UK Plans to Create Google Tax, an Inappropriately Named Tax Dodger Punishment - The UpStream

UK Plans to Create Google Tax, an Inappropriately Named Tax Dodger Punishment

posted Sunday Dec 7, 2014 by Scott Ertz

Right now, Internet taxation has become all the rage. Several countries, the world over, have considered or implemented taxes on Internet purchases, sometimes with huge public backlash. The United Kingdom seems to have taken the concept and expanded it, planning to punish companies that generate revenue in the UK, but divert the profits to other countries where taxation is lessened.

British Chancellor of the Exchequer George Osborne announced what is being called the "diverted profit tax" but is better known as the "Google tax," despite the fact that its intended audience is not necessarily even Internet companies, nor is it exactly a tax. He said at the announcement,

Today I am introducing a 25 percent tax on profits generated by multinationals from economic activity here in the UK which they then artificially shift out of the country. That's not fair to other British firms. It's not fair to the British people either. My message is consistent and clear. Low taxes; but taxes that will be paid.

First, this is not exactly a tax, so much as a tariff. The British government looks to impose a fee on the exportation of profits, not on the actual revenue generated through business, which would be a tax. It is, ironically, very similar to what they did once before, and is today known as the Intolerable Acts which ultimately sparked the American Revolution. Once again, this tariff is targeted at the former colonies, as most of the affected businesses are US in origin.

Second, this is not about Google, so much as it is about foreign interests. Google, however, has been a major target of European regulation lately, so it makes some sense for them to associate the act with the search giant. In addition to Google, Amazon and Starbucks are also major targets, as they have been well-known to divert profits to other, international divisions instead of realizing them in the UK.

While this coercive act might work to their advantage, it is more likely that it will backfire. In 2010, Google proved to the world that they were not afraid to leave a market over a government disagreeance. It is far more likely that Google would shut down UK operations than bow down to a 25 percent tariff, whose only purpose is to force payment of a tax which is clearly higher than that from other countries. Perhaps, if the UK would like to see their economy not collapse like Greece, they might try lowering the percentage a foreign entity pays rather than trying to extort more money out of them. If it was financially reasonable for these companies to pay taxes in the UK, they would - it is not an inexpensive task to divert profits to other divisions.

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