[Closed] Google Tax and what do you get?

Have you had a look at La Hodge's financial arrangements? They're all at it!

At the end of the day it is governments that make the tax rules. As directors of Google is it not their duty to maximise profits and minimise costs for their share holders( the owner ) If they don't do this then are they not derelict in their duty? Why would anyone pay more tax then they need to.

I do not see any reason why the government cannot bring in stronger laws. People all say it is impossible because of cross boarders but certain countries like the USe, Belgium etc have banned online gambling and the companies play by the rules of the land.

The real problem we have is that as we are in the EEC (which I think is great) and have open borders we can not stop free trade with the rest of Europe. So with Google basing themselves in Ireland we cant do much about it.

Easy solution is to make corporate tax rates more attractive in the UK so the government doesn't lose revenue overseas.
Sadly I think Labour and the Libs would vote it down as there is an ideological aspect of their more socialist policies that seems to want to punish success in business. ...and then cry foul when companies base themselves off shore to avoid punitive tax!
They can't have it both ways...they need to encourage business or accept that multinational companies will use the more attractive tax rates abroad and the government will lose out altogether.

Easy solution is to make corporate tax rates more attractive in the UK so the government doesn't lose revenue overseas.

That worked so well for the Irish.

As directors of Google is it not their duty to maximise profits and minimise costs for their share holders( the owner )

Trouble is they only take a short term view, based on the bonus culture and share flipping. When all large corporations take the same view they are damaging the markets they profit from. Ultimately the continued pursuit of greed following this model will destroy them, not just singularly but collectively will bring the system down.

Easy solution is to make corporate tax rates more attractive in the UK so the government doesn't lose revenue overseas.

This.

Or even better do away with corporation tax. It's a stealth tax. Corporations don't pay tax, people pay tax - it's people the involved who foot the bill:

Higher tax means lower returns for shareholders, lower wages for staff and hight prices to the consumer.

Reduce it to zero.

As directors of Google is it not their duty to maximise profits and minimise costs for their share holders( the owner ) If they don't do this then are they not derelict in their duty? Why would anyone pay more tax then they need to.

There's a difference between efficient tax planning, and setting up teams with the sole function of exploiting loopholes, which aren't available to ordinary businesses. And I suspect that these companies' stated aims aren't solely the short-term maximisation of shareholder returns.

The thing is, they're not all at it. Compare Starbucks with Costa, or Amazon with John Lewis.

My wife (who is a chartered tax adviser) tells me it would be very difficult to devise tougher rules that wouldn't catch out legitimate businesses.
That said, HMRC are far too keen to roll over (Vodafone) and waste too much time on trivia. Did you know they're currently going after small cricket clubs, who have committed the dreadful sin of paying scorers out of petty cash?

[i]There's a difference between efficient tax planning, and setting up teams with the sole function of exploiting loopholes, which aren't available to ordinary businesses.[/i]

There's not really any difference, its all about reducing costs to the business.

MSP - Member

That worked so well for the Irish.

Ireland's problem was a government spending more than it was recieving in revenue....the same for Greece....the same for me if i spend more than my salary each month....this isnt rocket science.

Politicians became dizzy on low interest rates for borrowing and ran amock splurging money they didnt have on the public sector like there was no tomorrow.
When the banking crisis hit they realised they'd put nothing away for a rainy day, had no way of repaying the ludicrous debt and had to start begging to the EU....my Granny taught me to live within my means when i was still in short trousers, you'd like to think our politicians understood this sound advice.

Ireland's problem was a government spending more than it was recieving in revenue.

And if Governments keep bending over for the corporations who's left to raise revenue from. It's the small businesses, small start-ups and individuals that are suffering under current tax regimes, the real lifeblood of the economy and the potential to grow are being stifled by governments pandering to the corporations.

Ireland, Luxembourg etc should be blacklisted for their corporate tax regimes, excluded from free trade agreements, until they come in line with the rest. Corporations are having a laugh at our expense playing countries off against each other with false promises of future revenues that they will never deliver.

What MSP said.

two things:

1. The fiduciary duty thing on google's directors is an absolute load of crock. Almost no other company has set up such an elaborate web of companies to disguise what are clearly in-country sales via a plethora of IP cross charges, license fees, non selling "customer advisers" and other such nonsense. There are plenty of british based multinationals paying average tax of over 20% on profits whilst google pays virtually none and puts on a good effort of trying to bankrupt the likes of ITV who do play by the rules. Google are unethical and lacking in integrity and their business model and leaders should be held responsible for this in the court of public opinion.

