Google's tax affairs have been bad for Google and they look unlikely to do anything about it.
They've been worse for George Osborne, and he may be expected to do something as a result, but what?
Osborne will need to be seen to be tackling three issues. First, tax avoidance. Second, multinational companies. Third, (maybe), the internet.
On tax avoidance the options are three fold. First, scrap the general anti-avoidance rule, and replace it with a general anti-avoidance principle. I wrote him one in 2012.
Second, invest heavily in HMRC.
Third, co-operate with the EU on this issue.
All else may be window dressing.
On multinational companies there are three options. First, country-by-country reporting whether the EU goes for it or not. He could do it. I think t unlikely, but he could.
Second, create a distance selling levy. I oppose extra sales taxes, but there is a real issue with what the supermarkets are saying about unfair competition in the area of business rates. They pay high business rates: Google and Amazon, et al, are not and this is distorting competition. So, let's look at that and charge an excess land value tax on the UK property of companies that use those facilities to arrange on line sales of products not otherwise taxable in the UK. This is a super land tax. I have not developed the idea in full, but it is a direction of travel. EU issues would have to be looked at.
Third, demand that the OECD finally resolve permanent establishment and if they cannot get the EU to create a common initiative instead.
And the internet? Every company is on line: there is no special case to be made now, barring what I note on a special land tax, above. Sometimes we just have to be realistic about this.
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I think the most likely outcome will be this:
2016: Something headline grabbing, but ineffective (a tweak to the GAAR perhaps).
2018: More window-dressing.
2019: “This crash is still all Labour’s fault, and as party leader I will continue with the policies that will make Britain great again.”
2021: A seat on the board(s).
All we can hope is that this final prediction will transpire because he is out of office.
There is of course the proposed EU Anti-Avoidance Directive. Whether that is approved unanimously is another matter.
Legislation is already on the statute books for Country-by-Country Reporting in the UK. And the OECD has already amended its model tax treaty and its guidance on the definition of a PE, and the multilateral instrument is not far away. I expect to see quite a lot of further BEPS related measures in this year’s budget and finance bill.
Andrew
Most of what you say misses the mark as spectacularly as HMRC does
Bullshtting that we have CBC when it is not oin public record is just BS
And the EU package is OECD LCD
Please do not waste my time
Richard
Osborne just came out in favour of public CBCR in the EU
So I have heard
At ECOFIN
I don’t see that business rates are a huge issue for Google, who are really a glorified advertising agency and must be paying the same rates on their offices as would any other advertising agency. The only matter for concern is that they employ quite a lot of their staff in Ireland — but so I believe did WPP a while ago. For Amazon, they compete directly with all retailers andd I think the solution may be to tax their warehouses – currently doubtless treated as industrial and so lower rated – as retail, because their business supplies the final consumer. Although it delivers to the consumer rather than the consumer collecting from it. Of course the supermarkets and Argos I believe (and of course all Ocado) have some ‘dark’ stores who deliver to the final consumer, so those would end up being higher rated, but presumably they would be happier on balance if Amazon were ‘properly’ rated.
Certainly The Grocer Magazine has suggested a J Sainsbury store pays the highest business rates in the UK.
Part of the issue of competing against Amazon is that they seem happy to make losses for very long periods, which of course drives out competition, but presumably anything we can do to make that loss more painful is good. Should suppliers whose products do not otherwise pay tax be asked where their customers are – what furthest postcodes they deliver to – and pay a carbon tax as well? (Most supermarket stores would deliver only relatively locally, though of course they pay tax.)
The other Amazon difficulty is that they might decide to subcontract all their warehousing and distribution to Wincanton, say, in an endeavour to hide the issue. It will then be getting to the stage where everyone has to declare whether they store or distribute or otherwise handle any products not otherwise taxable in the UK…
The sub-contract site could still be subject to the tax
And Google might by happy coincidence be subject to it as well
Google in the news again with HUNT’s medical ‘expertise’ leading him to advise people to check symptoms on Google-perhaps another sweetheart deal!!
Doctor’s advice is DON’T use Google for this!!
This Government’s incompetence is proportionate to its hubris.
I don’t understand the logic of ‘unfair’ competition between supermarkets and online sellers. Surely they are two different substitutory models of business that are competing – one with big expensive sites that customers can visit to get things straight away, and the other with much lower cost sites but customers have to wait for goods. Online businesses base themselves in low cost locations (so lower rent, business rates etc) to offer lower prices but have to take the hit that customers will not be able to visit them.
Ceteris paribus on all other taxes, I can’t see why you would apply any additional land tax on the online businesses unless you wanted to distort the market in favour of traditional retailing, which would kill the online model for no reason that I can see. Consumers would only lose in this case.
I beg to differ
Ceterus paribus is always the sign of a lost argument to me
SO I shouldn’t use the useful Latin shorthand I was taught at A-Level? Why?
I think it’s valid in this case – online retailing is soooooo much more than Amazon and Google and the offshore company model. This direction of travel will kill a perfectly legitimate business model and reduce choice for people.
Take Ocado for example – if they can undercut other supermarkets by not having big expensive buildings and just going for warehouses and a fleet of trucks, what is unfair about that? They won’t get the customers that want to go to a supermarket in person, but they will get more of the people who just want deliveries. Business rates are a red herring on this one.
Why? Because all other things are never equal so it is a poor assumption
And a market built on an artificial tax advantage is the same
I’d prefer if we left Google alone, the response will be a claim that they will be tough on tax for corporations then attack small businesses who are already paying high amounts of tax and corporations will continue to pay nothing, same as always. We should resist the knee-jerk tabloid reaction as it will only return on us.
Neither claim is justified