Schmidt 'very proud' of Google's tiny tax bill: 'It's called capitalism' Google executive chairman Eric Schmidt has dismissed criticism over how little corporation tax his company pays, saying it's just capitalism. Schmidt is "very proud" of the corporate structure Google set up to divert profits made in European countries, such as the UK, to its firms in the low-tax havens of Ireland and The …
"but he does have a point."
Indeed, one could argue that the entire tax structure of 'Europe' has been built around these principles - why on Earth would any business not take advantage of lucrative tax situations - as long as it's all legal.
I get a bit fed up of politicians claiming someone else is morally bankrupt - talk about pot meets kettle. Fiddling expenses is ILLEGAL, but tax AVOIDANCE is not - not that hard to work out.
If the politicians weren't in it up to their necks they would be closing the loopholes - but all we get are soundbytes, inquiries and 'he's been bad - won't the public please punish them for us because we can't because they haven't done anything illegal'.
Bloody hypocrites.
Well said, sir.
It isn't the place of politicians - corrupt or otherwise - to stand there pointing the finger and single out individuals (such as Jimmy Carr) or even big companies. It's their job to audit the companies they suspect are avoiding the most tax, and close the loopholes being used.
At the risk of sounding evil, I actually think it's quite refreshing the hear someone like Schmidt come out and basically say "Yeah, we avoid paying large amounts tax, but it's all legal, baby. Fuck you."
Tax accountants only exist to help you get away with paying as little as possible. Google's are obviously better at it than most.
"An interesting one. Short of Chinese or Iranian style measures, how do you propose you do that? I'd expect such ill-thought ideas in the Mail, not on the enlightened El-Reg."
Google are primarily an advertising business. They offer 'free' services in order to collect data about users so that they can better target their advertising. They do this because companies will pay more for targeted advertising.
You're right that Google can't be stopped from offering its 'free' services in the UK unless some form of censorship is instituted. However, if it is illegal for companies operating within the UK to advertise using Google then any data Google has collected about UK residents becomes valueless (I suspect the CIA don't pay anything for access to this data).
The google could be innocent if they weren't the leading lobbyist among American high-tech companies. You see the way it works in America is that most businesspeople are fine and upstanding, but the rules of the game are encoded in laws written by the most easily bribed politicians. How many guesses do you want as to who is doing the bribing? Hint, it is not "most businesspeople". If you guess the least ethical businessmen, then you win. You also lose, unless you're one of them.
In other words, the google is not becoming evil just because the rules of the game in America require them to become increasingly evil. The google is "investing" to control how those rules evolve to require ever greater levels of evil just to keep your company alive.
Why are people being blasted for using the tax rules to their advantage? surely it's the rules that need to be changed if this is the result of it.
I don't blame rich people for trying to pay as little as they can, we all do that. It's the rules that facilitate this that need to be looked at.
And yes, i think Google should pay a shitload more tax, just look at how much they made in the past few years.
It's easy to do; just follow the scheme set up by thatchers grubberment and availed of by David Cameron father ,
Simples!
And remember it's only morally repugnant if you're not a Tory .
IF politicians want to close down these sort of tax loopholes they could, as I always say, follow the money
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"because, we wish we could do exactly the same, or even better, but can't really afford the services of those sandwich-making accountants / lawyers."
If the system is set up such that it is cheaper to pay an accountant to avoid the tax liability, then *obviously* that will happen. Apparently only the politicians are too effing thick to see this.
If we ignore this systemic problem and instead insist that Google pay more tax than they need to then firstly their shareholders will sue them and secondly we are effectively asking them to make voluntary contributions to our nation. Does "begging" sound like a sane way to finance public services?
We've identified a handful of major corporations that are avoiding tax. Great. This gives us a clear example of what is wrong with the system. Now we need to kick the damn politicians up the arse hard and repeatedly until they fix it.
Blaming the corporations merely lets the politicians off the hook. It is *all* the politicians' fault.
Not only that, I imagine executives of publicly traded companies are legally obliged to serve their shareholders by minimising their tax bill. So we have the bizarre site of committees of people who make the laws, railing against people for obeying them.
Why don't they do something useful and change the damn laws?
"So we have the bizarre site of committees of people who make the laws, railing against people for obeying them".
