Aww, diddums

Under a deal which will keep it clear of the diverted profits tax, Google has agreed to pay tax on an element of future revenues from UK advertisers as well as on profits. However, the company will be able to keep taxes low by continuing to book advertising deals with UK clients through its international headquarters in Ireland.

Tax expert Richard Murphy, who was a prominent backer of Jeremy Corbyn’s leadership campaign, estimates that Google should be paying £200m a year in corporation tax, based on the firm’s declared profit margins and sales 2014 sales in Britain of £4.5bn.

“I can’t understand why the deal with Google is so cheap. I’m worried if they are going to repeat that with other companies. What was agreed is far removed from what is required for sustainable corporation tax in future,” Murphy said. “They are undermining the new international tax consensus which David Cameron and George Osborne have worked for, supposedly.”

The important point there is that this deal leaves Google free of that diverted profits tax. And so all Ritchie’s a’screamin’ an’ a’wailin’ has managed to recoup £13 million a year. Fun but not exactly important, is it?

Or, as we might actually put it, now that Google has been investigated for tax avoidance we find that, except at the trivial margin, it hasn’t been doing so. Thus Ritchie’s numbers for tax avoidance look to be out by an order of magnitude.

86 thoughts on “Aww, diddums”

  1. Has Google actually broken any rules? If they have, why are they doing “a deal”? If they haven’t, why are they doing “a deal”?

  2. So far as I can tell, they said that the price they were charging was an open market value; HMRC disagreed; they compromised on a different price which meant that more UK tax was due.

    The “rule-breaking” is to come up with a value which differs from the one HMRC came up with; the “deal” is to talk to HMRC and agree a better figure.

    Now given that HMRC recently proposed to me that a small area of overgrown land that had been used for dumping cars on was worth £15k per acre, I suspect that blindly doing what HMRC says is not necessarily going to give you a fair result…:-)

    Actually, that’s not true. The real offence is for a US company to sell things to the UK from abroad, rather than structuring things such that they are selling within the UK 🙂

  3. “What was agreed is far removed from what is required for sustainable corporation tax in future”

    Gibberish. The 20% professor gives us 20% of a thought.

  4. The Tax Expert appeared unable to understand the notion on Permanent Establishment this weekend. He appears never to have heard of Advanced Pricing Agreement at all.

  5. @Ironman “[Murphy] appears never to have heard of Advanced Pricing Agreement at all”

    Again and again Murphy has shown that he has no real practical experience in many of the tax areas he pontificates on.

    He is like a football ‘expert’ who has never kicked a ball or been on a pitch in his life. For that matter he’s never even watched a game, just read about football in a book.

  6. “I can’t understand…”

    Delete all else he says and everything about Murphy comes into focus.

    The Google case turns out to be a mild disagreement between Google and HMRC over transfer pricing. Big. Deal.

  7. “Tax expert Richard Murphy, who was a prominent backer of Jeremy Corbyn’s leadership campaign…”

    Not a bad “one liner” for a stand-up, that one. Funny on so many levels.

  8. I note in another post today, 25th, that Mr. Murphy identifies himself with Ian Drury And The Blockheads.

    Were Ian DURY in the condition to do so, I’m sure he’d object.

    Dury songs that Murphy can surely relate to:

    Blockheads
    In-betweenies
    Spasticus
    What A Waste
    If I Was With A Woman
    Blackmail Man
    Dance Of The Screamers
    Poo-Poo In The Prawn

  9. And yet another whinge about companies using one company to trade throughout the EU.

    If you want to change this, surely the only option is to leave the EU at a minimum; would EFTA/EEA membership effectively be the same?

    Either way, suggest that Google is working exactly the way the EU founders wanted it to work and you can hear the cognitive dissonance frying their delicate synapses from a mile away as none of them want to leave the bloated bureaucracy that is the Brussels fiefdom.

  10. Timmy, how can you be investigated for tax avoidance because as you keep telling us tax avoidance is legal. So what is there to investigate?

  11. These articles always talk about company x only paying $$$ on revenues of $$$$$$$$$. Why don’t I ever see what the profit is?

    The quoted numbers in the article at 4.5B revenue, 13M tax paid, 20% corporate tax, and Murphy’s 200M tax that should have been paid.

