So let’s look at what Ritchie said then

There is no evidence that profits are disappearing from the UK, as a proportion of UK GDP.

Well, actually, yes there is. Or alternatively, no there isn’t:

Therefore, we are in a situation in which we not losing the profits; what we are losing is the ability to capture those profits in corporation tax, which is something quite different.

Our evidence of the profits in the UK economy is the UK GDP figures. And those Google (and whoever else) profits being booked in Ireland simply are not part of UK GDP. They’re part of Irish. Profits which are part of UK GDP are well captured by our current method of corporation tax.

So, great, he starts out by not understanding GDP accounting.

actually, higher‑tax societies flourish better.

They do? Evidence of that would be nice.

Things like the Fair Tax Mark to which FTSE 100 companies have signed up—and I should declare an interest, as I am a director—are indicating a new temperament in taxation.

Three companies and a teapot mark a sea change in opinion do they?

Richard Murphy: Tangible assets, real assets that create wealth, not intangible assets, which are legal fictions, are what we are looking for.

That’s brave. IP has no value now, eh?

If a company decides that it is better to have a call centre in Delhi, then it should clearly be making a tax contribution to India, for the fact that India is supplying it with trained people. That is perfectly fair.

Corporation tax is a rental payment to the State for its slaves now, is it?

Anyone else want to have ago?

66 thoughts on “So let’s look at what Ritchie said then”

  1. That’s brave. IP has no value now, eh?

    This was what he was banging on about to the select committee the other day for the bit I saw. The idea being that the IP has value to the consumer in terms of brand recognition and perception and it has value to a potential purchaser but it has no value to its owner because its owner owns it already in any case.

    You’ll find this makes perfect sense if you take the elementary precaution of sawing your head off first.

  2. If IP is worthless to its owner, how come McDonalds and KFC can get any number of punters they want to fork out £250k+ for a franchise?

    Murphy really is a fucking idiot.

    He should open up a ‘FatDick’s” burger bar near a McDonald’s and see how well he can compete.

  3. I guess we’re all free to appropriate the Fair Tax Mark and sell it to what suckers we can find and then pocket all the profits.

    RIght?

    And bets on whether Murphy’s copyrighted and trademarked everything related to the Fair Tax Mark?

  4. Q13 “…We should not forget the fact that half of corporation tax is paid by small companies…”

    Even Murphy couldn’t believe such obvious bollocks, could he?

  5. “If a company decides that it is better to have a call centre in Delhi, then it should clearly be making a tax contribution to India”

    Make a contribution? I thought Richie was all about forcing companies to pay their full whack, not just make a contribution.

    Ah, wait, he wants them to pay a full whack to UKHMG, but just make a contribution from the crumbs left over to India.

  6. Its all an extension of the ‘If its not made by large unionised workforces hitting big lumps of metal with hammers, then its not wealth creation’ school of thought. Mainly espoused by Leftists due to the ‘large unionised workforce’ element providing them with a permanent power base. Software developers, merchant bankers and lawyers dealing with international legal issues don’t tend to vote Left so their production and exports don’t count.

    Incidentally the son of a chap I know just sold his company to Microsoft for £174m (SwiftKey apparently, and no I’d never heard of it either). So I suppose all that money Microsoft paid was for the furniture in the SwiftKey offices, because thats about all you can stub your toe on I suspect. Must be some very comfy office chairs……………..

  7. Richard Murphy: Tangible assets, real assets that create wealth, not intangible assets, which are legal fictions, are what we are looking for.

    That’s brave. IP has no value now, eh?

    I expect he only charges for the actual paper and ink in his work. Those being the only “tangibles”.

  8. AndrewC: If IP is worthless to its owner, how come McDonalds and KFC can get any number of punters they want to fork out £250k+ for a franchise?

    Aha! But he admits it’s worth something to franchisees or potential corporate predators. But KFC’s IP is valueless to KFC because…

    …the concept of imputed rent does not figure in Prof Murphy’s economics lexicon.

  9. He explicitly said that IP does have a value when you’re selling it to someone else, it’s just that it’s worthless when you’re using it yourself.

    Which makes logical sense. If I sell my car, its worth a few grand. If I drive it, I get no cash from it so it must be worthless. That’s how things work… oh, wait.

  10. Richard Murphy:

      “In fact, within UK tax law, effectively, we recognise a UK‑based group as being a single entity for these purposes”

    No we don’t! We recognise companies and charge companies to CT. We do have something we call ‘Group Relief’. This allows one company to surrender it’s losses to another company that happens to be in the same group. It is, however, a bilateral arrangement with significant qualifications; not a relief given to groups.

