent disciple’s parents were still, probably, in nappies through the 3-day weeks, power outages, etc.

  6. AndrewM #4: “Why not just scrap corporation tax entirely and raise the revenue on dividends instead?”

    Because then you can’t sell favours, “prefer” certain beneficial (to your campaign) industries, and generally claim you’re “doing something.”

  7. Perhaps someone can clarify something here on the dividends thing

    Corporation tax is paid out on profit, as far as I understand it, dividends are not a liability and therefore included in that profit figure. So it is not possible for a company to avoid paying tax on the dividends that have been paid to shareholders. Or have I misunderstood the accounting?

    Tim adds: It depends. Different countries do it different ways.

    In theory there are two ways. Tax all the profits at the company level and then allow dividends to be tax free to recipients. Or tax only post dividend profits at the company level and tax the dividend recipients as income. The UK taxes all profits at corporate level then says to the dividend recipients, well, you’ve already paid some tax on this dividend so this gets taxed as income at a lower rate.

  8. And further to Tim’s comment – there is also the USian way. Tax the profits at the company level and then tax the dividends as income. Hence the understandable reluctance of many US companies to pay dividends, despite sitting on huge cash piles.

  9. Interested – the interesting thing is that the single market provisions that encourage this behaviour are almost certainly the best bits of the EU and the ones which the majority of eurosceptics would retain in negotiating a trading relationship with the EU as a non-member . The aim would be to drop tax down in the UK so that the UK was the HQ domicile of choice rather than Luxembourg or Ireland, not to whack up tariffs to ensure UK operations paid more tax.

  10. Botzarelli (#10)

    On a rare occasion an enemy such as myself got into the comments at TRUK (Murphy’s blog) , I put your point to him. He seems to be pinning his hopes on an idea which has been germinating for a while (at least since the accession of the order COMECON countries in 2004), that of the CCTB (Common Corporate Tax Base), a Green/ Socialist proposal which I suggested might as well have been ‘written in Cantonese or Mandarin’ as the effect will be to transfer activity to the Far East.

    However, it advocates a Common base rate across the EU, of around 25%, but as even he acknowledges, not everyone is expected to acquiesce.

  11. Another alternative solution is to decree a minimum corporate tax rate in the EU that countries can’t undercut. Say 20%.

    It was never likely that Google or Amazon would HQ themselves in Spain but the likes of Dublin are attractive not only for their low tax rates but because they speak English. Spain and Italy etc just aren’t in the market for hosting US multinationals.

    The UK arguably gets the worst of this multinational HQing it should be country of choice but because small countries that speak English either as first language or because of decent education systems/int’l outlook (like Ireland and Luxembourg) get to undercut us.

    And then they asked to be bailed out by the Treasury when their banks go tits up.

  12. Amazon makes money. No idea if it makes taxable profit, and to be honest I don’t care. They operate under the same rules as other EU companies, just the media find them easy to pick on rather than much smaller but more commonplace companies.

  13. @ Surreptitious Evil: ‘I don’t think that’s the message the ‘general public’ are getting from the WGCE’s continued utterances.’

    Absolutely not, but my point is that if you believe it is a terribly bad thing that Amazon can base themselves in Lux, it (eventually) follows from that that you will begin to ask why it is. And that will then – possuibly – get you thinking.

    @botzarelli ‘Interested – the interesting thing is that the single market provisions that encourage this behaviour are almost certainly the best bits of the EU and the ones which the majority of eurosceptics would retain in negotiating a trading relationship with the EU as a non-member . The aim would be to drop tax down in the UK so that the UK was the HQ domicile of choice rather than Luxembourg or Ireland, not to whack up tariffs to ensure UK operations paid more tax.’

    Agreed – I am in favour of free trade, after all. I’m just saying that, as someone who hates the other 90% of what the EU represents, anything which makes the man in the street think about it is a good thing.

  14. Am I alone in finding this media furore about the CT rates of large UK companies slightly strange? Corp Tax is described (not explained) in an extraordinarily large number of pages of legalese for the revenue it brings in. Companies such as Starbucks appear to spend a lot of time circumventing those rules – at massive internal cost. Meanwhile both an unprofitable company such as Amazon and a profitable one such as Starbucks pay large amounts of taxes in the UK that are much more difficult to avoid – VAT., business rates etc. (add payroll taxes for completeness and have the incidence arguments later).

    Is the answer to add more pages to the definition of Corp Tax? Yes if you are a lefty – and therefore incapable of rational thought, but very good at sounding pompous and knowledgeable. The transfer pricing division of HMRC is very good but it can only handle so many cases and the cases grow each year because of the way the legislation is growing. (Hint to Luis Enrique that reality sometimes matters more than models)

    Do you drop CT to , say a level of 20%, where it is not worthwhile paying all that money and investing so much deadweight to avoid…and ramp up business rates instead?

  15. @Shinsei 67: “Another alternative solution is to decree a minimum corporate tax rate in the EU that countries can’t undercut. Say 20%.”

    Whatever for?

    Tax income; tax dividends as income and leave the corporations out of it; and tax capital gains as income minus a discount for assets held long term.

  16. MellorsSJ: “Tax income; tax dividends as income and leave the corporations out of it”: unfortunately that would leave the State without a big stick to coerce corporations into doing what they want. All the allowances for the State’s pet ideas would become irrelevant if corporate taxes were zero. With zero CT companies might end up making their investment and spending decisions for the sole benefit of the shareholders, not trying to reduce its tax bill. Private individuals being free to do what they want? Can’t have that!

    Plus all the existing sole traders/partnerships would have a huge incentive to start limited companies. All profits would be taxed at zero and only any dividends paid taxed as income. So a business could retain its excess profit (above what the owner wished to live on) tax free until such a point (such as retirement most likely) then pay it out as a pension. It would affect the income tax take from the self employed quite considerably, and give individuals considerable power over when they paid their tax. Again, the State can’t have that.

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