2. HMRC estimate the total amount lost through aggressive tax avoidance planning for high net worth individuals and corporates is around £32B a year.

The unpalatable truth (particularly for Ed Balls) is that even if everyone and every organisation like google paid up, government spending still outstrips tax receipts by some margin and has done so every year since 2002 ish when Labour started to borrow £1 for every £2 they spent on welfare. It's no good nibbling round public services slicing a bit off here and there - we need to radically re-think how services are delivered and drive significant cost savings if we are ever going to get back on a sustainable footing AND make sure high net worth individuals and the likes of Google pay up towards the cost of the services that enables them to create wealth in the first place i.e. education, infrastructure, health etc.

The first thing they need to do is close or the loop holes or at least have a method of closing them in real time as they come across them. I was listening to the US Sentate hearing the other day when they were questioning Apple and Tim Cook as saying that they were so large that they have permanent IRS (HMRC) staff based at their headquarters looking over the books and advising what is right and wrong. Cant imagine that ever happening in this country but its what should be happening as a few staff could save millions in lost tax.

What Google is doing is actualy known as fraud they make a deal in london which is liable to UK tax then lie and say it was made in Ireland so avoid uk tax dishonestly.

Corporation tax should be changed to an income tax rather than a profit tax then the creative tax avoidance would be wiped out at a stroke.

Loony left or does she have a point

I like impartial questions I do

Have you had a look at La Hodge's financial arrangements? They're all at it!

Staggers back in amazament as the CPT somehow manages to turn the question round to have a dig at labour

Why would anyone pay more tax then they need to.

Well it all comes down to what you mean by need to tbh. Not all companies choose to aggressively avoid tax in this manner the answer is because they [ lets not pretend a company is not owned by people] have a moral conscience and they are not selfish ****s.

there is an ideological aspect of their more socialist policies that seems to want to punish success in business. ...and then cry foul when companies base themselves off shore to avoid punitive tax!

you sure this does not happen because the companies and their owners are not basically very ****ing greedy- no one forces them to do this. It seems strange to blame those who oppose it for their behaviour. What utter nonesense you can support big business if you like and lower taxes but at leats be honest about it and explain why. PS Who TF thinks the lib dems or labour have socialist policies?

They can't have it both ways...they need to encourage business or accept that multinational companies will use the more attractive tax rates abroad and the government will lose out altogether.

What? I think you can actually both encourage busines [ whatever that means] and expect they to pay tax. Perhaps we should just ban them from operating here if they wont pay tax on what they earn here?

Or even better do away with corporation tax. It's a stealth tax.

You may wish to look up the meaning of the phrase stealth tax In hat sense is Corporation tax a hidden tax?

Corporations don't pay tax, people pay tax - it's people the involved who foot the bill:

This is just basically incorrect though it may be what you want to happen

Higher tax means lower returns for shareholders, lower wages for staff and hight prices to the consumer.

Yes if we lowered tax they would share the money around and not at all increase their own profits this is definitely what would happen..it would trickle down as well for the betterment of all

Reduce it to zero.

Yes that would help in our times of austerity and the books not balancing

It will take joint action to stop this and it is not going to happen ...the only think that will matter is if people stop using them and that is unlikely

Dont like google tax affairs dont use google same with amazon etc hey dont care about anything but the bottom line. If we dont use them they make nothing

Roddixon "1. The fiduciary duty thing on google's directors is an absolute load of crock. Almost no other company has set up such an elaborate web of companies to disguise what are clearly in-country sales"

What about:
Microsoft
Groupon
Adobe
Living Social
Starbucks
Amazon
Ebay
Paypal

Nearly every large multi national has their european headquarters outside the UK usually in Ireland, Luxembourg or The Netherlands where corporation rates are so low.

Its the governments job to stop people evading tax by having simple and clear laws. They were able to change the laws almost overnight when we had the banking crisis so they can certainly do it quickly when they want to.

I totally agree with you that these directors should be held to account but unfortunately as we have had piss poor government for so many years and even worse HMRC, these directors are not breaking any laws.

it is avoidance [ evasion is illegal]and really the issue is aggressive tax avoidance which they will always do as they dont GAS about anything beyond profit
Was it Thames water who are owned by a bank and pay all their profits as interest payments to said bank and therefore make no profit.
It may be legal but it is little more than fraud [ morally though obviously not legally]

simplification of the tax code is the place to start, it would drive some real efficiencies and make life easier for small businesses and individuals, get shut of National Insurance (redistribute the outcomes across corporation tax and income tax) and everything starts to organise itself accordingly

Quite simple

[i]No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.[/i]

Lord Clyde, Ayrshire Pullman Motor Services and Ritchie v. IRC (1929) 14 TC 754.

