The Guardian has reported Margaret Hodge's reaction to George Osborne's Google Tax. She apparently said:
This is an important symbolic statement but it is really on the margins … what you really need is international agreement and a really, really tough, determined HMRC.
I agree. Indeed, that's remarkably similar to my own reaction, and I did not brief her. But, Margaret has one of the astutest brains for the politics of tax, and her reaction is spot on. Osborne really has missed the point.
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“But, Margaret has one of the astutest brains for the politics of tax”
And yet she voted into law many of the taxes she now blames companies and accountancy firms for following.
Perhaps that’s the art of politics. Making sure other people take the blame for your own actions.
I think the moderation policy is going to apply to you soon
You are not engaging in debate, just diatribe
I really don’t see how this is a ‘Google Tax’, it looks like an ‘Amazon Tax’ to me.
Amazon has a big warehouse and is shipping goods, so it is easy to see how “Amazon is carrying on activity in the United Kingdom in connection with the supplies of goods” and it isn’t something they can easily avoid.
On the other hand when you look at Google you need to be able to say that “Google is carrying on activity in the United Kingdom in connection with the supplies of services [advertising]”. It is trivial for Google to make sure that nothing related to advertising takes place in the United Kingdom.
Why would Google do any of its marketing in the UK if it costs them tens or hundreds of millions in the process? There are plenty people that can deal with customers over the phone from Ireland and it would be cheaper for them to offer free flights and hotel accommodation in Ireland to any significant client that wants to have a chat in person.
Michael
It won’t be trivial. The likes of Google have plenty of boots on the ground in the UK giving support to their clients: that is work in connection with the supply of services. Their tax planning to date has been based on saying that the contract conclusion was outside the UK and hence no PE as the UK activity is only preparatory/auxiliary. Unless they go totally cyber from offshore then they will have to do serious thinking on the avoided PE tests (both on the tax avoidance and mismatch conditions). Are they easily going to be able to restructure that much?
AK
I think we can safely say that the potential tax bill will focus their minds very clearly on all options open to them. The idea that they will continue to employ people in a UK call centre is a bit of a stretch of the imagination from a personal point of view.
Google offer telephone support 24 hours per day and ship the calls all over the place depending upon the time of day you call. A measure like this will definitely encourage them to drop the UK call centre. Even if they can’t move the whole thing overnight you can bet they will give it serious consideration.
Even without the so-called double Irish (which is only being phased out over 5 years) the Republic of Ireland will attractive.
The UK call centre is completely irrelevant to this charge