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Google Ordered Back To UK Parliament To "Explain Itself" Following Investigation

samzenpus posted about a year and a half ago | from the what-do-you-have-to-say-for-yourself dept.

Google 176

DavidGilbert99 writes "Last November Matt Brittin, Google's European chief gave a pretty convincing account of himself as he tried to explain why Google wasn't paying more tax in the UK. All the sales staff were based in Ireland apparently and the UK-based staff were there just to promote the platform for advertisers. Great. Nothing to see here. Move on please. Well, actually there is a little more to the story, as an investigation by Reuters has discovered. There are many sales staff in the UK with titles and responsibilities curiously close to what most people would call sales staff and as a result Mr. Brittin will once again have to face Margaret Hodge and the PAC to explain just what is happening."

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Googled it? (2, Insightful)

M3.14 (1616191) | about a year and a half ago | (#43607169)

I wonder if Reuters did use google to find it out.

I interviewed for Google in Ireland (2, Interesting)

Anonymous Coward | about a year and a half ago | (#43607191)

I did a couple of interviews for Google in Ireland, yet all my interviewing was through the UK... 0.o

It usually works like this (0)

Anonymous Coward | about a year and a half ago | (#43607213)

1) The public fund protection of Google's entitlement to private ownership and profit;

2) In return, Google bribe the right people at HMRC and central government to turn a blind eye;

3) Google gets all the benefit of a particular society but little of the responsibility.

What will have happened here is that something went wrong at stage 2.

The universally sad thing about Libertarians is that they don't undertand that power always fills a vacuum: the less powerful you make democratic government, the more powerful you make privately owned businesses.

Re:It usually works like this (0, Troll)

philip.paradis (2580427) | about a year and a half ago | (#43607563)

The universally sad thing about Libertarians is that they don't undertand that power always fills a vacuum: the less powerful you make democratic government, the more powerful you make privately owned businesses.

That's the point. Nothing is misunderstood, aside from your misunderstanding of economics. You probably also suffer from an unfortunate tendency to view markets with blinders and therefore see large players dominating various fields at any given snapshot in time as a bad thing, but without the ability to see that such domination is still better than the alternative of unskilled bureaucratic control that is necessarily comprised of similarly flawed human beings with no real accountability to speak of in the same examined period, with those two options being an exclusive OR proposition, and without understanding that disruptive forces periodically come along in said markets to upset the entire deal in a constructive manner.

In other words, you probably aren't somebody who effects large scale change in the first place, and happily you're not somebody who will wind up having any real influence on things in any event. You probably think you speak for the masses in some respect, but the truth of the matter is the masses don't even know what they truly believe beyond their own personal lives. This has always been true, and will always be true as long as economic scarcity exists. You might as well stop wasting your time concerning yourself with such things and just live your life.

TLDR: This is how the human species operates. Get used to it and relax.

Re:It usually works like this (1)

gutnor (872759) | about a year and a half ago | (#43607753)

You probably also suffer from an unfortunate tendency to view markets with blinders and therefore see large players dominating various fields at any given snapshot in time as a bad thing, but without the ability to see that such domination is still better than the alternative of unskilled bureaucratic control that is necessarily comprised of similarly flawed human beings with no real accountability to speak of in the same examined period.

By living in a democratic country you have a guaranteed slice of control on the government and therefore there is some accountability. With private entities, the accountability is only to the shareholders, which exclude most of the masses. That's in the best of cases, with a privately owned company, you don't even have access to that.

The only difference at this stage is market pressure which address the "unskilled" bit of your rant. That should allow you to get a better service in theory. Of course there is the drawback that you need unskilled bureaucratic control to make sure the market is fair.

TLDR: You make a very weak attempt at justifying the personal insult against GP in your second paragraph and trick slashdot moderators to mod you up.

Re:It usually works like this (-1)

Charliemopps (1157495) | about a year and a half ago | (#43608005)

Most bad government has grown out of too much government. - Thomas Jefferson

So what? (0)

Anonymous Coward | about a year and a half ago | (#43608065)

Thomas Jefferson said it.

Whoop-de-doo.

That was before incorporation and the stock exchange, right? Before Standard Oil and Mama Bell, right?

I guess it may have been right in his day, but we've seen what "the invisible finger" is doing to us since then.

Re:It usually works like this (5, Informative)

rednip (186217) | about a year and a half ago | (#43608141)

Most bad government has grown out of too much government. - Thomas Jefferson

Whenever I see a quote like that attributed to Thomas Jefferson, I always [use a popular internet search tool] to find more often than not that it's simple right wing fantasy. Why am I not surprised, that it's fake? [monticello.org] .

Here are some more things to chew on:

  • All of our founding fathers spent their entire lives as politicians both during the colonial era and after the revolution. The idea that they were somehow 'afraid of government' is ludicrous.
  • The idea that revolution was 'a bunch of farmers with their personal guns' is ridiculous, it was funded by state governments (Continental Congress) and supported by the French crown.
  • Thomas Jefferson didn't write the Constitution, nor the bill of rights, as he was minister to France that entire time, he wasn't even on the committees. Was he really even a 'Framer'? Also, for all his views, when given the chance as a President he governed with an expansive view of both executive and federal power.