    Using the basic formula:

    Tax paid=(revenue-costs)*tax rate

    With the 13M paid it would seem that 1.44% of Google’s 2014 revenue is profit.

    In Murphy’s world where 200M is owed then Google managed 22.2% profit.

    I can understand why Murphy doesn’t want to leave his little world. If I lived in that world all I would have to do is to cut my prices slightly and live on 20% profits while driving Google out of business.

  12. theoldgreenfsacist

    HMRC enquiries into avoidance schemes are to test if the schemes work.

    Try to learn just one thing from his blog.

  13. Gamecock and AndrewC should be banned from this blog.

    Guilty of assessments of the Big Dick that are simply far too generous…

  14. So, as Blair would have said, nothing to see, move on.

    Nothing technical here, merely a difference of opinion, which Google have resolved by dipping into the petty cash.

    The case did not involve the “international tax consensus” (whatever that is), nor did it relate in any shape or form to a “sustainable corporation tax” (whatever that is), and I doubt very much whether Dave knows what corporation tax is (and I have a sneaky feeling, neither does Georgie).

  15. It was a correction of Google’s original estimate of their tax liability, to conform more closely to HMRC’s view of the position.

  16. theoldgreenfsacist

    Where on his thread have I opined on whether it was avoidance or not?

    Some of us here understand how the tax system works; you’re out of your depth and embarrassing yourself.

  17. @ Liberal Yank

    There is no point talking about the profit when the whole argument is about whether or not the profit figure is correct.

    People can shout about the turnover because it gives you big numbers and sparks outrage from the outraged. However, the intelligent approach is still to start with turnover and then figure out if the profit that falls out is reasonable.

    It’s fine to ask why a company which is globally profitable doesn’t make a profit from high UK sales. The key is to then make some effort to understand the answer and adjust the outrage accordingly.

  18. Ironman; so Google paid an extra £130m this was not avoidance you say . So what was it evasion?

    It’s called an audit adjustment. At least that’s what trained professionals call it. If HMRC intends to criminally prosecute, they will then call it evasion.

    Hope that helps.

  19. @The Thought Gang

    My point is that Muphy’s 200M(I’m not sure if that was total or in addition to what they already paid) for 2014 would mean that at least 22.2% of what Google takes in is profit. If there is that high of a profit margin then there should be hundreds of competitors trying to break into the search industry instead of the handful we see.

    I’m not saying that Google didn’t do everything possible to lower their tax bill, they have plenty of accountants whose only job is to do just that. 200M a year in avoided tax indicates an insane profit margin.

    Looking at Google’s investor information* for Q4 2014 could be helpful.

    Google Inc. reported consolidated revenues of $18.10 billion for the quarter ended December 31, 2014, an increase of 15% compared to the fourth quarter of 2013. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the fourth quarter of 2014, TAC totaled $3.62 billion, or 22% of advertising revenues.

    Other Cost of Revenues – Other cost of revenues, which is comprised primarily of data center operational expenses, content acquisition costs, revenue share payments to mobile carriers and original equipment manufacturers, and hardware inventory costs, increased to $3.30 billion, or 18% of revenues, in the fourth quarter of 2014, compared to $2.94 billion, or 19% of revenues, in the fourth quarter of 2013.

    Operating Expenses – Operating expenses, other than cost of revenues, were $6.78 billion in the fourth quarter of 2014, or 37% of revenues, compared to $5.03 billion in the fourth quarter of 2013, or 32% of revenues.

    Just these 3 major expenses balance out 87% of all revenue. A corporate tax of 20% on the remainder is only a total of 117M and someone less lazy than myself will easily find other expenses reducing that further.

  20. Liberal Yank-

    Google aren’t in the Search Industry, they’re in the Advertising Industry. Search is just one of their advertising platforms, like webmail. There isn’t any money in search, nobody will pay for it. There’s money in advertising platforms, and Google have got that pretty much sewn up for the moment. People who care enough to use something better for Search or Email are also clever enough to run adblockers, so there’s not much of an opening for any competitors.

    I use Bing myself for search, FWIW. But the masses use Google just because it’s there.

  21. I only mentioned search because I feel it is the most important tool they have to maintain their market shares. Yes Google currently earns it’s revenue primarily through advertising but you wouldn’t call the Guardian an advertising company although their revenue is from the same source.

