So the original complaint was that these American companies are comin’ over ‘ere and not paying tax. Anywhere. So, Trump solved that one by making American companies pay tax on profits they didn’t repatriate. Job done.
Except, of course, for the tax campaigners that’s not enough. So the next idea is that those Big Bad American tech companies, if they’re making excess or economic, profits, should pay a minimum global tax rate. Absurd but that’s the current idea. This isn’t good enough:
Amazon is one of the largest businesses in the world, with a market value of $1.6tn (£1.1tn) and sales of $386bn in 2020. A Luxembourg subsidiary paid zero corporation tax in 2020 on sales income from across Europe of €44bn (£38bn), making Amazon a prominent target for politicians campaigning for changes to the global tax system.
However, its profit margin in 2020 was only 6.3%. It runs its online retail business at very low profit margins, partly because it reinvests heavily, and partly to gain market share.
Richard Murphy, visiting professor of accounting at the Sheffield University management school, said the 10% profits threshold was “inappropriate” because of different business models for different companies.
So a company that makes low profits should be taxed more anyway.
This at the same time that over in the US people like Lizzie Warren are arguing that companies paying out their profits as dividends and buybacks are terribly naughty. Because they should be investing in their businesses. Which is what Amazon does but that’s naughty. Because, of course, the point isn’t that companies should righteously be doing this or that but they should be doing what Lizzie damn well tells them to do.
There is one amusement though. From these guys:
George Turner, director of TaxWatch UK, a thinktank, said it would be vital to ascertain whether tech companies would pay more UK tax overall, after the UK and other nations including France conceded that they will remove unilateral digital services taxes that aimed to target big tech.
“It could be taking with one hand and giving with the other,” Turner said.
TaxWatch is one of those lovely organisations. It’s largely funded by:
Julian Richer is a highly respected entrepreneur and philanthropist. The founder of Richer Sounds, the UK’s largest Hi-Fi retailer, Julian opened his first shop aged just 19.
The company has paid the real living wage to all employees since 2014, and gives 15% of its operating profit to charity every year. Richer Sounds has also been awarded a fair tax mark accreditation.
Ah, yes, Mr. Richer.
Now isn’t this interesting? Julian Richer is selling Richer Sounds, his audio retailing company. Which is great, obviously, we always like to see those who have done well cashing in. But the thing is he’s structured the sale in a manner that means he doesn’t have to pay any capital gains tax. Yes, that’s right, one of the dynastic fortunes of our time will be monetised without the Treasury getting even a sniff at it.
It should be pointed out that this is all entirely legal. But that never stops the tax campaigners does it? Amazon pays absolutely every bean that the law states it should pay and yet they’re abused as tax dodging bastards. Apple’s the biggest single taxpayer ever in the United States and yet they’re actually prosecuted by the European Union over the matter.
The difference between tax evasion and tax avoidance is well knows. Evasion is illegal, avoidance is entirely legal. And yet there are those who think that certain forms of avoidance shouldn’t be allowed.
Mr. Richer sold his company to his employees. Entirely and wholly legally. There’s a specific tax provision insisting that if he does this and meets certain rules then he pays no capital gains tax on that lifetime’s work. Cool.
But it is a bit odd for him to be funding an organisation that shouts against those entirely legal methods of tax avoidance, isn’t it?