[i]Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.[/i]

Thomas Tomlin, Baron Tomlin, in the UK House of Lords case, IRC v. Duke of Westminster (1936)

Quite simple - if the Politicians don't like it, they should change the law!

woody 74 - google is virtually alone in having no internal sales transfers - instead we are told (i.e. it's b0llocks) that google's customers in the UK are purchasing (via Ireland) a license to use Google's IP / toolset which is funny because most of them think they are buying advertising in one form or another.

Google also use the double dutch with an irish twist tax fiddle to an extent that others do not - although there's a pretty clear pattern in that it's largely US companies d1cking about with internal transfers / IP licenses (starbucks doesn't sell coffee in the UK apparently - it's a brand license, IP etc etc. from Starbucks in Netherlands and Switzerland).

What's quite frustrating is that if you look down the FTSE 250 (which includes many companies headquartered here that have the bulk of the businesses abroad), most are generally playing by the rules yet they are all tarred with the same brush.

Everyone bangs on about Vodafone with no knowledge of what the tax dispute related or the subsequent national audit office investigation into HMRC's conduct which found they had acted reasonably - people continue to think Vodafone is a "British" company but most of their revenue is derived abroad, so they have (like many other companies) the usual challenges of moving money between markets in order to grow / invest / divest in markets and ultimately return dividends to uk shareholders (who are mainly pension schemes i.e. us) - that was certainly the case with the 2000 Mannesmann deal.

The rules are broken, Governments need to fix the rules.

What Google and pretty much everyone else is doing is playing the system, and then they've thrown in some genuine misrepresentation for good measure by claiming the London staff just introduce deals to the Irish sales force who close them. This has been alleged by the whistleblower to be a lie.

Companies like Google should be taxed on revenue generated in the UK, by taxing revenue you remove all the games they play by creating losses to set against profits and by booking profits abroad.

The European governments had the chance to address the low tax rates in Ireland back in 2008/9 when Ireland needed a bail out to avoid going bust, they did nothing.

Vodafone is a "British" company but most of their revenue is derived abroad

I will bet a pinch of pooh to a pound that they don't pay sufficient tax on that income derived in other markets either. When that involves removing income from some of the poorer countries of the world those involved deserve all the scorn and opprobrium that comes there way and maybe a sharp physical reminder that it's not "just business".

Companies like Google should be taxed on revenue generated in the UK, by taxing revenue you remove all the games they play by creating losses to set against profits and by booking profits abroad.

But wouldn't this kills loads of SME's who turnover modest amounts but don't make the profit? Given that the tax system should apply to all companies in the same manner? (Granted it doesn't at the moment, given a small business hasn't a cat in hells chance of [s]cheating the tax system[/s] operating as efficiently as a large corporate)

When they publish the company results boasting about how much profit they make, they should get taxed on that figure, not the BS figure they give HMRC.

Easy solution is to make corporate tax rates more attractive in the UK so the government doesn't lose revenue overseas.

Yes and an easy solution to the crime rate is to make crime legal. Got any more 'easy solutions'?

Seems to me that the tax avoidance situation is an inevitable conclusion of the lack of action on fiscal union in Europe

That fiscal union which is working so well at the moment?

i think you will find that it is capitalism that is not working all that great tbh..we are not in the Union would you say we are having a great time?

We seem to be doing a bit better than certain other countries. Isn't at least part of our problem actually the lack of demand in our biggest export market?

and worse than others....depends really.
Perhaps if we had been fine they would be fine ?anyway the point is everyone is screwed whether in the "fiscal union" or not so whatever the cause/fault it is not this fact

Do you really, really think that some countries aren't more screwed by being in the fiscal union than if they weren't?

uk shareholders (who are mainly pension schemes i.e. us)

Thats a myth.

At the end of 2010, insurance companies held 8.6 per cent and pension funds held 5.1 per cent by value. These are the lowest percentages since the share ownership survey began in 1963.

http://www.ons.gov.uk/ons/rel/pnfc1/share-ownership---share-register-survey-report/2010/stb-share-ownership-2010.html

Do you really, really think that some countries aren't more screwed by being in the fiscal union than if they weren't?

Well they would be able to devalue their currency, and then they would be able to load wheelbarrows with billions of notes and walk to the shop to buy a loaf of bread.
They wouldn't be able to sell government bonds, because who would buy a bond that will half in value by breakfast the next day?
They would just be trading one problem for another more serious problem.