    I was wondering who the one person was that used Bing, good to meet you. Personally I avoid Microsoft products whenever possible with the only version of windows I have on a dual boot for 1 program that doesn’t run in wine. Microsoft didn’t do itself any favors with an update several months ago that disables the program forcing me to choose between no updates(therefore no internet) and not using software I paid for.

  22. I’m still using Windows 7. Unfortunately Microsoft under pressure from the likes of Apple and Google have thrown their base userbase under a bus to try and copy the walled garden approach of Apple and the “services” approach of Google.

    Why sensible people still use Google baffles me. It’s irritating, happy-clappy proggie, it’s censored, and generally has that awful “liberal” kindergarten feel to everything. It was a good search engine compared to AltaVista 15 years ago, but nowadays I guess people just use it out of habit. Or because it’s the default in their browser. Or something.

    Microsoft as I said have taken a bad turn because they are trying to copy shitcakes like Google and Apple and hired people with that mentality (the ludicrous slaphead Jensen Harris, the Eddie “The Eagle” Edwards of user interface design. Hopefully they’ll come back to their senses at some point.

  23. @Theoldgreenfascist.

    A overseas company might arrange it’s trading so as to avoid setting up a ‘permanent establishment’ in the UK. HMRC might investigate that claim to see if the company is properly meeting the criteria. Tax avoidance. Investigated.

    A company with a permanent establishment might decide to operate that PE using a cost-plus financial model where the cost plus is (say) 5%. HMRC might investigate to see if 5% is right for that particular industry. They might argue 8%. Rather than spend years arguing the toss at great expense on both sides they might agree 6.5%.

    No laws broken. A tax enquiry. Additional tax to pay.

    Hope that helps. If I’ve used terms you don’t fully understand, it just shows, as others have said, that you’re out of your depth discussing these issues – especially as you clearly already have your answer set in concrete and no amount of evidence or persuasion will change that.

  24. But AndrewC, what about campaigning to change the rules? Highlighting the fact that there is such a mechanism for allowing an overseas company trading in the UK for the UK market to pay little tax because it’s paying for some IP or some other ‘service’ from somewhere else, and so demonstrating the difference in treatment for the big corps to the small companies, can’t be a bad thing.

    For anyone except the big corps.

    You like to defend the big man, that’s your prerogative. It’s my prerogative to think you’re a bastard for doing so.

  25. Arnald, you need to get your details right. Google pays little tax in the UK because it sells from Ireland. That’s nothing to do with IP. That’s the European Single Market at work. One company, anywhere in the EU, selling to anywhere in the EU. Free movement of goods and services, profits are taxed in the country that company is in. Basic rule.

    IP comes in when discussing the tax rate paid in Ireland, not the UK. How much does Google Bermuda charge Google Eire for the IP? That’s not actually part of the UK tax system at all, nothing to do with UK law.

    The importance of this is that you’ve got the big and small company thing the wrong way around. If there’s no UK PE, then a small, say French company selling into the UK is being treated in exactly the same way as Google Eire. That two man French company selling the occasional string of onions into Britain pays corporate tax in France. Google sells into the UK and pays tax in Eire. It’s the same thing. And it’s actually the small company that is the reason the system is this way. So that small companies can sell across Europe without having 28 tax authorities all demanding a slice of the profits. The paperwork just wouldn’t work.

    It isn’t that Google has some break not available to small companies. It’s that Google is making use of a set up specifically and expressly designed for small companies.

    You can complain about that, of course you can. But seriously, you need to understand what they’re doing before you do.

  26. @Arnald

    No problem. You clearly don’t really understand what you are talking about, I do and that leaves you feeling a little inadequate and so you resort to childish insults. That’s your prerogative.

    By the way, what are you talking about? The rules are exactly the same for all companies, big or small. Whether it’s permanent establishment or IP transfer pricing rules. I’ve acted for a company in the health food market with a small niche product with a name known in that niche. The overseas parent charged the UK subsidiary for using that name. The combined turnover of the two companies was c£800,000.

    Really you’re so ignorant, I can’t work out of it’s funny or dangerous.

  27. Arnald

    I will answer you properly; whether you can understand this is another matter entirely

    International tax is about allocating WHERE tax will be charged; not if. You have bought the line that it is about protecting the Big Man; more fool you.