Re:It usually works like this (0)

Anonymous Coward | about a year and a half ago | (#43607769)

You probably also suffer from an unfortunate tendency to view markets with blinders and therefore see large players dominating various fields at any given snapshot in time as a bad thing, but without the ability to see that such domination is still better than the alternative of unskilled bureaucratic control that is necessarily comprised of similarly flawed human beings with no real accountability to speak of in the same examined period, with those two options being an exclusive OR proposition, and without understanding that disruptive forces periodically come along in said markets to upset the entire deal in a constructive manner.

At least with democracy, if they're being particularly obnoxious you can vote out the fuckers. How do I vote against an anti-competitive corporate monopoly?

Re:It usually works like this (1)

hughbar (579555) | about a year and a half ago | (#43608109)

Yes, but unhappily the other fuckers are usually very similar to the previous fuckers and about as corrupted by non-transparent lobbying and the entitlement culture of professional politicians [in the UK, they've usually been to Oxford and haven't actually had a 'job' except as 'special advisers']. I think there are a couple of solutions:
  1. Apprenticeships for politicians and senior civil servants. They need to live in bad housing and do shit jobs before any promotion
  2. Sortition http://en.wikipedia.org/wiki/Sortition [wikipedia.org] choosing representatives by lottery, to prevent all the cosy, sweetheart stuff. The quality won't be worse and will even out

There are probably plenty of other ideas, but what we have certainly doesn't work properly for the 'people'.

Re:It usually works like this (1)

sa1lnr (669048) | about a year and a half ago | (#43607659)

"Google bribe the right people at HMRC"

If you looked at the career history of those at the top of HMRC you would see that there is no need for bribery.

Re:It usually works like this (1)

RaceProUK (1137575) | about a year and a half ago | (#43608169)

"Google bribe the right people at HMRC"

If you looked at the career history of those at the top of HMRC you would see that there is no need for bribery.

IIRC, Vodafone escaped a huge tax bill by taking one of the HMRC top dogs to dinner. Once.

Not quite 'Minimum Bribe Level: 1 Turnip', but not far off.

Why explain himself? (5, Interesting)

cerberusss (660701) | about a year and a half ago | (#43607283)

Why does this guy get to explain himself? In my country, the IRS just sends me a letter about me misbehaving, and says I've got 30 days to pony up the cash.

Why the flying duck does a company then gets to make apologies, when it's obvious by now that they're cheating?

Re:Why explain himself? (0)

Anonymous Coward | about a year and a half ago | (#43607301)

You haven't got a lot of lawyers that can stall the process. Incorporate yourself and pay yourself through an offshore company that get's it's (your) money through another shell company. Then hire lawyers and tax accountants to sort it all out for you.

If you can do all those things then you too can be treated like google. It's a level playing field for all.

Re:Why explain himself? (1)

JustLikeToSay (651328) | about a year and a half ago | (#43607303)

I'm assuming the question is rhetorical.

Re:Why explain himself? (5, Informative)

beelsebob (529313) | about a year and a half ago | (#43607309)

"Explain himself" is british english for "to face a bollocking".

Re:Why explain himself? (1, Interesting)

IamTheRealMike (537420) | about a year and a half ago | (#43607485)

Also, there's nothing really to explain here. Nobody is claiming the law has been broken or tax was mispaid. Hodge is just an idiot who wants to spend more money to make herself more popular and is holding "show trials" of companies who she believes somehow are too good at taking deductions. This is hilarious because she herself has a stake in a large company that uses exactly the same tax strategies.

Re:Why explain himself? (2)

beelsebob (529313) | about a year and a half ago | (#43607497)

Actually, if sales staff are based in the UK, then sales are being made in the UK, and profits are being made in the UK, so tax is being miss paid. That's the issue.

Re:Why explain himself? (1, Funny)

flyingfsck (986395) | about a year and a half ago | (#43607523)

Yeah, well you see, the UK sales staff are totally ineffective and never managed to sell a durn thing, despite receiving lots of training from the Irish. They are only retained to help reduce unemployment in the UK...

Re:Why explain himself? (3, Interesting)

IamTheRealMike (537420) | about a year and a half ago | (#43607569)

That's not how the law is written. The money that is being charged for the ads are paid to the Irish subsidiary. Therefore Irish taxes apply. There's no legal definition for what it means to "make a sale" in that regard and the location of the first person you talk to on the phone makes no difference. Otherwise if you call up a company and your purchase is handled by an Indian call center, is the sale suddenly taxable in India now even if you're a Brit and pay a British company? No, that's not how tax works.

If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

Re:Why explain himself? (5, Informative)

Anonymous Coward | about a year and a half ago | (#43607689)

That's not how the law is written. The money that is being charged for the ads are paid to the Irish subsidiary. Therefore Irish taxes apply. There's no legal definition for what it means to "make a sale" in that regard and the location of the first person you talk to on the phone makes no difference. Otherwise if you call up a company and your purchase is handled by an Indian call center, is the sale suddenly taxable in India now even if you're a Brit and pay a British company? No, that's not how tax works.

If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

I thought the whole point was for the Parliament to understand what is happening, and use that to consider adjustments to tax laws to address some of the current weaknesses that allows extreme (but today legal) tax avoidance. That is not a matter for HMRC, that is what the Parliament should be doing.

