Collecting Tax is about Political Will – Part 3

Parts 1 and 2 of this feature looked at the manipulation of company borrowing, and the rate of interest, to aggressively minimise corporation tax. Corporation tax is paid on profits, and another way to minimise corporation tax is to have no profits in the UK – because there are no sales in the UK!!  Amazon does this by selling from Luxembourg and claiming that their UK based offices, warehouses and staff are not involved in selling, and Google achieves the same by claiming everything is sold from Ireland!!

Taxing on-line retailers is hardly rocket science, as the on-line retailers have already done all the work!! When the shopper clicks to buy, or clicks a pay-per-click advertisement, a great deal of information is provided, and collecting tax from this information is easy. Just a small amount of additional software is required.

On 6th May 2013, the US Senate passed the Marketplace Fairness Act by 69 votes to 27, and the bill will now go to the House of Representatives. If passed, the bill will allow US States to charge the state sales tax to companies, even though they do not have a physical presence in the state. This will create fairness between Internet retailers and main street retailers.

This method of collecting sales tax is not dissimilar to how VAT is collected by on-line retailers in the UK, and it is not hard to see how this could be extended to collect a withholding tax against corporation tax. The principle would be that a withholding tax would be collected based on the individual sale value and be credited against corporation tax paid at a later date. It is possible that this could include corporation tax paid in another country, especially if the other country has a double taxation agreement with the UK.

Obviously, if the companies keep avoiding paying corporation tax in any country, on this or any other planet, then all the withholding tax collected could go into a big pot and reduce the amount of austerity being inflicted on millions of our citizens!!!

There is only one obstacle to doing this, and that is the lack of political will. None of the politicians have the guts to get rid of the antiquated tax legislation that has no validity in the age of the Internet. There is no political will to take independent action – the politicians hide behind the plaintive cliché that without international agreement there is nothing that can be done. There is no empirical evidence that international agreement is needed. There is not even the equivalent of the Iraq “dodgy dossier” showing that we need international agreement!!

Why won’t the politicians act? Are there incriminating pictures? Are they really scared that Google, Amazon and all the others will cease trading in the UK, despite the fact that it is a highly profitable market? Are the main political parties totally dependent on funding from these companies and their financial backers? Will these companies provide sinecure positions to the politicians – which will enhance their already generous pensions – when their political careers are over?

Whatever the reason for allowing this massive non-payment of tax, it exacerbates the already stringent austerity faced by this country. The reality of doing nothing is that the companies, their shareholders and their senior executives are living on the backs of the poor, and they are the real welfare scroungers.

Michael Gold,

michael@radicalsoapbox.com

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