Well, no actually Jonathan

For if Google gets the right to decide how much tax it wants to pay and when, that’s partly because it enjoys an extraordinarily close relationship with government.

That’s Freedland getting the wrong end of the stick again.

What determines how much tax Google pays is the law. As enacted by Parliament and those they have delegated that power to (both international tax treaties and the EU being relevant here). And that law says that sales from an Irish company into Britain are taxable in Ireland. And that’s that, the end.

14 thoughts on “Well, no actually Jonathan”

  1. I get to decide how much tax I want to pay in the UK.

    If I want to pay less, I can work less. Or move abroad and work there.

  2. It’s rather sweet watching this story, from an EU skeptic perspective. It’s happening because of the EU, at a fundamental EU level.

    But Osborne, being a good EUphile can’t shrug at a reporter and say “Single market, innit, can’t do nuffink about it” so instead has to make up some “tackling tax abuse” nonsense. And most of the serious press are too ignorant to understand the single market, because they’ve been too busy with their tongues jammed up the EU’s sphincter for decades and calling any skeptics racists.

  3. “And that law says that sales from an Irish company into Britain are taxable in Ireland. And that’s that, the end.”

    The more informed skepticism is whether London-based employees were effectively sealing some of the deals nominally done in Dublin, and if there is a pressure point on Google to “pay fairer taxes” campaigners could demand Google books more of its sales here.

    But the Dublin office is not just a company nameplate attached to a deserted block, it is clearly a European HQ and much bigger than the London office. Claiming sales as exports from Ireland is not just some clever technical loophole – besides as Timmy and Stigler point out, this arrangement isn’t some sneaky avoidance of the intentions of the law, it is pretty much the set-up the laws are explicitly encouraging.

    From an Irish point of view, every extra pound paid in the UK in tax that could have been booked as an export from Ireland is basically tax avoidance too (though an irrational one in the sense that it increases total tax paid). No doubt Brits would be unhappy if a UK exporter of whisky or jet engines or whatever declared it was making a loss on its UK operations and all its hugely profitable exports would be taxed in the country they got sold to on the grounds that’s where the revenue is.

  4. As far as I understand it this is about he UK’s bilateral tax treaties based on OECD principles; it is not this time about the EU or the EEA.

    But anyway, what Freed land is saying is that Google has tax officials in his pocket, who are not independant of ministers as they are required to be in law. Does he have any evidence of that?

  5. Ironman – I found that accusation surprising.

    That would actually be a far bigger scandal than the handling of Irish sales as taxable in Ireland.

  6. Burning ears – ‘…whether London-based employees were effectively sealing some of the deals nominally done in Dublin…’

    This would then apply to any company with international sales agents.

    I, for example, ‘sealed deals’ for a US registered company out of a branch office in London travelling to Europe and beyond (1970s).

    The US company shipped and invoiced to Europe and was taxed on profits of those sales in the USA.

    The branch office charged billed the parent for a service charge to cover cost of operation with a percentage uplift agreed with the Inland Revenue to allow a taxable profit.

    No tax was paid on these deals in the UK.

    None of this is new.

  7. Google should close down access to its search engines (and every other free service it provides) to the UK public for week, just to point out how much value they provide to people.

  8. John B

    Yes and that’s a fair point. Though what Google is “shipping” is rather ethereal, and to what extent it has to be “shipped from Ireland” is less clear than for a physical product, so if campaigners want something to try to push Google into this is at least a plausible line of attack. In the simplest case, that adverts served to UK consumers on behalf of UK advertisers who made a deal in London “ought” to be billed and taxed in the UK – even if there is no legal obligation this is something a successful campaign might be able to shame Google into.

    A lot of the attacks seem to think that somehow “Google negotiated a special rate of tax” or that “Google is using an obscure loophole to avoid paying tax” and those attacks are ultimately unproductive, because the diagnosis is so wrong they don’t lead to a possible (from the campaigners’ point of view) “solution”.

  9. What’s to stop Google closing all their EU offices and sending sales staff on business trips from somewhere else to make sales in Europe?

  10. As others have said, this is not new law, or a new ‘loophole’. It’s not even a loophole. It’s been in the OECD model treaty since it first came out around 1963.

    If salesmen don’t have powers to sign off on contracts they are not creating a PE.

    It’s not rocket science, it doesn’t require “an army of clever accountants running rings round HMRC”, it doesn’t require “exploiting a loophole”.

    It’s just the piss-poor state of UK government finances at the moment coupled with the amount of sales Google is making here in the UK that is garnering this attention.

    It would be interesting to work out what sales large importers into the UK have made in the past and how little tax they paid. Who as making a fuss then?

  11. “It’s just the piss-poor state of UK government finances at the moment coupled with the amount of sales Google is making here in the UK that is garnering this attention.”

    Not just in the UK. The real issue is that the basic philosophies and methods used at the core of (international) taxation are based in a world where we had just shifted from primarily equine power to petrol power, and fountain pen for typewriter.
    The world has…. changed a bit.. Including some very basic ways in which we view what is tradeable, or not, including a huge market in ephemerals not relying on physical location, or even physical existence as most people would view things, that were not even an inkling of a possibility when the basics of the current ways of taxation were laid down.

    The way you do business with digital information is entirely different from making and selling umbrellas, or holding a virtual obscure rare-earth monopoly ( 😛 ) , and applying ways of taxation designed for the latter will ultimately fail.

    I agree with Tim that there should be a serious overhaul in how we approach the subject of government finance through taxation. The actual method is still up in the air, but that things must change to accommodate new types of business is a simple fact.

    Google et al. are using a loophole, but it simply isn’t the one people are shouting about.. It’s the one that states : “If there is no rule, you cannot break it.”
    And like it or not, they’re free to use it, just as much as anyone else. Hell.. Using that particular one is Thradhithion

  12. Dongguan John

    “What’s to stop Google closing all their EU offices and sending sales staff on business trips from somewhere else to make sales in Europe?”

    Nothing, except the fact it wouldn’t work (financially, not fiscally). If a company employing some of the smartest people in the world decides it needs a London office, I reckon it probably needs a London office.

  13. “Google et al. are using a loophole, but it simply isn’t the one people are shouting about.. It’s the one that states : “If there is no rule, you cannot break it.””

    Bollocks. There ARE rules. Lots of them. Do you work in tax?

    Google sells advertising. How’s that something not even dreamt about when the OECD first drafted its model convention. So the advertising platform is the internet? Makes it even more crucial that you tax where the advertising agent is because if you’re trying to track down thousands of advertisers or millions of customers of those advertisers, you’re fucked.

    If some countries are pissed off that Google books adverts in Ireland why don’t they think about not trying to tax the shit out of businesses?

    There’s nothing wrong with the tax rules. It’s just that while businesses have moved with technology developments, governments still think they have stationary or tied down targets to tax and throw a hissy fit when they realise they don’t.

Leave a Reply

Your email address will not be published. Required fields are marked *