Re:Why explain himself? (0)

Anonymous Coward | about a year and a half ago | (#43608015)

I thought the whole point was for the Parliament to understand what is happening...

Parliament already understands what is happening. Margaret Hodge who chairs the public accounts committee is involved in such tax avoidance schemes herself. Her family company Stemcor paid £157k in taxes on top of £2.1 billion in revenue due to some clever accounting tricks. Wikipedia [wikipedia.org] article.

Re:Why explain himself? (1)

Anonymous Coward | about a year and a half ago | (#43608143)

Maybe she thinks Google is still better at dodging taxes than her own company, and needs some pointers?

Re:Why explain himself? (5, Insightful)

Xest (935314) | about a year and a half ago | (#43608033)

These parliamentary committees exist to investigate issues in society. They have the option of summoning individuals or representatives of corporations to get to the bottom of those issues. If those individuals lie to them (as Google did in this case) then they have the right to recall them and question them hard about that.

Saying it's a waste of time and is guaranteed to achieve nothing is absurd, how the fuck do you think policy gets made if politicians aren't allowed to call in relevant people to explain how things work and to see if they can provide any justification for their position if they lie, or are perceived to be on the wrong side of public opinion?

The whole reason this committee has been pursuing these lines of questioning is to see whether the law needs to change precisely so HMRC can prosecute, but when companies like Google and Amazon come to the committee and either lie, or fail to answer simple questions, then it's not really surprising the committees push them a bit harder for justification is it? The point being that if even after all these chances, even after all this deep questioning they can't provide reasonable answers to questions such as "Why is your corporation tax payment so low, when you make so much profit here?" then yes, the law is going to change, and yes, if they persist after that, they will be prosecuted. The law can't change in an effective way however if MPs don't understand the problem in depth to make sure the changes work, and are relevant.

Re:Why explain himself? (0)

jamstar7 (694492) | about a year and a half ago | (#43608087)

If someone thought the law was actually being broken, then the right thing to do is for HMRC to prosecute. Not summon random executives to "explain themselves" to Parliament. That's a waste of time that is guaranteed to achieve nothing.

That's because Parliament wants to look like they're doing something rather than upsetting their campaign contributers and actually doing something. We see a lot of that in Congress over here across the pond.

Re:Why explain himself? (1)

Anonymous Coward | about a year and a half ago | (#43607567)

Not defending Google, but it's highly ironic that he's going to receive his bollocking from Margaret Hodge. Her personal wealth is mostly held within a family firm that, you guessed it, dodges UK tax using the very measures she publicly decries. Thus far she's refused to answer questions on the matter stating that she's only a tiny shareholder, despite her shares being worth many millions of pounds.

Re:Why explain himself? (3, Informative)

BasilBrush (643681) | about a year and a half ago | (#43607743)

A false smear from an AC, repeating the tax cheats excuses.

Margaret Hodge owns shares in Stemcor. Stemcor's effective tax rate over the last 5 years was 32%. Google's effective tax rate was 8%. Google's UK effective tax rate was 0.4%.

Re:Why explain himself? (1)

CadentOrange (2429626) | about a year and a half ago | (#43608035)

How is that a smear? Stemcor paid £157k in tax on revenue of £2.1 billion. Given that corporate tax in the UK is 24% on profits, this means that Stemcor made a profit of £654k. A £654,000 profit on top of £2.1 billion in revenue is laughable and utterly unbelievable.

Re:Why explain himself? (1)

MrBandersnatch (544818) | about a year and a half ago | (#43608073)

It is quite possible that they made a considerable loss in previous years and had offset this loss against future profits. I'm not going to dig through their accounts to see if this is the case, I'm just saying that the amount of tax paid in a given financial period doesn't tell the whole story.

Re:Why explain himself? (1)

jamstar7 (694492) | about a year and a half ago | (#43608097)

How is that a smear? Stemcor paid £157k in tax on revenue of £2.1 billion. Given that corporate tax in the UK is 24% on profits, this means that Stemcor made a profit of £654k. A £654,000 profit on top of £2.1 billion in revenue is laughable and utterly unbelievable.

Stemcore in the movie business? To hear the Hollywood studios talk, they haven't made a dime in profits in over a hundred years.

Re:Why explain himself? (3, Insightful)

BasilBrush (643681) | about a year and a half ago | (#43608131)

Stemcor trades steel. Big old fashioned, heavy to transport, unglamorous steel. In a country where British Steel made losses for decades. And 2011 was in the depths of a recession. Just how much profit do you think they should have made? It's admirable that they made any.

Note that the Telegraph article that you are probably referencing, directly or indirectly says: "However. it is not known whether the company â" which made profits of £65m â" used similar controversial tax avoidance measures criticised in the past by Mrs Hodge."

If it's "not known", and based purely on looking at revenue rather than profit, then it is indeed a smear.

Google on the other hand IS KNOWN to use tax avoidance, and we KNOW they made huge profits on which they paid very little tax, cheating people in countries all over the world.

Re:Why explain himself? (2, Interesting)

Captain Hook (923766) | about a year and a half ago | (#43607329)

Why does this guy get to explain himself? In my country, the IRS just sends me a letter...

This isn't the HMRC, this is a special parlimentary committee who are trying to work out how the companies are legally avoiding tax.

