I always get a little annoyed when those who suggest that commerce is the only way to create wealth ignore the fact that those companies that very often attract the highest publicity for being in the forefront of the entrepreneurial revolution get some of the biggest tax subsidies. Richard Branson's Virgin is one such enterprise that seems to live off subsidies. Google is another. As Web Host Industry Review reports:
Google is going to build a $600 million data center in Lenoir, North Carolina. That [means] Google will receive $100 million in tax benefits over the next 30 years. That's $500K for each of the 200 jobs that the data center is expected to create.
So much for the risk taking of free enterprise. Google has been the fastest growing stock over the last few years. And it still requires the state to absorb its risk.
As ever, don't get me wrong. I'm pro business. But I also argue that business would be completely lost without government. The evidence is plain to see. Without taxes (which Google is keen to avoid) Google could not do what it does. Which makes it a hypocrite for locating its entities in low tax zones, like Ireland.
I guess they've got that in common with Microsoft and Apple.
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Your statement about Virgin is fascinating. I always thought there was something I didn’t quite trust about Branson. Is there a link you can give me?
When I last seriously looked at Virgin Atlantic’saccounts (2003) deferred tax was 3 times larger than shareholder funds.
To out it another way, tax subsidies provided 75% of its funding.
I’ve always thought that made it, in effect, a state owned enterprise where the government had forgotten to claim its share.
Richard Murphy
But surely deferring tax is not the same thing as a receiving a subsidy? Presumably Virgin is operating under the same tax rules as everyone else, or am I being naive? Surely the definition of a subsidy implies that it is not given to everyone?
If deferred tax never becomes due and payable it’s not deferred tax. It’s a subsidy. That’s the overall pattern of deferred tax liabilities. It was the case at Virgin.
And deferred tax depends upon the choice of tax regime, or the combination of tax regimes used. This is not a level playing field.
As such this is a question of subsidies, and they are not general if some have greater opprtunity than others to defer liability.