Taxing Times For Google

So, here's how it works, Sir. You agree to buy this lovely car, I'll throw in a years insurance and you can drive it away today. What's that? How do you pay? Sorry, I don't take cash. Debit or credit card only, or we can arrange finance. Cheque?  Well, I guess that's OK too. Make it payable to Honest Ray Sullivan Motors, Ireland please. Yes I know we're standing in a forecourt in London and this is a UK registered car but I pay lower taxes in Ireland, something to do with them being stony broke and keen to drag any income in that they can. Do I live over there? Do I look like I can afford a pad in the Emerald Isles? No, I live in London, where I sell my cars. Let's shake on it, but for transactional purposes this handshake is taking place in Ireland.  No I don't have a nervous tic, I was winking Sir.

Google have been coming in for a lot of stick in the UK over the last few months regarding their taxes. Google claim they pay everything they owe, it's just that they choose to pay it to whichever country asks the least from them. So they negotiate deals in the UK with UK firms with UK residents aimed fairly and squarely at UK consumers then address the billing invoice to an Irish account. Meanwhile, Mabel in Dublin picks up the mail in the morning, makes a cup of tea while she opens the envelopes, and then books the payments into the Google account.  At the end of the tax year Mabel files with the Irish revenue and pays a lower rate of corporation tax than would have been required if she had dealt with the UK Inland Revenue.

OK, so Google probably have more than one member of staff working in Ireland, but it is becoming increasingly obvious that they have been economical with the truth when they were questioned by the British Parliament a couple of months ago.  In fact, it looks like Google would have got away with their statements back then if it wasn't for a few dozen whistle-blowers who sent their pay statements to Reuters, the news agency.  Reuters investigated and have informed Parliament that it looks like the head of Google in the UK may have not been wholly honest.  In fact some Members of Parliament have suggested that Google may have committed Contempt of Parliament, which can result in gaol time for offenders.  Their deputy head in the region, Matt Brittan, suggested to Parliament a few months ago that none of their staff in the UK closed deals, but there is a lot of evidence that actually, they do.

Brittan is also understood to have said recently that almost nobody cared about how much tax Google pays, underestimating the national sentiment by about 60 million.  If we had a pound for every person in the UK that thinks corporations like Google should pay its fair share of tax then we'd quickly garner more money than Google have ever paid.  However this is hardly a news item, if you Google tax avoiding scams UK you'll find no end of entries going back years - Google are serial none payers of tax, and not just in the UK.  Hardly any of their profits make it back to any government - they have an arrangement in Barbados that means they pay hardly any tax.  Brittan calls it capitalism and makes no apologies for trying to keep all the  money to themselves, citing that they are a major employer in the UK (they do employ a couple of thousand people, so they are a middling employer), but it must be assumed his statement was a thinly veiled threat.  One MP pointed out there are plenty of large companies in the UK that employ sizable numbers of people, make good profits and pay their share of taxes.

Google aren't the only organisation in this country that is avoiding paying taxes.  It could be that they are up there with the best of them with regard to avoiding taxes - it's likely that many countries they operate in also fail to benefit from their profits generated by their own populace, and it looks like that includes the US.  But the irony is that their innovative mapping strategy that involves driving a car around every country in the world requires roads to do that, as does their self driving car scheme.  Where do they think the money for the roads comes from?

This is a story that will roll on - maybe Google will close its UK arm if the Government gives it a hard time.  It could shift its sales teams over the water to Ireland relatively easily and I'm sure there's plenty of unemployed people in Ireland who would love that to happen.  And maybe there would be no backlash to such a move.  However they may also find that the UK love affair may end too.  They're not the only search engine out there and traditionally us Brits have preferred underdogs and resented organisations that have got too big for their boots, and the arrogant statements coming out from Google right now might suggest their footwear might be straining a bit.  I'm sure Mr Brittan will have to return to Parliament and my advice would be for him to make sure he can back up his claims, because I suspect Parliament will be checking very closely.  In fact I expect they will Google and Bing every claim he makes.

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On-line Services Need Off-line Logic

In the late 1960s the UK made the first faltering steps towards decimalisation.  I was just a kid and remember my teacher in what would now be called sixth grade but was just 'Junior 4' to me then, holding up some pre-decimalisation coins and explaining that we were going to get new coins to replace them.  I was fired up; at ten years old I was quite bored with the shillings and florins, not to mention the half crowns that I'd had virtually no exposure to.  This was new coinage and I had visions of triangular shaped coins to herald the new era in.

