Ritchie on Microsoft

Microsoft’s tax avoidance by use of now familiar sales operations in places like Ireland, Puerto Rico and Singapore saves them $4.68 billion in tax a year.

The best estimate of the world aid budget that I can find is $133.5 billion a year.

So Microsoft avoids a sum in tax equivalent to 3.5% of the world aid budget each year.

Maybe Bill Gates might like to discuss the social justice in that. Many of the savings will, of course, be in countries where aid is delivered.

Of course pretty much piss all of Microsoft\’s revenues come from places where aid is delivered. Because aid goes to poor countries where they tend not to have many computers and when they do they tend to nick the software to run them.

Indeed, it would be easy enough to dig up the claimed numbers for software piracy (contentious enough as they are) and show that Microsoft\’s losses from this are greater than any tax savings.

But much more importantly, the aid budget (really, the official aid budget, this doesn\’t include any charitable stuff) isn\’t the right comparator. What is is foreign direct investment. Which, last time I looked at least, was running at $500 billion a year just into Africa.

That\’s the thing that is making those poor countries and poor people richer. And if multinational companies are fiddling on a few billions here or there of tax then what the fuck do we care if they\’re at the same time pumping hundreds and hundreds of billions into employing people, providing jobs, in general making people richer?

And really importantly, the measure of how much wealth a company produces isn\’t in the profits it makes nor even in the wages it pays: and certainly not in the tax that is skimmed from it. The real value, what really creates wealth, is the consumer surplus from the use of the company\’s products. How much do the people who use the shit get over and above what they\’ve paid for it?

And there I\’m afraid that Ritchie and his ilk are really onto a loser. For the best empirical research so far seems to show that the entrepreneur captures something like 3% of the total value created by his/her activities. (Technically, it\’s of Schumpeterian profits.) The other 97% goes to consumers, the value that they get from the use of what is produced over and above what they pay for it.

Say Bill Gates has made $40 billion. That means that consumers have made $1.3 trillion out of his activities.

At which point we\’ve some tosser wibbling about $5 billion for the entire company? Please, please, do fuck off.

9 thoughts on “Ritchie on Microsoft”

  1. Tim

    You aren’t understanding him – This ia about state power and the sums really are a distraction. I don’t think Murphy has any historical or wider sociological awareness – had he read anything by the late, lamented Peter Bauer, he’d understand Aid is often a positive hindrance rather than a help. However, what Aid is good for is the conflation of political and economic power, which as he is in thrall to the Public Sector Union Barons is of course his key thrust.

  2. If he had the slightest interest in Africa at all he would have notice the very interesting things that have been happening there in the last ten years. He does not however, his only interest is as a stick to beat more money out of private enterprise to fund his new task masters.

  3. Of all the greedy capitalist pigs to pick on, he chooses Bill Gates.

    First line from Wikipedia:
    ……The Bill & Melinda Gates Foundation (B&MGF or the Gates Foundation) is the largest transparently operated private foundation in the world……

    Bill Gates has better things to spend his money on than Taxes, helping the poorest people in the world. What a bastard.

    Tim adds: Oh no. In Ritchieworld Gates made his money by dodging taxes. It would have been much better if the taxes had been paid instead!

  4. I’m just waiting for him to persuade his brainless followers to start picketing Microsoft’s offices and campaigning for people boycott Windows PCs. Just like he’s done with Starbucks and Google. Though why UKUnCut are still using a gmail account is beyond me.

  5. “And if multinational companies are fiddling on a few billions here or there of tax then what the fuck do we care if they’re at the same time…”

    Careful Tim, that’s Ritchie-logic. “It’s ok if a few people are clobbered unfairly by HMRC, that’s small beer compared to the billions we’d collect if we had stricter enforcement.”

    Let’s all stick to the letter of the law please!

  6. SadButMadLad

    “Though why UKUnCut are still using a gmail account is beyond me.”

    I suspect because it’s free and works. Probably also because they don’t understand two-sided markets. They already have problems understanding that two parties in a normal market can benefit from a transaction, so they won’t understand how a two-sided market can work

  7. Serf, that was my first thought, too. I mean, did Murph really want to pick a fight with the lefty feelgoods entailed by a $15bn charitable endowment?

    But then I remembered: no one has a place in the lefty pantheon who has not ordered the deaths of large numbers of people. So Gates is fair game.

  8. Do it.

    Microsoft will ship even more of their consultancy jobs abroad. Purchases of say, MSDN subscriptions and volume licenses will be made to other countries and the VAT man will get absolutely zilch.

    On the other hand, I’ll miss the beer and pizza in Reading.

  9. Is he now rushing in where angels fear to tread? The final Q in the latest post on Tax Avoidance “The vendors of tax avoidance have to be treated a bit like pimps: their penalties should be greater than those using the arrangements just as pimps pay bigger penalties than prostitutes, and rightly so. Both live off immoral earnings after all.”
    No doubt these are the two oldest professions but is prostitution really the same as tax avoidance – legal but immoral?

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