    The allocation is based on recognising where economic value is added. Now Murphy highlights sales in the UK – a highly developed consumer Arkesden – and call a for more tax here. The moron doesn’t join the dots and realise that allocations on the basis of ultimate retail market is regressive, penalising emerging economies that usually participate earlier in the process. Those nations will not sign up to any change.

    Then Murphy also calls for Unitary Taxation, an even more cretinous idea. Hat it is incompatible with his main analysis sy doesn’t dawn on him. But then, none of this has dawned on you, has it.

  28. “And it’s actually the small company that is the reason the system is this way. So that small companies can sell across Europe without having 28 tax authorities all demanding a slice of the profits. The paperwork just wouldn’t work.”

    Bang on, Tim.

    The likes of Arnald, bleating on about how companies should pay tax where their customers are haven’t thought of the nightmare of a small company faced with having to file tax returns in a dozen countries just because they have a few customers in each. It would kill overseas trade for small companies. It’d be great for government tax departments and accountants as you’d need thousands more staff.

    But ‘thinking things through’ isn’t the left’s strong point.

  29. Time

    “some other ‘service’” I said, and I didn’t mention Google in that post.

    But if you want to talk about Google, what about Jolyon Maugham’s analysis?

    http://waitingfortax.com/2016/01/23/that-google-deal/

    http://waitingfortax.com/2016/01/26/the-google-deal-a-response-to-my-critics/

    It’s not about where the customers are, why can’t you see that. Google, or any MNC has a permanent base in the UK. Were not talking about importing and selling. The revenue raising part of the business is in the UK and yet it pays Eire for the privilege.

    “The Company is in provision of marketing services to Google Ireland and the provision of R&D services to Google Inc.”

    Can your greengrocer do the same?

    http://www.ft.com/cms/s/0/46e44b6c-c203-11e2-ab66-00144feab7de.html#axzz3yLBgB3yJ

    That says there are a 1000 MNCs registered in Ireland. Apparently they make all their sales there.

    Yep, those damned EU rules that you hate so much.

    http://www.uclalawreview.org/pdf/62-1-1.pdf

    That’s IP and tax avoidance, it’s US I know.

  30. @TimWorstall “One company, anywhere in the EU, selling to anywhere in the EU. Free movement of goods and services, profits are taxed in the country that company is in”

    I’ve lost count of the number of times I’ve pointed something like this out to people. What do you think the “Common Market” means or the “Single European Market” ?

    Whether they are wilfully blocking it or just plain stupid I don’t know, I suspect the former.

  31. @Arnald “It’s not about where the customers are, why can’t you see that. Google, or any MNC has a permanent base in the UK”

    No. Can’t you see that they very often don’t. Under the rules as they are. Stop arguing as if things are how you WANT them to be

    “Google has a PE in the UK because Arnald says so” Isn’t tax law.

  32. “Can your greengrocer do the same?”

    Yes, he (or she) can.

    Maughan’s idiotic article seems to me to show he is deliberately confusing what ‘should happen’ with the law.

    Someone who is supposedly a QC should understand that the law is what the law is, not what you would like it to be because it’s not fair.

  33. “Stop arguing as if things are how you WANT them to be”

    What, you mean like no one’s allowed an opinion just because AndrewC says so?

    This blog is full of extreme view points. I happened to think Google and other HMCs are taking the piss.

  34. Maughan (and I quote)

    “No. I merely assume that the UK should have taxing rights over revenues made here”

    I can assume the world is flat and pigs can fly. I’m pretty sure the world will have different views.

    Is Maughan a deluded fantasist or just plain dishonest for political reasons ?

  35. “Maughan’s idiotic article seems to me to show he is deliberately confusing what ‘should happen’ with the law.”

    Yes, Maugham is arguing for a way that reflects how the business really works. And it’s something that some guy called Paul can call a QC ‘idiotic’. You have a very high opinion of yourself.

    How often do we hear on here about how rules are stupid and how bureaucrats should be hanged?

  36. @Arnald

    Did you read Iamconsitent and Andrew Jackson’s responses to Jolyon’s post?

    Jolyon writes his article based on how he thinks the law ought to be and gets his economic model of how Google operates wrong.

    Even James on the second thread undermines Jolyon’s point.

    He just can’t claim what he claims with any validity.

    It’s back to him arguing that tax ought to be paid on the way the law ought to be.