The companies questioned (Google, Amazon, Starbucks + 1 other I can't remember off the top of my head - probably MS) were all choosen because they pay very little tax in relation to the turnover the companies are reporting in the UK, and are therefore either very badly run or are engaged in some very effective tax avoidance.

Some of the answers given by the executives were extremely funny, the Amazon executive especially didn't perform well, but Google actually came out of it looking reasonably good, they seemed to be quite honest saying they based most of their operations in Ireland because of it's lower Corporation Tax level and that it wasn't hiding anything while Amazon twisted and turned trying not to say the exact same thing about it's luxembourg HQ.

The Google executive is being brought back because it's now been shown that most of the Google operations are based in London, not Dublin and he was therefore telling porkies.

He's not being brought back in to explain his tax affairs, he's being brought back for lying to a government committee.

Re:Why explain himself? (1)

maroberts (15852) | about a year and a half ago | (#43607413)

Also lying to Parliament is actually an offence for which you can theoretically be sent to prison.

Re:Why explain himself? (1)

_Shad0w_ (127912) | about a year and a half ago | (#43607577)

The best bit is the court in that case is actually parliament itself; you would be called before the bar of the house. Although they haven't actually fined anyone since the C17th.

Re:Why explain himself? (0)

Anonymous Coward | about a year and a half ago | (#43607823)

mainly as being polticians they lie when they open their mouths and when they close them, they cant agrre on a definition of lying

Re:Why explain himself? (1)

the real darkskye (723822) | about a year and a half ago | (#43607579)

And yet lying in parliament is perfectly legal.

Re:Why explain himself? (1)

Xest (935314) | about a year and a half ago | (#43607517)

For the same reason newspapers get to "reject" the implementation of the Leveson enquiry.

Companies rule the government, apparently for corporations, the law is optional and something they get to decide whether they opt in to or not.

Meanwhile it's just forced on the rest of us which is a shame, because I'd also quite like to "reject" the digital economy act and RIPA just like the papers say they're rejecting legislation against their decades of abuse and illegal intrusion into people's private lives.

Re:Why explain himself? (1)

Angostura (703910) | about a year and a half ago | (#43607553)

Because in this case the large companies aren't actually doing anything illegal. In most cases they are using a very detailed understanding of the law to stay within the letter of it, if not the intent.

Much as I dislike the way Google, Apple, Microsoft et al operate in this regard, it is up to the legislature to create their laws precisely and carefully - and in this case clearly the tax laws need to be amended.

Re:Why explain himself? (1)

jamstar7 (694492) | about a year and a half ago | (#43608107)

Much as I dislike the way Google, Apple, Microsoft et al operate in this regard, it is up to the legislature to create their laws precisely and carefully - and in this case clearly the tax laws need to be amended.

You don't think the corporations bought the law just like they did in the US?

Re:Why explain himself? (1)

hairyfeet (841228) | about a year and a half ago | (#43607571)

Because in case you ain't figured it out friend classism is alive and well in the 21st century, its just wealth has taken the place of birth titles. Its the same result either way, the peasants get one set of laws and the large corps and the wealthy get a different much nicer set.

Hell wasn't it the UK where we saw the MAFIAA altering evidence and they didn't even get a slap on the wrist, nor was the damages against the peasant set aside? if that would have been you then you'd be rotting in a cell right now with an obstruction charge but again because corps like the barons and counts in the old days are just "better class of people" than you they don't even get a slap on the wrist.

Re:Why explain himself? (1)

jamstar7 (694492) | about a year and a half ago | (#43608113)

I thought that case was in Scandanavia someplace. Sweden, IIRC, which struck me as ironic because Sweden was the home of The Pirate Bay...

Re:Why explain himself? (1)

jamstar7 (694492) | about a year and a half ago | (#43608061)

They're a corporation. A corporation has more rights than you do in the US. So be a good little meat citizen and worship your local corporation, and pray they don't figure out how to move your job to some Third World toilet to inch their profit margins up.

Re:Why explain himself? (1)

Ash Vince (602485) | about a year and a half ago | (#43608103)

Why does this guy get to explain himself? In my country, the IRS just sends me a letter about me misbehaving, and says I've got 30 days to pony up the cash.

Why the flying duck does a company then gets to make apologies, when it's obvious by now that they're cheating?

Because that is if you break the law. Google are not breaking any laws here, they are just making sure they pay as little tax as legally possible.

Big international companies always have the ability to declare their profits in whatever country they see fit by rigging the rates that the parent companies charge for use of the brand name, this is perfectly legal, if the government want to stop this they can try changing the law. Even if you changed this law though it would be tremendously hard to prove if the fees being charged for use of the brand name were over the top or not.

This is just that the government has to be seen to be doing something as we have local elections today and the ruling coalition is going to take a bath at the hands of smaller parties and desperately want to be seen to be doing something on tax avoidance.

The truth is that the government has already done something, they have lowered the rate of corporate tax to the same level as Ireland to make us competitive as a nation in the race to the bottom. Simply lowering the rate of corporate tax in response to corporations avoiding tax smacks of surrender and weakness though so they do not exactly want to draw attention to this.