  11. John Cullinane

    “It goes back to the invention of internationally traded products.  They could be largely made and constructed in one country, but they are very valuable in another, because they have not seen a product like that yet.  It is older than corporation tax that you could have a valuable activity in one country and a customer in another.  As in the Zambian copper example, it is probably fairer to stick with activities than with sales.”

    Which makes for a far fairer system than Murphy’s regressive offering. (Did I say ‘regressive?)

  12. Jacob Rees-Mogg:

    “If a Hollywood studio has a film that is broadcast in the United Kingdom, the intellectual property—the intangible that you dismissed in an earlier answer—is very real.  It is the major driver of the profit.  If you are dismissing it when you are saying that it is a confection, who is deciding that?  How do you determine it?

    Richard Murphy: There is a very big difference between the payment of a royalty for the use of intellectual royalty when there are third parties who are negotiating this in a marketplace to when the company has decided to create an artificial asset”

    So Ritchie does accept that IP has a commercial value.

    So what is his point exactly? Is.it just that he hates and hates?

  13. “IP has value to the consumer in terms of brand recognition and perception and it has value to a potential purchaser but it has no value to its owner because its owner owns it already in any case”

    If that’s what he thinks, why doesn’t that apply to tangible assets as well? A shop is valuable to the customer (he knows where to find the business) and to a potential purchaser, but is he then saying that it has no value to the owner?

    In which case, when are we moving in to his spare room?

  14. Ironman said:
    “So what is his point exactly? Is.it just that he hates and hates?”

    Isn’t it just that he wants to tax and tax again?

  15. Richard: If that’s what he thinks, why doesn’t …

    That’s an invitation to begin a wild goose chase in the dystopian world of Murphy’s logic. Best not.

  16. At Qu 44 onwards Jacob Rees-Mogg starts to beat him. At Qu 60 the Chair skewers him. When forced to accept that IP has a value that should be recognised he is asked WHERE Google’s profits should be taxed. It is pointed out that the IP wasn’t developed here and so it’s really nothing to do with us; should it be taxed in the States? After acknowledging that it COULD be taxed there he waffles on about withholding taxes.
    The parliamentarians murdered him, simple as that.

  17. Ironman: The parliamentarians murdered him, simple as that.

    You might think so but Murphy won’t.

  18. “Richard Murphy: There is a very big difference between the payment of a royalty for the use of intellectual royalty when there are third parties who are negotiating this in a marketplace to when the company has decided to create an artificial asset”

    I think he is quite right about this.

    However, his argument requires that ALL intra-group IP is artificially created and so should be ignored – or perhaps, in a weaker version: as only third-party IP transactions are clearly commercial, all intra-group IP risks being artificial and so should be ignored.

  19. Is he mangling the anti IP argument put forward by the like of S. Kinsella, that IP is not an economic good because it is not scarce resource, in that it can be copied? It only becomes a scarce good because of the state granting a monopoly on it use in the way of granting patents etc.

  20. Actually, Murphy is quite right when he says that many rights and much property would be worthless without a strong stable State to help enforce those rights. The broad sensible political right-of-centre have never suggested otherwise though.

    The world he suggests is real, however, where IP has no commercial value, is a dystopia with no pharmaceuticals, no digital communications. In short, IP is to us what land was to medieval Lords.

  21. unbelievable.

    [although I don’t think suggesting firms in countries should pay taxes to contribute towards education + other publicly funded stuff they benefit from is quite rental payment to state for slaves]

  22. Something that can be copied is not an economic good?

    “It can be copied” is a pre-condition for an economic good surely.

  23. Look who makes the money for out-of-copyright works: the publishers and distrubuters.

    If IP has no value, how come JK Rowling is so very rich?

  24. They would be pretty scarce if nobody did the research, development and innovation because they could never exploit them.

    Creating a world without private priority doesn’t eliminate scarcity of goods; it eliminates the existence of those goods.

  25. “actually, higher‑tax societies flourish better. ”

    I’ve a feeling that he’s hinting at the Nordics, who have a completely different setup of …well… everything..
    And as a result different challenges in different areas, not all of them pretty..

  26. “Grikath

    “actually, higher‑tax societies flourish better. ”

    I’ve a feeling that he’s hinting at the Nordics,”

    It’s more of that ‘Spirit Level’ shit.

    Cherry picking good things from any particular country and claiming they are causal.

    Nordic countries have high taxation, high standards of living and are more financially equal than the UK. So high taxation must have caused the other things.

    What about high levels of alcoholism and heart disease? Maybe high taxation caused those?

    Or maybe the equality derives from the (until recently) racial homogeny of those countries?

