So is Charles Elphicke just stupid or is he a lying cunt?

Mr Elphicke said that Google had paid an effective rate of tax of 0.4 per cent in the UK on declared earnings of £2.5 billion for 2011. Amazon paid an effective rate of 2.5 per cent on UK earnings of £3.9 billion. Pfizer paid no tax in the same financial year on declared UK earnings of £1.8 billion and Starbucks paid nothing on declared UK earnings of more than £365 million.

And here\’s what he said in Hansard:

Google, a big content provider, had declared earnings for the financial year of £2.5 billion, with a pre-tax profit, estimated on the basis of its global operating margin, of £836.7 million, and a tax charge of just £3.4 million, which is equivalent to an effective tax rate of 0.4%.

Payment for the provision of infrastructure is an important matter, particularly in the case of companies based overseas—big multinationals—which, according to Securities and Exchange Commission filings, have much higher effective tax rates in their home territories: 21% in the case of Google, whose effective tax rate over all its foreign territories is just 3.25%. The same is true of Amazon, which had declared UK earnings for the financial year of £3.9 billion, a pre-tax profit, estimated on the basis of its global operating margins, of £76.9 million, and a tax charge in the UK of £1.9 million—equivalent to an effective tax rate of 2.5%, while back in the States it had a rate of 31.2%. It is very important to tackle the abuse of the tax system and make sure that people pay their fair share to the UK authorities.

Which isn\’t quite so appallingly stupid for he does differentiate between \”earnings\” and \”profit\”. But he\’s still using earnings the wrong way as a simple Google search shows:

Earnings Definition | Investopedia
www.investopedia.com/terms/e/earnings.asp
The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year. Earnings typically …
Earnings financial definition of Earnings. Earnings finance term by …
financial-dictionary.thefreedictionary.com/Earnings
A company\’s total revenue less its operating expenses, interest paid, depreciation, and taxes. For example, suppose a widget manufacturer makes $1,000,000 in …
earnings – definition of earnings by the Free Online Dictionary …
www.thefreedictionary.com/earnings
Noun, 1. earnings – the excess of revenues over outlays in a given period of time (including depreciation and other non-cash expenses). net income, net profit, …

In the context of a company earnings means profits. And as these companies are making no or minial profits in the UK then no or minimal corporation tax (which is a tax on profits made in the jurisdiction) is payable.

Not that this means they\’re not paying tax at all of course: has no one ever heard of business rates? As close to land value taxation as we can get, the one tax that is virtually unavoidable? Oh, and as I would further point out, the tax which we use more than all other OECD countries? We get more of our tax revenue from property/land taxation than do they all. We\’re well over twice the portion of the tax take that we get from this source than the average: and three to four times laggards like Sweden.

We get more tax from these multinationals as a result than most others do. But that\’s an aside you understand. Just pointing out that if we moved all of the tax to there then we\’d have a system much more difficult to dodge, less economically distorting and much easier to collect. You know, jus\’ sayin\’.

And finally we come to the real point. As Christy points out in this quote from HMRC:

Non-resident trading companies which do not have a branch in the UK, but have UK customers, will therefore pay tax on the profits arising from those customers in the country where the company is resident, according to the tax law in that country. The profits will not be taxed in the UK. This is not tax avoidance: it is simply the way that corporation tax works.

Most major economies operate corporation tax in the same way as the UK, so UK-resident companies are treated in a similar way in other countries. In other words, UK companies do not pay corporation tax to another country on the profits from sales in that country, unless they trade through a branch based there. Instead, they pay corporation tax in the UK

This is not an aberration, not a mistake and not dodging. This is just the way that corporation tax works.

So, now back to our major question. Is Charles Elphicke simply too stupid to fart and chew gum at the same time or is he a lying cunt?

9 thoughts on “So is Charles Elphicke just stupid or is he a lying cunt?”

  1. Don’t you ever get bored of playing the keyboard warrior? Your Forbes blog is much more interesting because it has few of the stupidities that make this an annoying read. ”Yay, I called a man a stupid cunt.”

  2. The quote from HMRC, as we’ve been over before, is entirely irrelevant. All four companies listed in the article have branches in the UK: they own UK-registered limited companies that employ people whose job it is to sell things to British people.

    Yes, if I phone up Bob from Bob’s Widgets Inc of Iowa, and he posts me some widgets from Iowa, and I wire him some money, it would be insane to suggest that UK corporation tax should be due on that sale.

    The relevant question is how close (both in terms of how the law is now and how the law should be) the operations of the companies in question are to the Bob’s Widgets model (unequivocally foreign, and hence not due for any tax) compared to the postwar Vauxhall Motor Co Ltd model (unequivocally domestic, albeit with a foreign 100% shareholder, and hence due for the same tax as any domestic company).

  3. Bored, if someone does not understand the difference between turnover and profit, yet seeks to make changes to how companies are taxed, what else do you call them?

    I suspect the truth is they do know, but are trying to mislead everyone on the issue shamelessly. That means they should be called something much ruder.

  4. You can criticise someone’s intellectual faculties, or lack thereof, without resorting to calling that someone a cunt. Like most internet insults, I doubt Mr Worstall would say that to anyone’s face. Perhaps I’m wrong, but in my experience, those who have a big virtual mouth cannot back it up in the real world.

  5. I agree, Bored. Worstall puts his name to childishness and is therefore overlooked, rightly.

    To be honest, it only highlights the paucity of ideas.

    Also, when people dare to disagree they get the same treatment from otherposters, and when I stoop to parody, I get accused of being a whole range of useless epithets.

    People seem to be amused by Worstall. Throw the dog a bone.

  6. No, no SE. For goodness’ sake, you call yourself Surreptitious Evil.

    That’s a clear indication of wanting to win Crufts > Precious > Mummy.

    Timbo imagines he’s at the vanguard of something or other. Centuries ago.

    Maybe a couple of centuries ago.

    You choose your poisons

  7. Arnald

    You make it sound like you’re the poor kid at the posh school and all the others are ganging up and flushing your head down the toilet. No one makes you comment here and as your comments rarely throw any light on anything and your sense of humour doesn’t transfer to print ( neither does mine so we’re in the same boat ) you get some stick. Sorry but that’s how it is, my comments usually get ignored although occasionally someone calls me dim which is fair enough there’s no point in whinging, if you venture on to the stage don’t be surprised if the somewhat exacting audience throw things or greet you with stony silence.
    As for Tim being “rightly overlooked”, to the extent that he is, not as much as you think I suspect, that’s because his views are out of synch with the prevailing economic and political consensus, not because of a bit of swearing.

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