This week saw me in the media once again with an appearance on Sky News Live at Five show in the UK on Saturday afternoon.
The topic discussed was corporations paying what is now being described as their ‘fair share’ of taxes.
I was interviewed on Sky News alongside Margaret Hodge, a Labour MP in the UK, and interestingly from a family who own a multibillion-sterling pound steel business, one which has also been called in to scrutiny in recent years for allegedly not paying its fair share!
As discussion moved forward, a couple of interesting points came to light whilst discussing Google and their recent settlement with HMRC of some GBP 130 million in corporation taxes, accumulated over the last few years.
My position remains that whilst companies should pay corporation tax on profits, let’s not misunderstand just what corporations like Google contribute to the UK economy before we even get to corporation tax.
Let us also remember that Google is a US corporation and as such files its main tax return in the USA and pays its lion’s share of corporation tax right there.
They have chosen to set up a substantial base in the UK with a multimillion-pound London HQ and thousands of employees, around 4,000 I believe. Now, I don’t know what these people earn of average, if you were to take Facebook Inc (another US corporation) as a guide though it is potentially as much as GBP 200,000 each, with a potential tax liability of GBP 100,000 per year, each!
Do the maths on just half that and for Google with perhaps 4,000 UK employees we are already at GBP 200,000,000 per year just in NI and PAYE.
Now add the spending power that these well above average earners bring to the UK economy, pus VAT on what they spend and suddenly it even puts the potential corporation tax in the shade.
Mrs Hodge argued that the UK offers so much by way of infrastructure, skilled labour force, security and safety and services, I would accept that to be true.
Let’s though not overlook the fact that Google bring massive innovation, on point technological advances, business and income to the UK with them, and the UK is said to be their second largest market. This begs the question, is that because Google are in the UK, or are they there because the UK is the second largest market?
I mention Facebook, so just as a further point as they have been derided for not paying their fair share either. Facebook paid some GBP 35 million in share bonuses last year. Surely rather than tax avoidance this is merely deferral and will ultimately benefit HMRC and government coffers more.
Once these options are taken as income, cash, then the tax will be paid, and most likely paid at a higher rate and then the proceeds probably in the most part spent in the UK economy as well thus contributing to the same, again paying VAT and other indirect taxes.
In addition to that now add in the knowledge and learnings that Google bring to the UK and employ such a large local workforce. It further starts to reinforce the UK’s service based economy and adding on the Technology string, at a time when banks and finance, the UK mainstay of industry power in London, are wavering and letting people go.
The question was posed about what I thought then of HMRC. Indeed the news report that preceded my appearance, and Mrs Hodge, both referred to HMRC being traditionally known for ensuring the average person paid their taxes, and perhaps this is where the issue lies.
Is it not time in this global economy that governments started to talk to each other and cooperate so that taxes are shared rather than country-by-country? Each countries tax authorities, like UK’s HMRC and USA’s IRS, surely should pool information and work out a fair compromise and share of corporation tax paid in each jurisdiction and simply have one authority collect the tax and then distribute it accordingly.
A final point, kudos to HMRC for, in my opinion, getting Google to pay GBP 130 million in back taxes, which perhaps they don’t actually owe. I have a question though, this six year audit, how much did it actually cost the taxpayer?
The UK can ill afford to turn away corporations like Google, Facebook and others (I’ll talk about Amazon and Starbucks another time as their business is fundamentally different to the likes of Google and Facebook). We, as Brits, should be proud of the fact that these hugely successful Global firms choose to set up such large presences in the UK and indeed need to encourage the same.
The UK does have some excellent facilities and people and needs more modern technology investment, that’s why I have a plethora of skill sets there and they in turn contribute to the North East UK at a time when investment is needed.
I believe it is an international discussion at the highest level that is needed, not targeting of companies, or even individuals and let’s all pay our fair share, in a fair way.