3 Nov 2010

Are people who avoid taxes evil?

Following my posts yesterday about how Google manage to pay only 2.4% tax on their European operations, I suddenly thought that, hey, my Blogspot is actually using Google. Perhaps I should say something about whether or not I think that Google are "evil" when they come up with such an amazingly good tax avoidance/evasion scheme (after all, "Do no evil" is their motto).

Actually, to reassure Google (and avoid them blocking my blog, no, only kidding), let me make my position clear. I honestly think that it is not so much the people who are exploiting the current tax system to maximize their profits who are evil. They are, after all, just doing what is best for their shareholders. If there is a legal way of avoiding paying tax by shuffling money from Google Ireland to Google Ireland Holdings using tricks like the Irish Double and the Dutch Sandwich, then I guess that it is only normal that Google Inc (which is full of very bright people) will use it. (I strongly recommend the Bloomberg article on this).

The real problem is that we live in a world where this is possible. And as long as the taxation system is based on taxing income, profits and sales, then this will continue. The solution (in case you didn't know), would be to replace all of the conventional taxes with a single flat rate Financial Transaction Tax of (say) 1%. For Google's revenue from a European source, half of that 1% could be paid to the country of origin, and the other half could go to the US Goverment (if the money was paid to Google Inc in the US). This would allow both the place that is profiting from Google's technology and the place where the technology was invented to get a share.

It all seems so simple to me.

Unfortunately, if the Republicans take over in the US, they (or at least some of them) will be campaigning to abolish income tax (I'm ok with that), but replace it with a 23% Sales Tax (which I am absolutely opposed to).

1 comment:

  1. Actually I think there's a very good chance that the bulk of Google's financial transactions may be done in London - so under an Irish-US FTT Google might escape entirely tax free! 

    But I wonder how much financial transactions Google do - probably not a lot given that these days they are a cash-generating machine from ads. They'll probably be grateful for the reduction in their tax bill. If not, I'm sure they'll consider moving them to somewhere such as Hong Kong which doesn't charge an FTT.