  37. Paul, and I quote

    “I can assume the world is flat and pigs can fly. I’m pretty sure the world will have different views.”

    How about addressing his points?

  38. “Arnald

    What, you mean like no one’s allowed an opinion just because AndrewC says so?”

    You can argue that the law ought to be changed.

    You’re just plain wrong when you say more tax is due from the likes of Google under the law as it is.

  39. AndrewC

    Yes, it’s an opinion piece and it’s backed up by knowledgeable argument.

    Jesus, it’s like talking to a brick wall.

  40. No Arnald, not “Time”. Because a cretin in a shed in Norfolk has advised another cretin who just happens to be the shadow chancellor and they are making as much noise as they possibly can. So you.can’t plead for “time” when the response comes in.

    You say: “It’s not about where the customers are, why can’t you see that. Google, or any MNC has a permanent base in the UK. Were not talking about importing and selling. The revenue raising part of the business is in the UK and yet it pays Eire for the privilege.”

    No,.just no. HMRC -and other fiscs -have been through this and arrived at a settlement when the option of litigation was there for them (maybe they just didn’t fancy Jolyon’s advocacy skills in a forum where his analysis would be challenged and tested). These fiscs.found the economic value added primarily in Ireland. Yes, some value is added in the UK (and France) and the settlement reflects that. The customers (that is the advertisers; not, as cretin Murphy claims the individuals browsing) might be in the UK, sure. He sales though are primarily conducted from Ireland.

    Whether it is about EU/EEA freedoms or about tax treaties, it doesn’t matter. Those are the rules.

  41. AndrewC

    My first comment on this thread-

    “But AndrewC, what about campaigning to change the rules?”

    You and others respond a million times,-

    “You’re just plain wrong when you say more tax is due from the likes of Google under the law as it is.”

    Can you read?

  42. TinRibs (thanks Mr Ecks!)

    I meant Tim. I was responding to Tim Worstall. It was pretty clear even with typo.

    “He sales though are primarily conducted from Ireland.”

    No, not “He sales”.

    The sales aren’t conducted from Ireland. They just say they do. I’m (notionally) in the UK. I use google.co.uk, and I click on an advert for a widget from a UK retailer.

    The use of that ad has fuck all to do with Eire.

    Yep the rules is rules, I’m allowed not to like them. As you don’t like rules about all sorts.

    Jesus wept.

  43. “Yes, Maugham is arguing for a way that reflects how the business really works. And it’s something that some guy called Paul can call a QC ‘idiotic’. You have a very high opinion of yourself.”

    Actually, no he isn’t doing that.

    If he was that would be fine. No problem with anyone calling for things to be improved or changed. I agree this should be changed, or at least blocked.

    What he’s saying is Google should be retrospectively taxed in a way that “reflects how the business really works” – he’s complaining about the settlement of back taxes.

    So rather than the law being applied as it actually *is*, the law that is applied is something like *what he thinks is morally right*.

    He blocked me on twitter for making this exact same point.

    And he’s a bad QC because he either doesn’t know this or he’s ignoring it. Such an argument is a route to fascism.

  44. @Arnald ““I can assume the world is flat and pigs can fly. I’m pretty sure the world will have different views.”
    How about addressing his points?”

    It is.

    I’m pointing out he’s assuming something that is wrong.

    “No. I merely assume that the UK should have taxing rights over revenues made here”

    If I assume 1+1 = 3 it makes all arguments dependent on that wrong.

  45. @Arnauld “But AndrewC, what about campaigning to change the rules?” You and others respond a million times,- “You’re just plain wrong when you say more tax is due from the likes of Google under the law as it is.”

    The problem is you are defending Maugham who isn’t campaigning to change the rules. Nor are McDonnell and all the others.

    What they are saying is the changes in the rules they advocate should apply retrospectively.

    So you may have a job, I don’t know. And you are paying 20% income tax on that. The government then says, we’re increasing the rate to 25%.

    *Then* it says, by the way, we’ve decided that this rate is going to be backdated six years, so here’s a bill for £shedloads.

    You okay with that ?

  46. The sales aren’t conducted from Ireland. They just say they do. I’m (notionally) in the UK. I use google.co.uk, and I click on an advert for a widget from a UK retailer.

    The use of that ad has fuck all to do with Eire.

