Amid UK Uncut tax protests, new Google, Microsoft tax avoidance stories
Hundreds of demonstrators protested at Starbucks cafes across Britain on Saturday accusing the US coffee chain of avoiding paying corporation tax at a time when the government was cutting essential services because of a fall in revenues.Good for them. Now in the last few minutes, from Bloomberg:
At one central London outlet activists from the anti-austerity UK Uncut movement staged a sit-in, chanting “Starbucks pay your taxes” and briefly setting up a children’s crèche before police moved them on.
"Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show.Now read on. The story prominently quotes TJN Senior Adviser Richard Murphy. And take a look at this headline from him (and follow the links back): Microsoft’s tax avoidance represents 3.5% of the world aid budget. The problem is getting worse, fast. Take a look at this graph, courtesy of Marty Sullivan and Tax Analysts.
By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011."
(That same report contains other dramatic graphs illustrating the problem from different angles.) That is a dramatic shift, and quite representative of what's going on around the world. The whole system, overseen by the OECD, is fundamentally broken.
And there is an answer to all this this. In the words of tax expert Professor Sol Picciotto:
"The only rational way to tax modern multinational companies is to tax them according to where their genuine economic activity is, rather than where their tax advisers pretend it is."TJN's report on this approach, known as unitary taxation, was described prominently in the UK's Observer newspaper on the weekend.
The OECD, subject to huge lobbying from multinationals and their tax advisers, has fought tooth and nail against this approach which is recognised by independent experts as the best alternative to the current broken system. Pascal Saint-Amans of the OECD agreed in the same Observer article that the system was broken, but then took a fatalistic attitude, saying it will be a very long time indeed before such a scheme could be implemented. Which is rather a strange thing to say, given that it is already being implemented in various parts of the world, and the EU is already proposing to push this forwards in a first step. The Financial Times has endorsed this proposal, repeatedly (e.g. here and here, and TJN endorsed it in a recent FT comment article.) The experts line up to slam the current system and endorse this alternative. The momentum for change is really building.
What are we all waiting for?