Pay As You Go: for corporations

I've been reading over the last couple of years about massive global corporations playing the system to avoid paying any tax. Vodafone, for instance, hasn't paid any corporation tax despite making profits of billions. Apple, by dodging between jurisdictions with differing taxation principles, has built up $188 billion in its subsidiaries' offshore bank accounts, untouched. The list goes on and on and on.

Why should they pay tax? Because tax makes their profits possible. Taxes empty their bins. Taxes educate their workforces in schools and universities. Taxes pave the roads on which their products and executives travel. Taxes fund the research which makes innovation profitable. Taxes keep their private jets from hitting other tax avoiders' private jets. Taxes keep the lights on, the water running and the sewage drained. Taxes heal their sick and investigate shoplifting. Taxes pay for the courts they repeatedly run to when they think their copyrights have been infringed. Taxes pay to prosecute the illegal downloaders and taxes protect their patents. Taxes make up the gap between what these companies pay their poorest workers and what they need to live on (the biggest, sickest subsidy of all).

Apple, Google, Tesco, Amazon, Vodafone, the banks and a whole range of organisations need us – but they don't want to pay their share. They are stealing from us, building huge profits not from innovation or efficiency, but from ducking out of the agreement we all make to be part of a civilised society.

It's time to hit back. Cut off the water. Block their sewers. Stop the police from answering the phone when they call. Wipe Vodafone HQ off the ambulance service database. Block off their access roads. Withdraw their executives' passports. Cut off the power. When CEOs fly in, tell Air Traffic Control to close the airspace until a very large sum of money arrives in the state's bank account.

Seal off Canary Wharf and similar enclaves of capitalism, and see what happens without all the things we pay for and they sponge off. Don't let them withdraw from their social duties while continuing to enjoy the privileges of membership of developed societies. If they want to exist in a no-tax, no obligation polity, invite them to move their HQs to Somalia.

And then we start sending in bills. Work out how much each employee cost to educate and add it to local and property taxes that they can't avoid through transfer pricing and Double Irish manoeuvres. Bill them in A+E. Coin-operated courts, police cars and ambulances – or simply refuse to come out. Let the bins pile up outside Vodafone's offices unless they pay cash. If they decide to move their businesses offshore, we tax the imports until we think they've paid back what they owe. Most of them claim to be doing their business elsewhere anyway, like Google's London sales team which 'books' the actual sales in Ireland.

The principle comes from a passage in Lewis Jones's 1937 novel Cwmardy, in which one sell-out miner refuses to join the union. He loads up his truck, down in the blackness, and it starts to slip down the incline. Desperate, he begs them to help before it rolls down over him. Grimly, they refuse: he's refused to share their load and in return they teach him a lesson in collective struggle. Eventually, they relent when he promises to join the union, suitably chastened.

What they did to one class traitor, we can do to any number of free-loading, thieving corporations. Vodafone has started 'rounding up' pay-as-you-go bills to squeeze even more money out of their customers. Fine: let's do the same to them. Pay As You Go services until they give in and cough up.

(This is, of course, pure fantasy. While the government talks big about corporate tax, the truth is that they're actually making it easier to avoid tax. They're cutting corporate tax rates to 20% and George Osborne has made it easier for companies to hide their money offshore. Of course he has: they're his friends. He'd rather they paid a few millions to his party than many millions to the state).

Vodafone: they literally don't get the message.

Receiving an unwanted promotional text from Vodafone today, I thought I'd respond with an equally unwelcome message:

'Not delivered': that'd be right.

Vodafone, in case you missed it, is one of the world's most egregious tax avoiders. Any trick they can think off, they pull. In the end, a private deal with the head of HMRC (of very dubious legality, let alone morality) let them off a £6 billion bill.

We're also used to the idea (other than in the banking sector) that CEOs of global companies are very clever men (they are all men). Perhaps this is erroneous. I watched an interview on Channel 4 News yesterday in which Eric Schmidt said two interesting things.