    You’re not the customer in this scenario, the advertiser is. And the advertiser buys his advert from Ireland.

  47. So he assumes that something should happen and has a coherent argument to support it.

    He’s not advocating going in and claiming that the actual interpretation of the law is incorrect. He’s complaining that the settlement doesn’t seem to have any basis other than a number plucked from thin air.

    Can’t really see how that’s a route to fascism. And, oh dear, he blocked you from twitter because you’re an arsehole, maybe?

    A man’s allowed assumptions and should haves.

    You’re saying he’s a bad QC is merely bitterness.

  48. BiW

    “And the advertiser buys his advert from Ireland”

    Does it? Or does Google UK actually do the ringing around, selling the space, and then pay Google Ireland for just being there and having it written down in an intercompany agreement?

    Why bother having a UK permanent base if the Ireland company is so good at drumming up sales? Why google .co.uk?

  49. “He’s not advocating going in and claiming that the actual interpretation of the law is incorrect. He’s complaining that the settlement doesn’t seem to have any basis other than a number plucked from thin air.”

    He hasn’t bothered to look or ask. Nor have the MPs. A shedload of people have pointed out reasons why he may be wrong, and his response is to go on about what the law should be.

    This, if nothing else, should show you he’s not operating honestly. He could argue the law as it exists isn’t being used correctly, but no, he’s arguing that “that the UK should have taxing rights over revenues made here”.

    Which it doesn’t.

    “Can’t really see how that’s a route to fascism.”

    Because you destroy the rule of law. Once you allow laws to be not what they are, but what someone thinks they should be, it conveys arbitrary power on that person to pretty much legalise or criminalise anything. I should read some history as well as some economics.

    “And, oh dear, he blocked you from twitter because you’re an arsehole, maybe?”

    Because I was supposedly a troll. Which is odd, because I was posting under my given name with a picture of me (not normal troll behaviour). He’s basically a coward, like Murphy, I think.

    If you think I write like an “arsehole” you are either very sensitive or have very limited internet experience.

  50. “Does it? Or does Google UK actually do the ringing around, selling the space, and then pay Google Ireland for just being there and having it written down in an intercompany agreement?”

    I don’t think you understand how law works. That’s the only conclusion I can come to.

    Nobody , probably, would question the general concept that this stuff isn’t “really in Ireland”, i.e. it’s connected with Double Dutch, low CT rates etc.

    That’s not the issue. The issue is, is it against the law ? If it *isn’t* against the law, there’s no back tax to pay.

    The law is what it is, not what you would like it to be, or even what it should be.

  51. @Arnald “Why bother having a UK permanent base if the Ireland company is so good at drumming up sales? Why google .co.uk?”

    Of all the business illiterate remarks you’ve made that’s the funniest. .co.uk is a web address. Someone from Botswana can acquire and use a .co.uk web address just as I could acquire a .au address from my workplace here in the UK without actually having to go to the bother of moving to Australia. If I was trading in Australia it might make, you know, business sense to acquire such a web address.

    The Polynesian Island of Tuvalu was designated as the internet top country code name .TV which means quite a lot of TV companies use that – even ones (now this might come as a shock to you) that aren’t based in Tuvalu.

    Now here’s some homework. See if you can find the magical Island of Com. ’cause there must be millions of companies based there if web addresses are anything to go by.

  52. Arnald

    “The sales aren’t conducted from Ireland. They just say they do.”

    So in.other words they are commotion a huge fraud. And HMRC together with other European fiscs has been taken in by it or is corrupt. And you, with your superior powers of logic – not to mention access from somewhere to the necessary documents – have realised what hey haben’t – if they’re not actually on Google’s pay.

    When your argent relies on a giant conspiracy theory please don’t be surprised when we just laugh at you.

  53. “The sales aren’t conducted from Ireland. They just say they do. I’m (notionally) in the UK. I use google.co.uk, and I click on an advert for a widget from a UK retailer.”

    But your not the fucking customer you numpty. If you can’t grasp the basic economic model then you can’t even begin to understand the answer. What a friend Jolyon Maughem has in you.

  54. FFS Iron-o

    It’s not a “commotion a huge fraud” (!) or a conspiracy, it’s the rules. Companies are allowed to state they are selling when they’re not actually selling.

    My “argent” isn’t conspiracy. It’s a ‘should it be like that?’