Do you really, really think that some countries aren't more screwed by being in the fiscal union than if they weren't?

what they said and they would also not have a large massive bank supported by germany prepared to support their economy with billions of loans at [ it seems almost] any cost financial and political

Swings and roundabouts basically.

I suppose Iceland is the only example outside fiscal union and their response was to apply for full EU membership and they required relatively modest amounts of loans [5 billion].
I guess, in true StW , we could argue about that but I dont think the EU is as casual as many claim. In some respects oit helps in some respects it harms

the opposition and claims are largely politically motivated tbh as all economic approaches have frankly been rubbish as capitalism is booim and bust however the fiscal arrangements are "administrated".

Have you had a look at La Hodge's financial arrangements?

Very much a case of a cheeky bitch living in a glass palace and throwing stones.

Iceland has supended its application for EU membership.

When it comes to global companies it's the international tax system (or lack of) that's the issue not any particular country's tax system. The basic issue is where should revenue be taxed, it would be unfair on a company like Google to pay tax on it's UK revenue and then transfer that back to the US (HQ location) only for the US to tax it again there. They're almost forced to start looking for loopholes to avoid this. I'm not sure it is possible to create a workable international tax system either, it would be in a country's interest to operate outside of it and become attractive for companies to base themselves there. Just one country not cooperating is enough to severely weaken the whole system.

Iceland has supended its application for EU membership pending a referendum vote by the people.

It is unclear what the vote will be anyway the point was their response to financial crisis was to start trying to join the EU.
It is fair to say the current situation in the Euro zone has somewhat dampened that enthusiasms from some quarters.

When they publish the company results boasting about how much profit they make, they should get taxed on that figure, not the BS figure they give HMRC.

Grum, can you elaborate? What is the main difference between the formal company results and the ones submitted to HRMC. And if there is a difference why would HRMC not be able to deal with it? [I get the difference between management accounts for running a business and financial accounts for tax etc, just not the bit you are describing]

I would like to be in a position to criticise Google and others, but since I use them every day as a search engine, buy books from Amazon more than anywhere else and have had the odd cup of Starbucks coffee, that would probably be very hypocritical 😉 .

As directors of Google is it not their duty to maximise profits and minimise costs for their share holders( the owner ) If they don't do this then are they not derelict in their duty?

No, their duty is to maximise shareholder value, which is not the same thing. For example, the directors of many banks were reporting huge profits (and paying correspondingly large dividends) a few years ago, but based on faulty business models. As a consequence, the shareholders lost out because the reduction in the value of the shares when it all went wrong was far greater than the inflated dividends which they has received in the "good" years.

Conversely, directors reporting no profit and paying no dividends can be doing a great job if it's because they're investing in growing or developing a business which will be very profitable in the future, and the shareholders see this, not in a dividend yield now, but in significant increase in the value of the shares themselves.

In this case, if the end result is that Google becomes discredited and loses business as a result of its aggressive tax planning, then that might be where the apparent contradiction of higher profits not being in the best interests of shareholders could arise.

One of the flaws in the system is that traditionally it was envisaged that shareholders were in it for the long run, whereas that is not so much the case these days..

When they publish the company results boasting about how much profit they make, they should get taxed on that figure, not the BS figure they give HMRC.
Grum, can you elaborate? What is the main difference between the formal company results and the ones submitted to HRMC. And if there is a difference why would HRMC not be able to deal with it? [I get the difference between management accounts for running a business and financial accounts for tax etc, just not the bit you are describing]

There's loads. For example on tangible fixed assets (e.g. plant and machinery), the company can decide what it's depreciation policy is and apply that in calculating its profit as stated in its accounts (subject to auditors agreeing that the treatment is reasonable).

There are specific rules on writing down allowances in relation to Corporation Tax, so unless the company's depreciation policies happen to coincide exactly with the CT writing down allowances, then that will be adjusted for in calculating the CT due.

What is the main difference between the formal company results and the ones submitted to HRMC

I assume he means the blurb where starbucks talk about how profitable they are in the UK in there corporate blurb but then dont make a profit on paper and yet still expand here.

Do you really believe starbucks/Google/Amazon etc dont make any money here?

Thanks you for not doing a Euro thing here [ not sarcasm]

Cheers edlong. I am a carp accountant. I though the published pre-tax profit would equate to same figure used for calculation of tax liability. so to be clear, you can apply different depreciation policies to your tax submission and your published set of accounts?

I do not agree that a management's sole objective it to maximise shareholder value. That has become recent folklore but is at best only part of the story. At the very least, they have a responsibility to three consituents: customers, staff and shareholders. OK, each of these interests may conflict with paying higher rates of tax but that is a different argument (expressed on previous page) from the narrow focus exclusively on shareholders IMO.