  27. “Ironman

    As I say, a world without IP is a dystopian nightmare”

    Certainly Murphy has never had to worry about holding valuable IP rights.

  28. 0.2 Prof-Murf

    “If a company decides that it is better to have a call centre in Delhi, then it should clearly be making a tax contribution to India, for the fact that India is supplying it with trained people. That is perfectly fair.”

    I’m confused. I thought India (post independence) was free to introduce whatever taxes it wanted, on activity or business being carried out there – be it corporation taxes, sales, employee or NI type taxes, or whatever else?

    Or do they now have to take their tax code from a retired accountant in a sleepy backwater in Norfolk?

    Henry Crun

    “Has no one ever just thought to ask him: Are you fucking insane?”

    Why ask a question to which one already has a perfectly good answer?

  29. Grikath

    “I’ve a feeling that he’s hinting at the Nordics, who have a completely different setup of …well… everything..”

    One very small benefit that will come from the utter tragedy of Sweden’s transition to a failed state is that that particular leftist trope will be proved to be bollocks.

    Just like “we’ve never had proper communism” et al…

  30. Can someone confirm as I skimmed some bits – did Ritchie really say he thought value is added when the British customer, after evaluating the other options, clicks the relevant link.
    A view that in a free market value is added when the customer has decided that your software is worth purchasing.
    This would lead to CT being a cash-back scheme for the countries of the people who are buying stuff.

  31. He seems incapable of sticking to his allies.
    Just attacked the All Party Parliamentary Group, chaired by Mrs Hodge because he thinks its a KPMG front, as evidenced by the choices of speakers.
    This for an organisation, COVI, which recently gave him air time and published his views on responsible tax.
    Also stating Tyrie did not understand his answers, at TSC, so that’s Tyries problem.

  32. Surely by employing people in a call centre in India they are contributing to Indian tax, either the income tax payed by the employees if direct or if it a contract then the taxable profits of the company plus the employees tax etc.

    As for the intangibles IP it’s almost as if he has never looked at any changes in accounting and standards in the last 30-40 years. This is an area that has seen a lot of change, partly driven by the very realisation that a brand does have a value and ignoring it does not represent a fair view of the value of the company.

  33. Jim, if you haven’t heard of SwiftKey you’re not getting the most out of your smartphone. It’s the best text entry software available today.

  34. I happen to know people in HMRC. I showed them his exchange:

    ” Most of them expect to face redundancy at some time in the future.  Almost all of them are now facing the prospect of being relocated.  That creates uncertainty, because they are being told that almost all the offices are shutting.  People towards the end of their careers are questioning why they would want to stay,”

    I am told this is blatant mis-statement of the truth if not plain outright lie. Most of them are not expecting to be made redundant – just a lie. The relocation is for most people to new offices in the same general location – mis-stating the truth. Almost all offices are closing because old leases are ending and shiny new offices are being purpose built. People towards the end of their careers tend not to stay – it’s a feature of being at the end of your career.

    This sort of talk causes deep upset and.worry to people. What a moral cripple.

  35. According to Google’s public annual financial statement, filed with the US financial authorities as required by law as a publically listed company, Google paid 19% of its trading surplus in taxes across all juristictions it operates in. Not 3%. Not a sweetheart deal. Surely Mr Murphy can use the 0.8 of his time he has free to actually read Google’s accounts. For $49 I could even buy the shareholders’ detailed financial report, but I have better things to spend my money on.

    If he wants 20% of Google UK’s surplus to be more in absolute terms he would have to somehow get Google UK to reduce their operating costs, like maybe by paying their staff less, as it’s almost 50% of their outgoings. How ***DARE*** they spend so much of their, sorry “the state’s” money on paying their staff!

  36. That’s amusing. Given that some of us know who Ironman is and you appear not to. Without giving the game away, someone with rather more knowledge of HMRC than just a mate who’s a teaboy there, or even the amount of knowledge that Ritchie has in fact.

  37. Until he tells me who he is, I don’t give a toss what he thinks he knows. He’s anonymous to me, which makes his bleatings about accusing me of slander because I happen to want to know how HMRC dealt with Google, and him thinking that I said it was unlawful, just a tad on the fucking stupid side. (a thread a couple of days ago)

    HMRC made a statement that a whole load of branch offices were closing down and that inevitably there will be a lot of job losses.

    Again, why are people defending the institutions that this blog attacks daily.

  38. I recently saw a similar exchange – expert witnesses providing expertise to a committee on the new proposed Communications Data Bill.

    What was very clear in that exchange was that the Committee learnt a great deal from those particular witnesses.