    I can’t think of any reason whatsoever how people could object to that.

    AndrewC, re the .co.uk, I was emphasising the fact that it’s actually unnecessary to have a UK company, according to Google who do all their revenue raising from Ireland. It specifies it from .com, nonetheless, so a distinct brand presence.

    Apparently Paul doesn’t want people to think about it. The issue is fixed forever in law and nothing should be done anymore than it already has.

    Obey Paul. He is The Law.

    Maugham thinks the law should be different. That’s the slippery road to fascism?

    Who’s the conspiracist?

  55. Iron-o

    The UK companies that advertise on Google.co.uk are the customers, I get that. What I’m seeing as a Google user is a UK company selling UK advertising space to UK companies. It’s a UK operation.

    No, as you keep saying, and as everyone accepts the rules, it’s actually an Irish company doing all that work on behalf of Google Inc and some chicanery involving Bermuda. All of which has nothing whatsoever to do with anything in the UK.

    Some people don’t like that. They say the rules should reflect something else which you don’t seem to have the imagination to envisage.

    It’s not a fucking crime and it doesn’t make anyone any more stupid for asking the question.

    You and others are just showing resentment that some people are voicing their dislike.

    A slow road to fascism.

  56. What Google claim to have is an Irish company selling to UK customers, with a little bit of help from a UK company on the marketing side.

    The approach tax law takes in that situation is exactly the situation you’d expect if Google had no presence in the UK at all, but retained a third party marketing agency to help them out. That is, the fact that you pay someone in the UK to help you out does not mean you are in the UK yourself.

    The interesting questions are:
    1) Does the selling actually happen in the UK, not Ireland?
    2) If so, is it Google UK or Google Ireland doing that UK selling?
    3) If not, is Google UK being paid enough for the marketing services it provides?

    The problem with the profit split method that Maugham prefers is that it kind of assumes that you’d pay a marketing agency more if you’re making more profit. That might make a little bit of sense until you realise that it implies that a third-party marketing agency would charge you less if you’re not doing very well – whereas in fact they’d chase up their outstanding bills, then ditch you as a client. Marketers get paid for what they do, not for the profit they help you make.

  57. “Apparently Paul doesn’t want people to think about it. The issue is fixed forever in law”

    Yes, it is. The tax that someone paid in (say) 2011 is specified by the law that was in place in 2011 (or thereabouts !).

    Changing the law in 2016 will not affect it one iota – or shouldn’t.

  58. “Some people don’t like that. They say the rules should reflect something else which you don’t seem to have the imagination to envisage.”

    What you don’t apparently get is that Jolyon Maughan and McDonnell et al are on about tax paid in the past.

    The future is different ; indeed it is changing with BEPS and DPT (I think ?)

    Whatever changes are made, however, do not affect previous tax payments.

    Do you not understand this ?

  59. “It’s not a “commotion a huge fraud” (!) or a conspiracy, it’s the rules. Companies are allowed to state they are selling when they’re not actually selling.”

    That’s the very essence of committing a huge fraud. Please, just pick up your guitar and get back to your pitch; people can’t be dropping 5p coins into your hat while you’re busy typing away.

  60. Yes Paul, but this is what Mr Maugham stated in his follow up post

    “I published a short post on what Google’s tax liability in the UK might look like”

    Might. What it might look like.

    Ronny

    What are you talking about? All the sales in Google UKs operation were made in Ireland. That’s what you said isn’t it?

  61. Ironman & Others arguing with Arnie

    I think we solve the issue by making everyone give all their money to whomever Murphy and Maugham, and by extension whom ever else represents ‘Civil Society’ – surely no one could object to that?

  62. What the fuck is an audit adjustment? Also you do not appear to know whether its should have an apostrophe or not. If you can’t follow simple grammar rules how am I to accept your views on the more complicated tax laws?

  63. It’s called an audit adjustment. At least that’s what trained professionals call it. If HMRC intends to criminally prosecute, they will then call it evasion.

    … and …

    Some of us here understand how the tax system works; you’re out of your depth and embarrassing yourself.

    What the fuck is an audit adjustment?

    Great stuff 🙂

    Also you do not appear to know whether its should have an apostrophe or not. If you can’t follow simple grammar rules how am I to accept your views on the more complicated tax laws?

