And we all knew that this was going to be amusing, didn’t we?
Firstly, by deliberately avoiding tax Google has shown contempt for the states that grant it the right to trade within their jurisdictions. In the process it shows contempt for their laws, the privilege of limited liability that they grant, their tax systems, and most of all their right to impose their democratic will on those who trade within their domains.
Most amusing. Google UK pays all the tax that is asked of it. The bit that doesn’t pay UK taxes is Google Eire. Which is, ermm, not, by the definitions of the law, actually “trading” in the jurisdiction.
It’s actually trading in Eire, a EU law insists it may….even should given the Single Market….and that’s why it doesn’t pay the UK corporate income tax. It pays the Eire one instead, as the law insists that it should.
Second, this is an attack on Google’s shareholders. The money hidden in Bermuda cannot be distributed to the shareholders of Google without tax being paid: Google says it will not pay that tax so these funds are beyond the shareholder’s reach. The shareholders seem not to care: they think the markets will value this unreachable cash dollar for dollar so they believe that it turns into a capital gain. But that can’t be true forever: all gains are based on income prospects. Google is in the long run denying its shareholders an income prospect. That will be valued in the end and this will reduce shareholder value. So this is definitely not an action in long term shareholder interest – which is what matters.
And isn’t that amusing. If the money goes onshore then yes, it’s correct that it can be distributed as dividends. In doing so there will be the US 35% corporate income tax to pay (less whatever foreign taxes have been paid) plus the dividend recipients will pay a further 15% on the income they receive. And after Jan 1 that rises to, I think, 45% or so.
So what The Murph is saying is that it’s actually in shareholders’ interests to pay 70% or something in tax. Instead of leaving the money in the company to fructify as they invest it in expansion of the business.
That is an odd view of the world.
Because that view of capitalism is not just contemptible, it’s the face of real political extremism in this world now. The biggest threat to democracy does not come from the left, or even religious fundamentalism. It comes from companies like Google and those who assist them.
And as to the threat to democracy. Hmm. It’s the democratically elected politicians who have written the laws that Google obeys so assiduously. I do tend to think that breaking such democratic laws is a threat to democracy, yes. But obeying them, somewhat less so.