Of course the new coins weren't that radically different to what went before, in the final analysis, but the way of counting was.  Out went the old 240 pennies to the pound, in came the new-fangled 100.  It was a time of change and I grew up understanding the old and the new currency systems quite well, not that the old guinea based concepts had much practical use once we'd changed over.  We did the same with metrication at the same time and that did help as for much of my RAF career I worked on aircraft that used imperial and metric measurements, so interchanging between them was a common event.  It was the younger, post metrication, engineers who struggled with the imperial stuff.

But with decimalisation it was the older folk who struggled as they tried to reconcile a lifetime of working in pounds, shillings and pence and the toll on some was just too much.  As decimalisation became a reality in the early 1970s, when I was in secondary school, I remember reading about the oldies who just couldn't cope and had sadly ended it all.  I suspect that in many cases there would have been other underlying reasons for taking their lives, but probably none that would sell newspapers.

Today that generation of oldies are largely gone, we're forty plus years down the line and nobody realistically harks after the old money.  Today's decimalisation and metrication challenge is the use of computers.  It's hard to imagine that computers present a difficulty to anyone anymore, given that we've all been using them for thirty years, right?  Well, actually, a lot of people haven't.

First off, access to the technology was costly in the early days and in fact that barrier continued for a good fifteen plus years.  It was only geeks, nerds and me who seemed prepared to put their hands deeply into their pockets back then.

Then there was the underpinning technology - not terribly different from today's but not as well disguised.  Back in the early days of computing and, in fact, up until comparatively recently, you needed to deal in ones and noughts, arcane hexadecimal numbers or in meaningless technical jargon to use the blighters.  I've long advocated that computers should be like TV sets in that you pull them out of the box, plug them in and they work.  I believe we could have had true plug and play a lot sooner than we did but that would have meant the software designers going an extra mile.  And programmers, a breed apart, just don't understand why someone wouldn't want to type a line of perl instead of just clicking on an icon.

So there is a generation of older persons in the UK who missed the digital bus.  Not all, by a long chalk, and many of today's retired greys were the driving forces behind the technological revolution that we all use today.  But society is full of different people, with different skills, knowledge and abilities and many feel that computers are somehow complicated (and to be fair, underneath, they are) and that they couldn't possibly learn how to use one at their age (add any number above and including 45 in here and you're probably still excluding some younger people in this group).

So, in the UK and I'm guessing most of the developed world, there is a core of people who do not feel comfortable with computers.  Of course this is a social issue that we all should try to help out with - volunteer  assistance, provide free training or perhaps just cut those with poor IT skills a bit more slack than many of us do.  Now it appears that many of the people who are less likely to be good with computers are the ones who need access to government services - the elderly, the unemployed and those with issues that the social state deal with.  Unfortunately the government is making it harder to interact with it by any means other than through computers, which disenfranchises those with the most need in many cases.

The reasons are obvious - it's estimated that every face to face enquiry costs the taxpayer £8.62, a telephone enquiry as little as £2.83 but it's the on-line enquiries that make the most savings coming in at 15 pence a pop.  That's one shilling and twopence in old money.  The estimate is that the move to 'digital by default' will save the taxpayer - that's me and you, unless you happen to be Amazon, Google or Starbucks of course - about £1.2bn  a year, rising to £1.8bn long term.  That's a lot of savings, but at a very real human cost.

I can understand the government wanting to save money - and the Civil Service cuts must mean that there's less people to talk to anyway - but it shouldn't be at the expense of those who do not understand computers and probably don't have access to the technology.  Some of the £1.2bn savings needs to be redirected to providing meaningful training and access to on-line services and, at least for the current generation of oldies, preserve some access to face-to-face information to help them.  Let's face it, with appropriate education and assistance then the long term gains will pay for themselves anyway.

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Taxing Times for All

These are hard times for many.  In some parts of Europe, in the mature economies, unemployment is running at over 25%.  That's a tough gig for anyone.  I know some will carp about the Social State and the amount of benefits available in such-and-such a country, but I'd rather earn a wage than be on the dole.

Those of us who have kept earning through the last five years have noticed a reduction in the purchasing power of our wages, in the main.  Taking a dive in spending power might seem trivial compared to not having a job, and I'd agree, but it is still unpleasant.  It is also galling to many that there is still an apparent strata of society that seems largely unaffected by the economic downturn - there's a significant amount of people who appear to be able to spend money like there's no tomorrow.  Senior bankers appear to be in this group.