He said that Google wouldn't be paying any more taxes than required (carefully not mentioning that his entire global corporate structure is set up to move profits to no-tax centres through chicanery) because Google does lots of 'philanthropic work' (tossing a few crumbs rather than being a responsible corporate citizen) and that the UK government had to get the economy going through a much greater financial stimulus (5.33 onwards).

Where does Eric think governments get their money from? He's a very clever man. Surely he knows that money comes from taxes. So basically he's saying that those of us who can't hide our money offshore should bail out those – like him – who can.

There's a word for people like Eric, but this is a family blog. But here's a thought: if Google paid local full corporate taxes in the countries where profits are made, perhaps our libraries wouldn't be closing, our hospitals sold off and our infrastructure failing. Increasing your profit margins by deceiving the taxman isn't innovation or any of the things business textbooks talk about. It's just parasitism.

Prepare the tumbrils

This is Eric Schmidt, CEO of Google. You may have heard of the company.

In this interview, he reveals two interesting things. The first is that despite the business's motto being 'Don't Be Evil', he's simply an old-fashioned vicious capitalist bastard - check the joy with which he espouses 'brutal' structural changes to European economies, particularly slashing wages. 

The second is his smug - and entirely correct - assumption that CEOs should be treated as oracles who should never be questioned. The interviewer raises Google's sponsorship of 100 science teachers under the Teach First scheme, which provides highly-qualified new graduates to schools for low wages. Schmidt describes it as Google doing their bit. 

This is a direct lie. According to a Conservative MP, Google made £700m profit on £2.15bn sales in the UK in the last financial year. It paid no taxes at all. 

Taxes pay for schools, and schoolteachers and healthcare and defence and transport and libraries and social workers and clean air and pensions and all the other things that Google's customers and employees need. 

Teach First personnel earn between £17,500 and £21,000 (for London-based staff). So Google are handing over between £1.75m and £2.1m. If Google paid corporation tax at the full rate of 24% (i.e. 16% less than individuals earning over £42,000), it would pay £168m in tax. 

So rather than Google 'doing its bit', it is in fact saving £166 million which could be spent providing schools with science teachers and other public goods. 

Which means that Mr Schmidt is a lying barefaced thief who thinks that dropping a few coins in the begging bowl is somehow a form of corporate social responsibility. 

Paranoid much?

Google's changing its security policy - merging all the various systems it has. Given that Google and Amazon now own everything (seriously, I'm expecting to come home and find a coin-slot on my fridge with an option for Prime Express Delivery), we need to be careful about what we tell them about us. After all, they take all that information and sell it on - that's the business model.

First thing to do is pause your Google History (including Youtube). You can't wipe it, and they'll keep using it for internal purposes, but it's a step in the right direction. Log in to your Google Account, go to google.com/history and press 'pause'. Job done.

My history is so boring:

Public Service Announcement

If you have a Google account (unfortunately necessary as they own Blogger), you may get this message:

Dear user accounts

Due to congestion on our users emaill and removal of all unused accounts, which will close by all accounts not used on 25 May. You must confirm your account as soon as possible so we can update your account before the deadline.

To confirm your account SEND THE REQUIREMENT.

Full Name:

E-mail:

Password:

Phone Number:

After following the instructions on the sheet, your account will not be interrupted and will continue as normal. Thank you for your consideration of this request.

We apologize for any inconvenience.

It's an attempt to steal your details - the poor English should give it away. Ignore it.

Tax? Search me…

Very interesting article on how Google's effective tax rate is around 2% (and on how Ireland bankrupted itself):

 Google’s office in Ireland is the center of the company’s international operations.  In 2009 it “was credited with 88 percent of the search juggernaut’s $12.5 billion in sales outside the U.S.”  But Google doesn’t pay taxes on that amount, because most of the profits went to Bermuda, where there is no corporate income tax.