Time to start taxing revenue instead? (4, Insightful)

Lincolnshire Poacher (1205798) | about a year and a half ago | (#43607293)

Corporation Tax is, of course, only levied on the profits disclosed by the company's annual return. So only profitable companies have to pay 23% of their net as tax.

But this encourages the Big Boys to simply shift their profit to other, overseas, divisions, through 'franchise payments' and other mechanisms.

Perhaps it's time to say that any company making over 1 million in annual revenue will pay, say, 5% on its revenue above that level. No discussion of profits. It is much easier to determine how much money a company took-in. What money landed in its UK bank accounts is what is taxed.

Re:Time to start taxing revenue instead? (1)

beelsebob (529313) | about a year and a half ago | (#43607315)

That would help defeat companies like Starbucks, but it would have no effect on google or amazon. They'd simply move the bank account that's paid into to ireland. Of course what would potentially work would be to put the tax on money paid by people in the UK, to the company, no matter where that money goes to.

Re:Time to start taxing revenue instead? (2)

91degrees (207121) | about a year and a half ago | (#43607401)

Google is very tricky to deal with because they do operate essentially on the internet. They can genuinely operate anywhere in the world. they might need a few servers in or near the UK, but they can easily do most of the work from any other European country. Switzerland and Gibraltar both have very low taxes, and few barriers to business with the EU.

Not sure I agree this is the same with Amazon. Amazon do, at least, have to have warehousing in the UK. Claiming it's a foreign transaction when you pay in UK pounds, and have an item shipped from a UK warehouse to a UK address is a lot harder to justify.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607665)

Google is very tricky to deal with because they do operate essentially on the internet. They can genuinely operate anywhere in the world. they might need a few servers in or near the UK, but they can easily do most of the work from any other European country. Switzerland and Gibraltar both have very low taxes, and few barriers to business with the EU. Not sure I agree this is the same with Amazon. Amazon do, at least, have to have warehousing in the UK. Claiming it's a foreign transaction when you pay in UK pounds, and have an item shipped from a UK warehouse to a UK address is a lot harder to justify.

You can say that about Google's consumer facing services. But Google's business is to be an ad sales company, and they have a significant local sales force operating in most of the countries they do business.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607453)

We have a tax like that already - VAT

VAT does not work like that. (3, Informative)

tuppe666 (904118) | about a year and a half ago | (#43607611)

We have a tax like that already - VAT

VAT does not work like that. VAT is paid by the Final Customer, The businesses in between don't pay. What you may be getting confused over is the HMRC *collect* the net of incoming VAT and outgoing VAT until it is finally paid in full by the final customer. Businesses essentially pay nothing.

There is a nice explanation and example at wikipedia http://en.wikipedia.org/wiki/Value_added_tax [wikipedia.org]

Re:VAT does not work like that. (1)

serviscope_minor (664417) | about a year and a half ago | (#43607655)

VAT is paid by the Final Customer, ... at the point of purchase, which in Amazon's case is an offshore subsidiary with lower tax. So basically they get to sell goods nearly tax free to UK residents where as local retailers have to pay full tax.

They pull the same trick in the US with sales tax too and it looks like congress are finally fed up enough (i.e. other retailers have lobbied enough) to close that loophole.

Books should be VAT free. (1)

tuppe666 (904118) | about a year and a half ago | (#43607873)

VAT is paid by the Final Customer, ... at the point of purchase, which in Amazon's case is an offshore subsidiary with lower tax. So basically they get to sell goods nearly tax free to UK residents where as local retailers have to pay full tax.

That is nothing to do with Amazon. In the UK books rightfully are vat free, but ebooks aren't. That is just wrong. The fact that throughout the EU ebooks are inconsistent...and Amazon take advantage of the fact is just an aside.

James Bridle "Ebooks are not exempt from VAT, being classed as, I believe, ‘electronic guides’ rather than ‘books’"

Re:Books should be VAT free. (1)

serviscope_minor (664417) | about a year and a half ago | (#43607893)

That is nothing to do with Amazon. In the UK books rightfully are vat free, but ebooks aren't.

Well, good job amazon only sells books, then.

Re:Books should be VAT free. (2)

FireFury03 (653718) | about a year and a half ago | (#43608119)

That is nothing to do with Amazon. In the UK books rightfully are vat free, but ebooks aren't.

Depends what you mean by "rightfully". The VAT laws are incredibly inconsistent and arbitrary in the UK.

VAT was originally _supposed_ to only apply to "luxury goods", which is why cakes (which are presumably a bare essential) are tax free whilst sanitary towels, incontenance pads, etc (which are clearly luxury items) are taxable.

Similarly, a flapjack (i.e. a bar made out of cerial, fat and sugar) is VAT free whilst a cerial bar (which is, instead, made out of cerial, fat and sugar) is taxable.

So as you can see, the VAT rules are completely clear, consistent and intuitive with no chance of ambuiguity or misinterpretation.

Re:Books should be VAT free. (2)

FireFury03 (653718) | about a year and a half ago | (#43608129)

VAT was originally _supposed_ to only apply to "luxury goods"

Oh, and I should add that keeping yourself from freezing to death and being able to get to work are also luxuries, as fuel has VAT charged on it. I'm not sure what happens if you decide to chuck VAT-free cakes on the fire and use them as fuel...