Of course, whether you have experienced a pay cut, job loss, or just an erosion of your spending power, or even if you are one of the lucky few who are relatively unaffected by the economic situation, the impact of the current financial situation will not have passed you by.  However all of us are likely to be affected by the cuts in public spending to some degree.

Now this isn't a political rail against any particular party; this blog is read across the globe in both hemispheres in countries that have widely differing political systems so that would be a pointless exercise.  And I fully accept that some readers believe whole-heartedly in the cuts to public sector spending while others will think it needs to be balanced and another group will insist that any cut is a bad one.

Now I'm a bit of a pragmatist by nature.  I recognise that we are always going to have a public sector of some size and consequently there are always going to be taxes needed to fund them.  Plus, apart from the extreme right wing in this country (at least) I guess we all want roads, schools, hospitals and all the other embodiments of a public infrastructure.  In the UK at the moment the drive is to reduce the public sector while maintaining the tax burden to reduce the deficit, mainly because that's the only obvious route to doing it other than raising taxes.

Like many other countries the UK is now taking a firmer stance against those who choose to not pay the right amount of tax, however this isn't always an easy task.  It is for those of us who are normal wage earners, but for the well heeled and large corporations with the cash to pay smart people to scrutinise the tax laws there are many ways to avoid paying too much.

This has caused a bit of a furore in the UK recently as it seems many of the global tech companies such as Amazon and Google are paying little or no tax in the UK and global coffee house Starbucks has managed to avoid making any profit, in a technical sense, for a decade, consequently not paying any tax.

Actually, despite the public outrage about the Starbucks side of the picture, they did pass on a sizeable amount of tax in the form of VAT and staff Paye-As-You-Earn (PAYE) income tax.  What they did do was reduce their Corporation Tax liability by legally shifting money around Europe and leasing their own logo from the US.  As far as I know, and I'm not an accountant or a lawyer, they didn't break any laws, they just exploited gaps in the legislation of the country.

The same goes for Amazon and Google.  They employ a lot of people in the UK, who all pay income tax.  A lot of the goods we buy from them are subject to VAT, so that feeds back into the public coffers too.  But they do seem to have spent a lot of effort in reducing their tax burden.  But I'm guessing they quite like having roads to drive on and hospitals for their employees.

Anyway, there's been a bit of a stink about the tax avoidance tactics of these three companies.  I'm sure they're not unique but it would appear that they are amongst the most effective at the avoidance thing.  As a result of a newspaper campaign backed by outraged politicians, who quite recently spent a lot of their inventiveness in fabricating expense claims that bled the taxpayer pretty well dry, the three companies are getting a lot of public scrutiny as 2012 draws to a close.

Predictably Starbucks caved in first - avoiding buying a latte in Starbucks is a lot easier than avoiding using Google to search for an alternative coffee house in the area or using someone other than Amazon to do your on-line Christmas shopping.  But Google have also felt the pinch as advertisers have decided that associating with them might damage their corporate image.  Amazon may come out of all this unscathed and virtually untaxed - they hold that much sway in the public shopping mind that it's difficult to imagine any other business ousting them right now.

But the real issue is the tax rules.  None of these companies, as far as I'm aware, did anything illegal.  Sure, they may have been inventive, wilful even.  Morally challenged probably doesn't even come close.  But law breakers?  Almost certainly not.

Simplify the tax rules, then make it clear - you trade in this country, you pay the taxes due.  If any Government gets that wrong and makes it too unprofitable for the likes of Amazon, Google or Starbucks to trade here then they'll do what any rational commercial enterprise would do - they would turn their backs on the country and millions of vote bearing, coffee drinking, Google searching and Amazon buying people would ensure the Government got it right pretty quickly.

Sorting the tax rules out should be a priority, although I don't see any move from my armchair, just lots of outraged politicians attempting to bully Amazon (good luck there guys).  However, getting the tax laws is likely to be a big job, will take time to get right.  So I guess a bit of moral pressure on these three and any others that are legally avoiding tax will have to continue.

In the meantime, why not avoid paying any tax - or indeed any money - at all by 'buying' my second novel, The Journeymen for free using the special code in this posting.  Offer good until January 1st 2013, don't ask exactly when, it's in Pacific time zone.  Best you get your copy from Smashwords earlier than later.

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Why not take a look at my books and read up on my Biog here

Want to see what B L O'Feld is up to?  Take a look at his website here

Worried/Interested in the secretive world of DLFs?  Take a look at this website dedicated to DLFs here, if you dare!