So, how did Google get its profits to Bermuda?  Businessweek explains:

Google’s profits travel to the island’s white sands via a convoluted route known to tax lawyers as the “Double Irish” and the “Dutch Sandwich.” In Google’s case, it generally works like this: When a company in Europe, the Middle East, or Africa purchases a search ad through Google, it sends the money to Google Ireland. The Irish government taxes corporate profits at 12.5 percent, but Google mostly escapes that tax because its earnings don’t stay in the Dublin office, which reported a pretax profit of less than 1 percent of revenues in 2008.

Irish law makes it difficult for Google to send the money directly to Bermuda without incurring a large tax hit, so the payment makes a brief detour through the Netherlands, since Ireland doesn’t tax certain payments to companies in other European Union states. Once the money is in the Netherlands, Google can take advantage of generous Dutch tax laws. Its subsidiary there, Google Netherlands Holdings, is just a shell (it has no employees) and passes on about 99.8 percent of what it collects to Bermuda. (The subsidiary managed in Bermuda is technically an Irish company, hence the “Double Irish” nickname.)

This set-up (as Businessweek describes it) also helps Google lower its tax bill in the U.S.  Google Ireland licenses its search and advertizing technology from Google’s headquarters in Mountain View, California.  Obviously this technology is worth a lot—but Google headquarters keeps the licensing fee to Google Ireland low.  Doing so means that Google headquarters can minimize its U.S. earnings and thus its tax obligations to the U.S. government.  And of course, Google Ireland knows how to move its profits around to minimize its tax liabilities.

 “Facebook is preparing a structure similar to Google’s that will send earnings from Ireland to the Cayman Islands, according to company filings and a person familiar with the arrangement.”  Microsoft already has one in place. 

Google: fearless defender of civil liberties?

I think not.

Google has announced that it's thinking about withdrawing the censorship it agreed to when it started in China. Chinese searches on certain sensitive topics (politics, sex, religion) return no results, as the result of an agreement between the company and the Chinese authorities.

Google has announced that, because sophisticated hackers (implication: the Chinese government) have accessed individuals' e-mail accounts, it's going to uncensor its operations, or leave China.

So: instituting censorship in pursuit of profit = absolutely fine. Hacking, on the other hand, is a no-no. It's not exactly a principled stand from the company, whose motto is 'Don't Be Evil'. I think this is the relevant point:

Evgeny Morozov, an expert on the political effects of the internet and a Yahoo fellow at Georgetown University, questioned why Google had made the decision after four years.

"They knew pretty well what they were getting into. Now it seems they are playing the innocence card ... It's like they thought they were dealing with the government of Switzerland and suddenly realised it was China," he said.

I get readers: odd ones (2)

Even better than the American who searched for 'nude Geordie lasses' is this Google search, from Abbotsford, British Columbia, Canada:

do i need licence in b.c to keep a monkey

Maybe you do, or maybe you don't, but you definitely need your head examined if you think that keeping a monkey as a pet is a civilised thing to do. Leave it in the jungle (or the lab).

O Brave New World

I blogged recently about a Digital Media lecture on social networking I went to - and asked for your responses to the new social formations promised by the information age. One of the participants has certainly responded to our suggestions that social-networking trains us to surrender personal information to any authority, commercial and public: the gentleman behind Unluckydip.com is closing down many of his accounts.

If you're bothered, matey, read this: 'Facebook users unwittingly reveal details' and this: 'Mobiles could spell the end of privacy': basically, Google et al. are tempting you to run location-sensitive applications - so that they (and whoever is tapping in to your account) and all the world's advertisers, know where you are for the rest of your life.

On the other hand, if you think technology can be fun, you'd be right. You can now use free Guardian APIs to do odd stuff, and one fan has tracked the history and characteristics of swearing in the Guardian. According to the graph, 'wank' is much underused. To the comment boards!

Into the corridors of power

I have a hotline to government - state government that is. Of Nebraska… Welcome, Nebraskan reader. I hope you've got Dick Cheney safely in an undisclosed location again!

To another reader using a Mac at Swansea University's English Department:did you Google yourself and find yourself on my page? I hope your ears (eyes?) are burning! Actually, I loved Twenty Thousand Saints: profound, funny, beautifully structured and written. How I wish I was as fluent in my first language as you are in your second.