Re:VAT does not work like that. (0)

Anonymous Coward | about a year and a half ago | (#43607897)

nope doesn't work like that, in EU VAT rate is based on the buyers location unless it is from another EU country and the seller has very little sale to that country then it is the sellers location

buy something from outside the EU and it is always buyers location

so the system can't be gamed like in the US

Re:Time to start taxing revenue instead? (2)

tonywestonuk (261622) | about a year and a half ago | (#43607321)

They already tax revenue. its called VAT, and for every £100 of takings, 16.6p is sent to the govenment.
 

Re:Time to start taxing revenue instead? (1)

tonywestonuk (261622) | about a year and a half ago | (#43607343)

I meant £16.66 ! lol

They don't pay that (0)

Anonymous Coward | about a year and a half ago | (#43607365)

No, they don't pay that. They merely add it to their bills and collect it on behalf of UK.gov.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607437)

Not for books from Amazon - no VAT on books in the UK

Re:Time to start taxing revenue instead? (1)

_Shad0w_ (127912) | about a year and a half ago | (#43607585)

Unless they're e-Books, because it's worded in such a way that it refer exclusively to printed works, which is annoying.

Re:Time to start taxing revenue instead? (1)

iserlohn (49556) | about a year and a half ago | (#43607439)

Which probably Google isn't paying either. This is because most people buying services from Google are VAT registered businesses, and the entity processing the sale is based in Ireland. Under EU VAT rules, the place of supply is based in the UK (where the customer is located), so the whole transaction is under the reverse charge and hence no VAT is charged either in the UK or in Ireland.

Of course, the idea is that the VAT is charged when the business sells the product to the end-user, which is probably in the UK, but for advertising Google isn't being taxed on any of that.

Re:Time to start taxing revenue instead? (1)

beelsebob (529313) | about a year and a half ago | (#43607511)

Which probably Google isn't paying either. This is because most people buying services from Google are VAT registered businesses

Note – this means that google is paying it, they're just probably also claiming a proportion of it back when they purchase items from other companies.

Re:Time to start taxing revenue instead? (1)

iserlohn (49556) | about a year and a half ago | (#43608123)

Under EU tax rules, if the supplier is in a different EU country than the customer, and both are VAT registered in their respective countries, then the supplier does not pay or claim for VAT. This is called the reverse charge.

It was clearly explained in my post. I don't know how you missed that.

The only reason they would pay VAT would be if Google's Irish subsidiary registered for VAT in the UK as well as in Ireland. But why would you want to do that when you could keep all that revenue away from HMRC by not registering for VAT in the UK?

Re:Time to start taxing revenue instead? (1)

SternisheFan (2529412) | about a year and a half ago | (#43607515)

Had to google 'VAT', do I now owe the U.K.?

From Wikipedia, the free encyclopedia

For the UK tax, see Value Added Tax (United Kingdom).Taxation:

A value added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.

http://en.wikipedia.org/wiki/Value_added_tax [wikipedia.org]

Re:Time to start taxing revenue instead? (1)

fnj (64210) | about a year and a half ago | (#43607771)

There is somebody who didn't know what VAT is? Not a criticism, just an expression of abject amazement.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607997)

There is somebody who didn't know what VAT is? Not a criticism, just an expression of abject amazement.

There are so many acronyms in life to know, can't blame someone if they're not up to speed on every one.

Re:Time to start taxing revenue instead? (1)

BasilBrush (643681) | about a year and a half ago | (#43607761)

Did it change? Last time I looked it was 20%. Or are you averaging with non-VATable items?

Re:Time to start taxing revenue instead? (1)

KramberryKoncerto (2552046) | about a year and a half ago | (#43607909)

Divide 20% by 120% and see what you get.

Re:Time to start taxing revenue instead? (1)

BasilBrush (643681) | about a year and a half ago | (#43607953)

I'm so glad I don't get involved in the sharp end of selling things.

That's a good idea sort of (1)

Anonymous Coward | about a year and a half ago | (#43607397)

Suppose instead a company was liable for corporation tax based on the *portion* of its revenue that comes from the country. So if UK is 8% of revenue for Google, Microsoft or whatever, then they asses that 8% of their revenue as liable for corporation tax in the UK.

Typo (0)

Anonymous Coward | about a year and a half ago | (#43607881)

Actually, I meant to say net income the second time.

So 8% of their revenue is from UK, so 8% of their GLOBAL NET INCOME (i.e. profit) are taxed by the UK.

To avoid double taxation problems, you would structure it so they pay only the excess to bring it up to UK taxation levels. Companies paying UK equivalent corporation tax in their home country, would pay nothing extra, companies dodging tax like crazy would pay the full UK part of the 8% of their net income.

The Belgians have a rule that any arrangement to reduce or avoid tax can be challenged and voided, simply on the basis that its only there to reduce tax. That could be done too, to prevent any fake corporate shell games that might result from this change in corporation tax.

Small companies usually pay full tax anyway, so this would not affect them. Only the large tax dodgers would pay more.

Re:Time to start taxing revenue instead? (1)

xelah (176252) | about a year and a half ago | (#43607427)

Consider a company which owns dairy farms, a cheesemaker and shops. They'd pay 5% of the final selling price (which would, of course, ultimately come from customers). Now consider a set of independent farmers, selling to a number of independent cheesemakers, selling to a number of different shops. Those people don't pay 5% of the final selling price, they pay more because they pay several times, and need to collect the extra from customers. So, you've just created a competitive pressure which favours large vertically integrated businesses over small or horizontally integrated businesses. I don't think that's a good thing. This is why VAT is charged on value added, not sale prices.

