Those of us rich in knowledge of the British tax and economic scene are really not surprised at all that Richard Murphy is the source of one of the more idiot suggestions about how Google should be taxed. The problem being that Murphy simply never does think through his proposals. It might even be that he’s simply not got the background – what we might describe as the “bottom” – to have enough general knowledge to understand just what it is that he’s really saying.
Which is where this idea about how to tax Google fails.
To set the scene. Google, in common with other tech giants – Facebook (less than it used to), Microsfot, Apple and so on – makes many to most of its sales into the UK from Ireland. They’re Irish sales, booked into an Irish company and taxed however Ireland wants to tax them.
What Murphy and others would like is that sales by Google in England are taxed in England (more accurately, in UK in UK). Moar Tax! for Murphy’s mates to waste of course.
OK, so, the idea is that if we can’t charge a profits tax to those sales in an Irish company why don’t we, instead, have a turnover tax? That’s the Treasury’s option as previously discussed. Murphy instead thinks we should, well, hmm, difficult to understand really, in common with much output from that source:
My proposal for an AMCT is simple. In essence the AMCT would apply an agreed tax rate to the globally reported pre-tax profits of the reporting entity. This sum would be collected by the head office location of the company, unless that jurisdiction refused to cooperate in the process, in which case another country could nominate itself to undertake the task.
The sum settled would then be apportioned among all the jurisdictions in which the entity traded as indicated by its country-by-country reporting data. To minimize potential valuation disputes, I would suggest any apportionment be based only on sales and labor, with sales also being apportioned on both a source and destination basis (each being weighted equally) and labor on both a headcount and payroll cost basis (again weighted equally). I accept this would mean extending the OECD template but this information should be available to any company, so the demand is not onerous.
Of course, as all we good little liberals know we shouldn’t be trying to tax corporations at all. But even ignoring that failure there’s still that problem with the idea from the Retired Accountant From Wandsworth. Which is, of course, that the sales he wants to tax are being recorded in those accounts as being inside that Irish corporation, aren’t they? Even his own country by country reporting (what I invented. Myself. Candidly) doesn’t drill down to the level of where is the customer resident for each sale, but to which residence and or domicile does the subsidiary of the company making the sale reside in. So, even under this new, improved and Moar Tax regime we’ve still got the vast majority of Google’s sales to UK advertisers being listed as taking place in Eire. Which still means they’ll be taxed there in whatever manner that independent and sovereign country wishes to do so.
Oh, and we can’t change this while we’re in the European Union either. Because the Single Market rules really do say that it’s a single market and we’re not allowed to distinguish among suppliers or producers by EU country of origin or location.
That is, as is so often true with Murphy’s Musings, we’ve a bad solution which doesn’t even tackle, let alone solve, the problem first being considered.