JY - I see little difference between Google etc and most multi-national companies tbh. Hence, my choice to still use their services.[edit, but yes they generate more returns that published in UK than published accounts would suggest imo]. But I also think that the Hodge criticism is valid 😉 !!

I left Euro out (in your honour!) merely because I do not believe that it is relevant. We need international tax harmony not just EU harmony. And that will never happen imo.

Of course it wont happen as little islands/enclaves/territories can make shit loads of money by being tax havens...perhaps we should invade like we do when they have oil?

I think some companies are clearly more aggressive in their tax avoidance [ some dont try very hard at all] and the ones named here are amongst the worst as are Thames Water

As i said the only think that will make a difference is if people stop using them and that is unlikely though i do my bit

Doh, mine was a stupid question. I understood impact of depreciation and valuing inventories but forgot that tax coding allowed this to differ between tax accounts and published accounts. Its over 20 years since I last looked at accounting and I was bad at it then! Beauty of google is that a few minutes later my ignorance has been corrected!!! As they say here, oh the ironing!!!

I do not agree that a management's sole objective it to maximise shareholder value. That has become recent folklore but is at best only part of the story. At the very least, they have a responsibility to three constituents: customers, staff and shareholders.

Well, in many cases they are congruent, i.e. if your customers and staff are happy, this will be for the good of the shareholders. However, the reality is that where they are in conflict, it is the shareholders who win - whether that is through making your UK staff redundant and outsourcing production to a cheaper territory, or charging higher prices to your customers.

Sure, there's been concepts such as "Corporate Social Responsibility" introduced to try and create some balance, but ultimately this is still done primarily for the interests of shareholders, e.g. if your firm as seen as "socially responsible" then this is good for business (sales) rather than just a good thing in itself. For example, customers choosing to buy their overpriced coffee from someone more socially responsible than Starbucks is considered to be.

so to be clear, you can apply different depreciation policies to your tax submission and your published set of accounts?

Yep.

@teamhurtmore - the Starbucks CFO/CEO (I cannot recall which) spoke glowingly about how profitable the UK was on an investor call. It's just they declare pretty much zero as taxable profits once all the accounting swerves (like licence payments to offshore subsidiaries for use of the brand / logo / ... ) are applied

Starbucks should be taxed on revenues not profits (as per my post earlier) the rate would only need to be 2% or 3%, if they don't like it they can leave and we can go back to small independently run shops. The same should apply to Apple, Amazon and Google etc

I just think we should be eternally grateful, as a nation, to these selfless companies for continuing to offer their services to a thankful nation, despite them doing so at a loss, year after year. Could they not apply for charitable status?

Actually... they've probably already tried it

Starbucks should be taxed on revenues not profits (as per my post earlier) the rate would only need to be 2% or 3%, if they don't like it they can leave and we can go back to small independently run shops.

That doesn't work though, because there is only an incentive for high margin sales. If CT was 3% on revenue then a profitable business producing high volumes, but selling at low margins would be screwed.

Jamabalaya, re the Starbucks stuff. When this was last debated, I looked through Starbucks investor presentations and never saw any comments on "profitability". Not sure how apocryphal that story has become or otherwise? But like edlong, I an not convinced that revenue taxes are the correct (if any) solution.

That doesn't work though, because there is only an incentive for high margin sales. If CT was 3% on revenue then a profitable business producing high volumes, but selling at low margins would be screwed.

Pretty sure we can legislate* so we just make Starbucks do this if they dont like it they can leave

We need to be as target them tbh

* if we cannot it is Europes fault right:wink:

Pretty sure we can legislate* so we just make Starbucks do this if they dont like it they can leave
We need to be as target them tbh

* if we cannot it is Europes fault right:wink:

I'm not convinced that having laws to target specific, individual companies is the way forward. Who is going to decide which companies are targetted, and with what? The "Comment is Free" crowd on the Guardian website? Richard Littlejohn? Mark Thomas? hora?

As I've said before on one of these "corporate tax avoiding bastards" threads, there's plenty of tax avoided by people that don't hit the front pages of the press, such as your friendly local plumber / builder / motor mechanic doing jobs for cash (avoiding VAT, and tax on profits) and also paying their workers cash-in-hand (avoiding employers' NI and allowing the workers to avoid NI and income tax). It's no different. No, hang on, actually it is different. The Vodafones, Starbucks, Googles etc. are aggressively using the available legal framework to their best advantage. The local builder working for cash / paying in cash is absolutely, indisputably breaking the law and acting utterly dishonestly.

Who's the villain?