Re:Time to start taxing revenue instead? (1)

iserlohn (49556) | about a year and a half ago | (#43607461)

Talking about just the sales tax angle, that's exactly the same issue faced in British Columbia with PST due to it being a cascading tax. The major businesses are all vertically integrated to avoid paying PST on supplies again and again. This was eventually replaced by the HST, which is a tax combining the federal GST with the provincial PST, but is a value-added tax as opposed to a cascading tax.

Interestingly enough, the voters rejected the fairer HST last year and opted to return to the PST because people were complaining that more things are being taxed to make up for the shortfall when the province moved from PST to HST a few years ago.

Re:Time to start taxing revenue instead? (1)

dnaumov (453672) | about a year and a half ago | (#43607459)

So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

Re:Time to start taxing revenue instead? (3, Interesting)

iserlohn (49556) | about a year and a half ago | (#43607549)

For an example is how prevalent this practice is, look at how Pepsico structure it's operations in the UK. They sells crisps (ie. potato chips) in the UK under the Walkers brand. There was an article no long ago in one of the major newspapers that described how they are able to effective transfer all the profits away from the UK part of the business to avoid paying tax. They did it by assigning all the potatoes that goes into the making of the crisps to be owned under the Swiss subsidiary. These are processed and made into crisps in the UK owned plants, which makes almost no profit in its operations. The finished product, still owned by the Swiss subsidiary is sold, and all the profits make are accounted for under the Swiss operation.

The problem with is that in the EU, we have the free movement of goods through economic union, but there is not overriding political union to plug the loop holes. This needs to be addressed somehow, or otherwise, we are just subsidising Switzerland, Luxembourg and Ireland through tax loopholes.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607911)

but the people that work in those UK plants pay tax

Re:Time to start taxing revenue instead? (1)

iserlohn (49556) | about a year and a half ago | (#43608133)

But it isn't fair to a UK based company making crisps locally to be sold in the UK. Not everybody can afford to set up a corporate office in Switzerland or Luxembourg to avoid tax.

Then salaries should not be tax deductible (0)

Anonymous Coward | about a year and a half ago | (#43608201)

If the payment of taxes on the salaries of the workers (the company, by the way, gains all the benefits and more of the things paid for by those workers' salary taxes, so why the hell should they not pay for it too?) is counted as "we're paying taxes" for the corporation, then the salaries should NOT be an expense for tax reasons for the corporation.

Re:Time to start taxing revenue instead? (1)

khallow (566160) | about a year and a half ago | (#43608179)

The problem with is that in the EU, we have the free movement of goods through economic union, but there is not overriding political union to plug the loop holes. This needs to be addressed somehow, or otherwise, we are just subsidising Switzerland, Luxembourg and Ireland through tax loopholes.

Subsidizing countries with relatively low tax burdens sounds far preferable to overriding political unions. So I'd have to disagree on the "need" for such things. As I see it, competition at the country level helps curb government abuses.

I think this is classic free lunch thinking. You want a free lunch from Pepsi. Pepsi moves their lunch to Switzerland where they are treated better. Lunch is no longer free. Something must be done. But the obvious solution is not "clean up my act so that Pepsi will come back", but rather "let's destroy the sovereignty of Switzerland".

I imagine you'd be a bit upset if Pepsi had a monopoly of soda drinks. But why aren't you similarly disturbed by the possibility of a government monopoly over all of Europe? Last time that was tried, 70-100 million people died.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607589)

So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

Companies don't get big by having a net profit margin of less than 5%

Also, we don't want big companies, we want many medium-sized ones. That way the companies don't have the power to strong-arm cities and nations. Taxing could be one way to make sure that mid-sized companies get an advantage over big ones.

Re:Time to start taxing revenue instead? (1)

dnaumov (453672) | about a year and a half ago | (#43607759)

So basically, you want to outright kill every single big company that has a net profit margin of less than 5%?

Companies don't get big by having a net profit margin of less than 5%

Tell that to Wal-Mart, Amazon, Glencore, etc etc

Re:Time to start taxing revenue instead? (1)

fnj (64210) | about a year and a half ago | (#43607847)

Companies don't get big by having a net profit margin of less than 5%

OK, let's look at S&P 500 net profit margins by sector [businessinsider.com] . The S&P 500 comprise some pretty big companies.

Consumer discretionary -> autos and components: 4.2%
How about Consumer discretionary -> retailing: 4.0%
Food and consumer staples retailing: 2.9%
Health care equipment & services: 4.7%

Most people think net margins are gigantic. In some sectors they are substantial, up to 20% sector-wide, but in other very important sectors they are extremely modest. Even the S&P overall is 9.0%. That means plenty of S&P 500 companies overall are below that figure.

Re:Time to start taxing revenue instead? (1)

N1AK (864906) | about a year and a half ago | (#43607691)

Another pretty obvious alternative result would be that companies would increase prices to make up for any tax increase, like they've done with tax increases in the past. You're also missing the point that this would be instead of a tax on profits so if the total amount of money raised was the same then any company which isn't currently avoiding taxation would end up paying less tax. Some issues aren't simple black and white; think a little harder about likely consequences when you think it really is that simple.