    What was also clear, listening to the video above, was that the Committee either learnt very little from Murphy or were often simply contemptuous of what he had to offer.

    In which case, what on earth was he actually doing there? I know Diogenes and GlenDorran have probably both nailed it above, but all the same, this is supposed to be a serious matter, not some sort of practical joke?

  39. Arnald

    Who I am or, more importantly, who I know is really quite unimportant here. Either Ritchie is telling the unvarnished truth and I have libelled him or he isn’t. The literate amongst us will have noticed I distinguished between outright untruth and mis-statement of the facts.

    As for you, well you accused public officials of knowingly making a corrupt deal. You dirty little bastard.

  40. This is what Ironman said.

    You are actually accusing public officials of corruption. It so happens that I personally have negotiated with HMRC on a couple of transfer pricing issues and know a couple of HMRC transfer pricing specialists personally. My challenge to you is not to be snivelling little shit but to use your own real name to make the accusation so that I can take it to them.

    I still don’t understand your position, Worstall. You hate the EU and yet you defend its rules, you take full advantage of it personally, and you pretend to be patriotic but applaud MNCs pissing all over nations states, and in particular, the UK.

    And you bang on about feminists.

    Have you considered getting some psychiatric counselling?

  41. “As for you, well you accused public officials of knowingly making a corrupt deal. You dirty little bastard.”

    Where did I say the deal was corrupt? I said it was a sweetheart deal. Me and the rest of the fucking world, precious.

  42. @Arnald ” said it was a sweetheart deal. Me and the rest of the fucking world”

    It’s certainly true that lots of shouty people who are pig-ignorant of tax law and practice and have an obsession with big business and ‘evil capitalism’ have said it’s a sweetheart deal but mercifully that isn’t the rest of the world.

  43. Is it, or is it not, a deal between Google and HMRC?

    An agreed deal?

    A deal Not a demand, but a deal. A deal agreed by both parties.

    Why this year, after ten years? Like, suddenly, if they do this and then that, it creates a conveniently shaped hole for a deal to fit into. Not because there was any tax value in particular due using hard and fast rules like most of the rest of the UK have to live under, but because it’s a deal.

    A deal which was designed to benefit both parties.

    AndrewC, do you know, as Ironman so obviously does because Timmy said so, what exactly went on in all those discussions with the Treasury and Cameron’s mates in the Club? Are you special, like Ironman?

    Do you not think that Google’s weighty persuasions counts for anything?

    Like making a deal more agreeable?

  44. “Is it, or is it not, a deal between Google and HMRC?”

    Actually, that’s wrong. It is a deal between Google and the Treasury.

  45. @Matthew L: Smartphone, whats one of those? I have a samsung B2100, it can be dropped in a tank of water, dropped onto concrete, smacked around with all manner of crap in my pockets, get covered in mud and oil and still do what I want, which is make calls and send texts. Oh, and never runs out of battery. Literally, I’ve never had it turn itself off due to low power, functions for ages with zero battery showing. All for £25 off ebay.

  46. Arnald, no-one lives under hard and fast tax rules. A lot of tax law is very complicated, because it comes down to interpretation. Is this thing in front of me a building, a structure, a bit of plant, or what? Is this person working under that person’s supervision, or independently? How much is that property worth? Is this person selling stuff to that person, or are they just helping the other person buy from a third person? Is this a cake or a biscuit?

    The Google issues are all about the sort of areas where interpretation is key. A “deal” is agreeing what the facts are: this is the complicated bit, and the tax position usually follows relatively simply from that.

  47. @Arnald

    I don’t know about Google’s settlement. Neither do you.

    I can say I’ve been professionally involved in transfer pricing and other settlements from both sides of the tax desk.

    One of those settlements took 7 years to negotiate. I’m aware of one that had been trundling on for 15 years.

    When I was a Tax Inspector I never experienced nor did any of my colleagues experience political pressure to settle one way or another.

    So I know something of how the system works and you know fuck all about the law or the system.

    But if it gets you angry. Yes, it was a deal. All the Google executives made bundles of cash and all the HMRC staff got back-handers. It’s all a corrupt game and the only one not involved is you. So fuck off. It’s our party and you’re not invited.

    Happy now? Vindicated?

  48. AndrewC

    Actually the people I know in HMRC haven’t made a penny. You have really upset them. Or maybe I’ve had a Friday evening in the pub.

  49. I’ve often thought that all this ‘Google et al are being given sweetheart deals by HMRC’ is tantamount to slander/libel, whatever the correct legal term is. I reckon its time HMRC started sending out a few legal letters to some of the usual suspects pointing out the legal implications of their allegations.

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