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Pay Your Fair Share… To Me!

November 6, 2012

Happy Election Day.  Hopefully it doesn’t turn into election week, like some people are warning.  My one remaining prediction on the election: the sun will rise in the morning, even if we Oregonians can’t see it for the clouds.

Anyway, here’s what we’re fighting for in elections, courtesy of the Register.  I’m going to have to parse this one a bit, but if you’re over here, you probably wanted something other than presidential politics to read anyway.

Major multinationals have been accused of declaring UK profits in other countries where tax rates are lower and using artificially high costs, like royalties for intellectual property or brand franchises, to reflect a lack of profit in Britain. Starbucks has paid no corporation tax in the UK for the last three years while Apple is paying less than 2 per cent tax on all its overseas profit.

The committee called Homer and some of her HMRC colleagues to face questioning and explain how international companies were getting away with paying so little.

Well, the laws of the country say that you can declare some profits in different places, given the structure of the company. So the companies in question are doing their financial due-diligence to save shareholder costs.  The head of Britan’s tax system (the HRMC) said the companies were only doing what they were allowed to do.

However, Chancellor George Osborne was saying at the same time that Britain and Germany wanted to strengthen international standards for corporate tax regimes.

“International tax standards have had difficulty keeping up with changes in global business practices, such as the development of e-commerce in commercial activities,” the joint statement said. “As a result, some multi-national businesses are able to shift the taxation of their profits away from the jurisdictions where they are being generated, thus minimising their tax payments compared to smaller, less international companies.”

Wait, so if a particular nation or soverign wants to offer lower taxes in order to attract business and revenue to that particular place, it’s bad, because…?

Well, really, because the money isn’t going to someone else.  We’re not arguing whether corporations pay taxes within the bounds of their legal requirements.  They do, since not doing so would get them kicked, hard.  What we’re seeing argured here is that some countries are mad because other countries have better tax rates, so they get the money.  Welcome to competition, folks.

I’d note that much of this focus is on Internet companies, which have the ability to shift profit and costs fairly easily… you know, since they’re global and have a presence everywhere.  If you bought something in Germany, but it shipped from a warehouse in England after being made in China and routed through Antilles… that’s possibility thinking there.  At some point in the article there’s a boo-hoo about how local companies can’t just skirt the laws, and they have to pay their taxes like good little soldiers.

Speaking as a small business owner, that’s the breaks.  Small business has a wealth of resources that big ones don’t have around personal contact, local knowledge, sympathy from people who don’t understand economics… and don’t forget desperation of needing to eat.  Many small businesses thrive purely because making money puts food on the table.  I’m not even mad or ashamed or whatever that businesses (large or small) are taking advantage of all the breaks they can to make money.  All those small-biz loans out there never get a blink from the multi-nationals.

This really isn’t about small business or big business.  It’s about government seeing the opportunity of revenue flying out of the national bounds to someplace that has better business conditions.  Here’s news: raising rates or making it harder to do business in a country just means that the big guys pull out, and the small guys suffer from a bigger load.  In the end, it’s not about business, it’s about business trying to survive when every government wants a “fair share.”

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