Re:Time to start taxing revenue instead? (1)

_Shad0w_ (127912) | about a year and a half ago | (#43607513)

Unfortunately that fucks over a lot of companies. In fact most companies that have high overheads; we had an income of over £80m last year. Only £3m of that was profit.

Re:Time to start taxing revenue instead? (1)

91degrees (207121) | about a year and a half ago | (#43607519)

Honestly though, if a company decided to shift profits to another company in order to avoid paying shareholders, this would be considered outright fraud.

For some reason tax evasion doesn't have the same criteria.

Re:Time to start taxing revenue instead? (0)

Anonymous Coward | about a year and a half ago | (#43607927)

Honestly though, if a company decided to shift profits to another company in order to avoid paying shareholders, this would be considered outright fraud.

No, it would be called Hollywood Accounting http://en.wikipedia.org/wiki/Hollywood_accounting [wikipedia.org]

Re:Time to start taxing revenue instead? (1)

91degrees (207121) | about a year and a half ago | (#43608229)

The studios should be charged with fraud as well though.

Looking at the examples, it seems the studios often settle or lose when they are sued.

Here's a techdirt article on the practice [techdirt.com] . I think the main reason it's still happening is that usually, those with the resources to sue are also savvy enough to ask for a percentage of gross.

Re:Time to start taxing revenue instead? (1)

Xest (935314) | about a year and a half ago | (#43608089)

The problem is that this hurts companies that are genuinely making a loss through a genuine need for restructuring and so forth.

What really needs to happen is to reorganise the way in which profits are calculated and at what point tax occurs.

Right now, the problem is that tax is taken after every other possible deduction on revenue has been calculated. The key is to move it up the chain of importance (but not all the way up to revenue). Realistically tax should come after genuine expenditure like staff wages, but before things like royalty payments which are heavily abused. This would keep royalty payments purely for what they're intended, as there'd be no reason to make them up arbitrarily for tax dodging purposes.

Tax shouldn't be pretty much the last thing (or in many cases, the last thing) to be calculated, it should be forced to be prioritised higher, and should come after only real expenses. This would also force companies to have sane policy on royalty payments and such because it wouldn't help them avoid tax, but would have a real impact on their real actual profit.

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Tax avoidance vs evasion (1)

Anonymous Coward | about a year and a half ago | (#43607431)

How to tell the difference?

Activity A is subject to tax.

You can avoid paying the tax by not doing activity A

If you do activity A and perform other acts solely to get around paying the tax, that is evasion.

Simple.

This is the same Margaret Hodge... (0)

Anonymous Coward | about a year and a half ago | (#43607433)

... who owns shares in her family's business which is tax advice for large corporations.

Re:This is the same Margaret Hodge... (1)

TheMathemagician (2515102) | about a year and a half ago | (#43607731)

Actually the family business is the steel-trading company Stemcor of which she owns about £15m worth of shares via a trust fund in the names of her children and other family members in order to avoid paying tax.

The government wants its cut (-1, Troll)

udachny (2454394) | about a year and a half ago | (#43607489)

Eric Schmidt [guardian.co.uk] just 10 days ago said that Google pays everything it owes in UK. Of-course there shouldn't be any income taxes in the first place, UK or US or any other country, all of these income tax schemes must be demolished, but hey, that would be real austerity IF the government also was cut in process, not just putting the difference on its credit card or printing it.

Real austerity is cutting all unprofitable spending, all government spending and then allowing the private sector to keep their taxes, because the government spending is reduced to almost nothing. THAT would be austerity.

Instead all these nonsensical countries raise taxes and grow government spending and call that 'austerity' and then complain that austerity doesn't work. Of-course it doesn't work when you don't do it.

Back to Google, they should just bribe a few politicians to get them off their case.

Simple solution (0)

Anonymous Coward | about a year and a half ago | (#43607555)

Stop companies for counting funds stashed overseas on the balance sheet.

That way if they don't bring the funds home (and pay tax) their operating capital and profits are 'accurate' - and the share price will plummet because teh value of the comapny s vastly decreased.

Put that in perspective, if google had money in say Cypres, is it really 'profit' ?

Google's real motto (2)

Required Snark (1702878) | about a year and a half ago | (#43607599)

Pay No Taxes

Re:Google's real motto (-1, Troll)

udachny (2454394) | about a year and a half ago | (#43608077)

It should be a universal motto. Nobody should be forced to give up any amount of their income.

Tax transactions, that's where taxation belongs. Tax heads, you can impose a direct (proportioned in USA) tax.

Taxing income, profits, wealth accumulation, savings is:
1. theft of private property, so it's immoral.
2. bad for the economy, as instead of investing more, people are more concerned with ways to avoid taxes.

They're not paying their taxes in Ireland either.. (1)

Anonymous Coward | about a year and a half ago | (#43607633)

http://businessetc.thejournal.ie/explainer-irish-corporation-tax-715761-Dec2012/

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Shame on Google! (0)

Anonymous Coward | about a year and a half ago | (#43608037)

Who do think they are not paying tax, UK Politicians?

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