Very rarely, one sees a single sentence that perfectly sums up a discussion, to the point that there is little more to be said about it. This is one of those sentences - how I wish I had thought of putting it so neatly! (Like ancient Greek craftsmen, Mike has even put in a small deliberate flaw to avoid offending the Gods). 8-)
Couldn't agree more. No-one likes it and mostly everyone thinks it's a sneaky thing to do, but they didn't break any laws so hounding them for legal conduct will only ensure less cooperation in the future. And it's the future we should be looking to by closing these loopholes. In the modern business world, no CEO or CFO REALLY has any choice in the matter - if word got out they were planning to pay millions more in tax than they could legally get away with, they would be booted out and replaced with someone else.
For my money the only long term workable plan is to have a mandatory percentage of tax applied in the jurisdiction of the consumer, before whatever tax haven Amagoog is in this week gets a look in. It's the only way tax revenues will have a hope of rising or falling proportional to the population the taxes are collected to support. The big problems with this are implementing such a shift without violating international agreements, the risk of corporations sneaking on a stealthy price rise when they can blame it on the government, and the risk of smaller businesses suffering from increased complexity/costs.
Theoretically, but in reality, it's part of the price. if corporation tax were cut, or even abolished, and VAT increased, the price should not really increase. You're simply moving where the tax is taken.
Problem is, the final sale price is not necessarily related to the profit on the item and therefore it would be almost impossible to set a sensible VAT rate that worked for everyone.
Yes, VAT is paid by the end consumer, SO IS TAX,
if the tax bill goes up, so will the prices to compensate!
Anyone who thinks taxes are paid by anyone but the consumer doesn't understand economics (and unfortunately that also means most economists)
All taxes are added into the price of the goods, so the consumer pays it..
You don't understand business.
If the profit doesn't exceed the actuarial risk of loss, the business will either not be started or fold at the point the loss arrives.
There is no point in risking one's (hard earned) capital in business (especially with all these pesky laws to protect employees) if the odds aren't favourable.
"You don't understand corporate tax...Tax is paid on profit. Even if the profit on doing business is lowered, as long as it is still profitable, a company will provide that good or service."
You don't understand corporations. If you add 10% to a company's tax bill they will increase prices by 10% to cover the cost, while still supplying the product.
Seriously, you think they'll just go "oh extra taxes, but we can decimate our profits and still charge the same to our customers"? They call that kind of naivete "magic pudding" economics down our way
@Chet Mannly - Market economics and price elasticity of demand. Let's say corporate tax did go up 10%. Let's further say that 100% of that tax bill was passed on to the customer (which doesn't necessarily equate to a 10% price rise). The company has two problems:
They may not sell enough at the new, higher price (demand is highly elastic) and so have to lower it again; or
Their biggest competitor might know the above already and simply fire a few bodies to recoup the cost, or simply suck it up meaning that out fictional company cannot raise prices.
This, of course, does assume a near-perfect market with no monopoly player and no price fixing.
You don't understand basic economics - if you blunt the profit in a particular action, you blunt the incentive to do it. The most profitable actions should be ones that address the greatest scarcity. With a tax on profits, the actions that address the greatest scarcity are the actions that attarct the most taxation.
"Anyone who thinks taxes are paid by anyone but the consumer doesn't understand economics "
I think that more than adequately sums up what all these 'tax' stories are about, a lack of understanding, and that from the people we have in charge of fixing the economy the previous lot destroyed? We're doomed I say, we're doooooomed!
BOFP Calc: Google generated $4.1b in sales in the UK, and therefore extracted approx £500m from UK consumers on behalf of the UK government. That has got to be worth more to the UK economy than whatever corporation tax those fools think Google should be paying.
(Note: very approximate calculation due to not knowing whether the $4.1b included VAT or not, or even whether VAT was chargeable on all of it.)
"BOFP Calc: Google generated $4.1b in sales in the UK, and therefore extracted approx £500m from UK consumers on behalf of the UK government. That has got to be worth more to the UK economy than whatever corporation tax those fools think Google should be paying."
You mean, unless it's business-to-business selling, like, I don't know, advertising, which isn't subject to VAT. Google give essentially nothing to the UK economy but extract $4.1bn from it.