    It gets better (it’s = it is)

  64. The idea of a negotiated settlement when neither side wants to go to court seems to evade morons like togf, and victims of justice such as Arnald

  65. Peasant

    “Look it up, you dumb motherfucker”

    You should be directing that to AndrewC, that paragon of professionalism – which is where togf must have been looking.

    “A overseas company might arrange it’s trading”

    “Whether it’s permanent establishment”

    I wonder if anyone checks his letters before sending them. Ah, he’s got a secretary for that. She’s the brains of the operation, obviously

  66. ENLB
    AndrewC writes @ 9:01 on 26/1 that “An overseas company might arrange it’s trading …”
    Bit of (to use the vernacular of this site) a cretin are you not?

  67. togf

    “Cretin”

    Not really. You said:

    What the fuck is an audit adjustment? Also you do not appear to know whether its should have an apostrophe or not. If you can’t follow simple grammar rules how am I to accept your views on the more complicated tax laws?

    DTP commented on audit adjustments, no one else. Hence, “you” clearly suggests it is targeted at DTP, and which is how others also saw it.

    If you meant AndrewC, no problem, and “sorry, I wasn’t clear, I meant AndrewC” probably works better, and to which my response is “Got it, I misunderstood”.

    Whatever, you are right, it’s not important…:)

  68. TOGF –

    Next time you wish to communicate two unrelated thoughts to two different people, try doing it in separate paragraphs.

    Those of us that know what an audit adjustment actually is call such use of paragraphs “grammar”.

  69. Audit Adjustment –

    IRS decides to audit a corporation, for example. IRS audits tend to be focused on particular issues. The IRS will test the corporation’s records and evaluate the results. Based on the fact patterns, the audit can either be expanded or completed. At completion the examiner(s) will present the corporation with its findings and one of three audit determinations will come of it:

    1) No change. No findings and no proposed audit adjustments.
    2) Agreed. The findings and proposed audit adjustments are agreed to by the corporation.
    3)Disagreed. The findings and/or proposed audit adjustments will be contested by the corporation.

    Audit adjustments are changes proposed by the IRS based on the results of their audit of the corporation. Hence the term “audit adjustment”. They may or may not be material, and they may or may not involve differing interpretations of tax law.

    An example: I was retained by a home health care company that the IRS was auditing. The issue was worker classification, so the audit was designed to test whether workers were properly classified as employees or independent contractors. The focus was on three classifications of workers: home health aides, licensed practical nurses and registered nurses. The home health care company allowed home health aides, LPNs and RNs to choose between being an employee or an independent contractor.

    The IRS took the position that all 3 three classifications had to be employees, based on the definition of employee in the IRC and relevant case law. After some negotiation, they allowed RNs to continue to choose, but HHAs and LPNs had to be classified as employees. The IRS then proposed that all HHAs and LPNs who had been independent contractors over the prior 2 years to be reclassified as employees and payroll taxes on the wages of those individuals be calculated and paid by the company, along with related interest on the back taxes (fines were waived as part of the negotiations).

    The calculated payroll taxes and interest on those wages are the audit adjustment.

    And by the way, the company then had to amend its corporate returns for both years, as they were accrual basis taxpayers and the audit adjustments significantly lowered their profits for both years. The refund of corporate income taxes were netted against the amounts due for the audit adjustments.

  70. DTP: IRS? That’s the USA. We are talking about HMRC here.

    HMRC does not conduct “audit adjustments” it conducts investigations.

    Since you appear to be living in the USA (and only have knowledge of that country)I shall any comments you have on the UK tax system with the contempt it deserves.

  71. Either you didn’t read my explanation of an audit adjustment or you didn’t understand it.

    An audit adjustment is one of the possible outcomes of a tax audit – or investigation, if you prefer. I made that very clear. You’re mixing up an activity with an outcome.

    And as to the vast differences between the HMRC and the IRS, well, they’re not very vast at all. The methodologies (activities) of tax auditing doesn’t really vary all that much from country to country. An audit is an audit. What varies is tax law and resolution procedures – they dictate the nature of the , which directly effect the outcomes of the audit.

    And I actually do know a bit about tax auditing at the HMRC. They publish all sorts of materials about how they audit and slap them up on the internet… much as the IRS does. I’ve read enough to know that the differences aren’t as great as you seem to think they are.

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