Politicians in danger of looking silly in global tax debate.

WALSALL, U.K. - June 13, 2013 - PRLog -- Speaking at a Google conference recently Ed Milliband said “I can’t be the only person here who feels disappointed that such a great company as Google, with such great founding principles, is reduced to arguing that when it employs thousands of people in Britain, makes billions of pounds of revenue in Britain, it’s fair to say it should pay just a fraction of 1% of that in tax”.

The Prime Minister, David Cameron also said recently to the G8 “There is a moral issue. Companies have to make decisions about themselves” he continued “It is important to tackle not just tax evasion but aggressive tax avoidance”.

This debate has rumbled on not just for a few months but really for many years - as any accountant will tell you, when does sensible tax planning become aggressive tax avoidance?

Eric Schmidt (Google’s Executive Chairman) said at the conference “I don’t think companies should decide what tax policies should be. Governments should.” He further commented “The Google view is that taxes should not be up to Google… I can’t defend the international tax regime. I did not design such an irrational structure”. He went on to say “It would not have been designed this way by a computer scientist… Virtually all of the American companies have tax structures like this and there are analogous structures for European companies in America but Governments have a lot more power than we do. We have to follow the law and if the law changes we will absolutely follow it”.

Mr Schmidt denied that Google’s activities and arrangements were unethical.  

It is difficult not to be sympathetic with Mr Schmidt. Google operates within the law and will pay tax via PAYE on its UK employees and any business rates on property occupied within the UK. As far as corporation tax is concerned HMRC have recently said “Companies are required to pay corporation tax in the country where they carry on the economic activity that generates their profits, not where their customers are located. This is not tax avoidance: it is simply that way that corporation tax works”.

Government often offer tax break to foreign companies – should a company relocate to take advantage of these tax breaks, would this amount to aggressive tax avoidance?

It is only the politicians that can change the law to determine how tax applies to global companies. Much of the present debate appears to be aimed at public opinion whilst neatly overlooking the technicalities of global tax law. What any company wants from a Government, whether they be global or otherwise is certainty and consistency. No doubt this debate will rumble on.

Tim Corfield (http://www.griffinandking.co.uk/meet-the-team.php)
Griffin and King

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