Anyone who thinks taxes are paid by anyone but the consumer doesn't understand economics
Lots of people don't understand economics, mostly commentards, politicians and economists :-)
There are a couple of factors that affect demand for a product:-
If google was taxed more and it passed on to the people who pay for adverting then that will increase the costs for people buying adverting who in turn would analyse the cost-benefits of paying for adverting with google. This may force the advertiser to look at substitutes (Bing???? Ha ha ha) resulting in a drop in income for google. Therefore google cannot afford to pass on a tax increse to advertisers (well not all of it anyway).
I'm not sure how this applies to oligopolies like google, mickysoft, etc.
Companies don't really pay tax, people do. Taxing companies is simply indirect way of taxing customers or shareholders.
What Adam Smith said about tax :-
The Four Cannons of Taxation.
Equality – Tax payments should be proportional to income
Certainty – Tax liabilities should be clear and certain
Convenience of payment – Taxes should be collected at a time and in a manner convenient for taxpayer
Economy of collection – Taxes should not be expensive to collect.
Corporation Tax does not fair too well on any of those.
Arguing that prices will go up by raising taxes is a completely false argument here.
Most companies in these countries are already paying these taxes, its a few bad players that playing lose and risky with the interpretation of these laws. Once they have to pay the same fair share as everyone else, they have a choice... loose the ill gotten added profits that they were originally stealing, or raise their prices to keep the same level of income. If they decide to raise their prices, the rest of the market that was already paying taxes suddenly becomes a lot more attractive to the end customer, and is a lot more competitive because of it.
Its the same principal that the Cess-filled wastes of human skin that call themselves the Walton use when running Walmart.. they refuse to pay fair wages and play by the full/part time laws... all their employees are part time and only subsist of off government dole and welfare. If they had to play be the rules, their prices would now longer be able to undercut everone else, and consumers would then have a real choice of going with competing companies that are not made of the same pile of stinking bile that makes up Walmart.
RE Adam Smith, Google makes the most income and should therefore be paying the most tax.
Taxes are certain, its loopholes and illegal interpretations of the law that allow this, if the governments take a few simple steps to clarify a minimum alternative taxe (no matter the loopholes you at least pay this much) then it would certain and simple)
Paying quarterly through automatic bank deductions is way more easy that Smith could have ever imagined a bank transaction to be. He did not have accounting software or electronic payments
See above about collection... should cost almost next to nothing to collect.. Now enforcement of law breakers may cost some, but should be able to pay for itself with the deterrence and regained monies collected.
Corporate tax does pretty well on all four parts if you remove these kinds of crap loopholes that only a few are able to take advantage of
Corporations are not people.
The less tax a corporation pays, the more it has for employees & shareholders.
Taking from employees and shareholders and giving to government makes sense according to who?
Before you respond, please read:
http://www.theregister.co.uk/2012/11/25/tax_and_tech_biz/
I was actually converted by the perfect logic of this piece.
"The less tax a corporation pays, the more it has for employees & shareholders."
In an ideal world, perhaps. A world where all employees earn enough to own shares in their companies and the general public holds shares so they can vote at company AGMs on things that matter to them. This is not the world in which we live.
Companies avoid paying tax, enrich their senior management and enrich the shareholders (sometimes these a pension funds, so that does play into you theory; more often that not it's tortuous shell companies to siphon the money away to the elite).
So these companies take everything, return nothing and at the first hint of trouble; they run away squealing like the pigs they are, or come begging for billions. Which their elitist pals in government decide they really must have, because their chums are much more important than schools or hospitals*. The bankers cost us billions in tax avoidance, billions again in the bail out and not one banker has been jailed or had their assets stripped in an attempt to recover their defaults; yet ordinary people are losing their jobs and homes instead.
That's the world we live in. The rich get richer, the poor get poorer and we sit here like total mugs and thank them for it.
*And it gets worse. With the likes of PFI we pay a company to build a hospital, which it then rents to us and all profits get hidden in a tax haven. When said company wants more money, it threatens to dump the hospital and we cough up. Same with school, trains and every other place that the PFI cancer has infested society.
Ye despite all the evidence on how bad PFI is, the ConDems and Labour still have a raging hard-on for it. It's almost as if their members were profiting personally from it. But that could not be, not those bastions of prudence and honour.
Pfft.
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