We are amused

Apparently the world of international corporate taxation has changed:

Netflix is to finally start declaring the £1bn-plus revenues it makes from millions of British subscribers each year to the UK tax authorities, a move likely to ramp up pressure on tech firms such as Google and Amazon to stop funnelling revenues through overseas tax jurisdictions.

Netflix, which has funnelled UK-generated revenue through separate accounts at its European headquarters in the Netherlands since launching in Britain in 2012, is to notify its almost 13 million UK subscribers on Tuesday about the change, which starts from January.

The change is likely to increase the amount Netflix pays in UK corporation tax and is expected to add to pressure on Google, Amazon and other tech firms that have been accused of funnelling revenues to low-tax jurisdictions to avoid tax.

No doubt there will be much patting of backs and lashings of ginger beer among the varied tax campaigners who will insist they made this happen. Sadly for such self-congratulations actions here in Europe have had near nothing to do with this. Diverted profits taxes, people gluing themselves to shop windows, marches and campaigning outfits just haven’t made any difference at all.

The claim always was that if profits could be wafted away out of the UK to somewhere less taxing then those profits would be entirely untaxed. This wasn’t entirely true, they would be taxed if shareholders were ever to get them but they could indeed be parked without having paid tax. So, therefore, there was good incentive to attempt to so waft - it is a standard tenet of economics that incentives matter.

What has changed is that the incentive is no longer there. Those European profits, wafted offshore, that accrue to US based companies - and this always was what it was about - are now taxed in the US. Profit shifting in Europe now makes no difference to the total tax bill of a corporation for European taxes paid are deductions from that US tax bill to be presented.

The company - that mixture of shareholders and legal personality that makes it up - doesn’t actually care who collects the cheque, only what the size of it is. So, if the tax bill will be of - exactly - the same size, wafted or not, why bother with the wafting? Which is why those American corporations aren’t - that tenet of incentives matter once again.

Which is where the amusement comes in. For the change that led to this was a change in American tax law. One suggested and, to the extent that the President gets to do this in the American system, imposed by Donald Trump.

Yep. The demands of Tax Justice, Richard Brooks, Richard Murphy, Alex Cobham, UKUncut and the rest of the dreary list of them have been met by The Donald. Not that any of them will ever be able to bring themselves to admit it, nor write a thank you note, but then that’s where the amusement is, isn’t it?

Previous
Previous

So, that's settled then

Next
Next

Here's an idea - let's not do things that don't work