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Heather Self’s Fantasy Budget: Taxing tech giants

Heather Self provides her personal view of how Chancellor Sunak should tackle the perceived unequal tax treatment of multinational technology companies.   

25th Feb 2021
Partner Blick Rothenberg
Columnist
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Facebook, Amazon, Apple, Netflix, Google - aka FAANG
iStock_FAANG tech giants_MagioreStock

Madam Deputy Speaker, I now turn to the taxation of the “Big Tech” companies – Amazon and the like. Many people consider that these companies do not pay their fair share of taxation, and I set out here how we will address this.

First, let me be clear that the UK is open for business and we want to attract companies to invest and create jobs here. Imposing punitive or even retrospective taxation is not the best way to do this.

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Replies (13)

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By Montrose
25th Feb 2021 15:58

"I am conscious of the burden of business rates on"bricks and mortar" retailers and propose to ease that burden vis a vis online retailers by crediting all business rates against VAT payments and to recoup this loss of revenue by increasing the rate of VAT by 1.5% to 21.5%. The net effect will be an increase of money received by the Treasury of approximately £2 billion which will go a small way to making good the deficit caused by the impact of Covid-19 on Government finances.
It will represent an injection of about£30bn directly to the high street.

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By AndrewV12
26th Feb 2021 09:45

I have personally been predicting for a while now the Chancellor will tax (directly or indirectly) multinationals. Something will happen regarding multinationals in the Chancellors budget in March.

Don't forget tax them whilst you can, they wont all be around for ever.

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By peterbruff
26th Feb 2021 10:17

I am 81 and retired from practice 14 months ago after 64 years in the profession. Until 1969 I specialised in tax before switching to tuition with ATC. I remember a section (not sure but it might have been Sec 28) of the 1952 Act that would appear to be appropriate here.
It allowed the authorities to disregard any transactions that could not be shown to have made for a commercial reason. I always thought that this sections omission from later legislation was political.

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By evildrome
26th Feb 2021 10:18

HMG is the sole issuer of GBP. As such it spends its own unit of account into existence.

For the currency issuer, there is no difference between printing a £50 note & writing a £50 cheque or issuing a £50 bank transfer.

The only monetary purpose of taxation is the control of inflation.

HMG could cease all taxation tomorrow & continue to pay all bills as they become due.

Taxation is not a source of revenue & in point of fact, your income tax is destroyed on receipt.

Look at your tax demand. What's the pay to account?

Does it have a 01-01-01 sort code?

Or is it Citi Bank?

Why is your tax money going to an account in the Citi Bank?

Have the revenue been banned from holding a government bank account?

The government creates a 'reserve' asset on a commercial bank's balance sheet much like a customer would when it signs a loan agreement.

The bank simultaneously creates a bank money deposit in the government payee's account. For all the world it looks very similar to a traditional commercial bank loan operation.

However, this ignores the 'forced' nature of the transaction. The government is forcing the commercial bank to expand its balance sheet at a dictated interest rate.

There is no choice involved like the choice it has to grant a loan or not to a high street customer.

Government similarly forces the banks to contract their balance sheets when taxes are paid to HMRC. Hence the payment to Citi Bank.

When your tax money hits the Citi Bank account it pays down the "loan" the government took out.

+1 & -1 = 0

Your tax money is destroyed on receipt.

In return the commercial bank gains a banking licence and access to the Bank of England payment system, lender of last resort and ability to clear its money at par.

This is not to say that we should not tax multi-national internet companies.

We certainly should, if only to present a level playing field for bricks & mortar companies.

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Replying to evildrome:
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By NeilW
26th Feb 2021 11:04

"Why is your tax money going to an account in the Citi Bank?"

So that BACS can redirect it to an account at Barclays ;-)

If you want to know how UK government spending works (including how the thorny question above is resolved), then there is a 200+ page document at GIMMS (https://gimms.org.uk/2021/02/21/an-accounting-model-of-the-uk-exchequer/) that explains it for you - in full gory detail.

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Replying to NeilW:
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By evildrome
26th Feb 2021 14:27

Big props to the guys at GIMMS.

I'll read eventually... honest guv!

It can't be worse than wading through the ONS mire...

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Replying to evildrome:
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By Dandan
26th Feb 2021 14:19

Thanks and very true. Not sure this board is sufficiently aquainted with the physics of money though.

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Replying to Dandan:
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By evildrome
26th Feb 2021 14:31

You'd be amazed.

I definitely get a warmer reception on MMT from accountants than from any other area.

MMT is all about Credits & Debits and accountants live & breathe that stuff.

This is really good. Its only 4 minutes long & its technically about the Fed but applies to all Fiat currency governments.

https://www.youtube.com/watch?v=pex89N9Oqog

Professor L. Randall Wray is a professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute.

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Replying to evildrome:
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By Dandan
26th Feb 2021 15:58

Thanks for the clip. Very interesting !

I can understand your point on how Debits & Credit should make MMT naturally digestible to accountants. Sadly, the accountants that I meet don't even know what MMT means.

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By Nebs
26th Feb 2021 10:35

Pointless having a budget speech these days. Everything of interest is leaked to the press in the days and weeks beforehand.

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By AndyC555
01st Mar 2021 11:56

"I do, however, agree that companies should pay tax on the economic profits they make in the UK"

Presumably, then, you agree that UK companies currently making 'economic profits' in other countries should be taxed in those other countries.

This is the other side of the coin which no one seems to notice.

If we think we will be able to keep all the tax on profits that UK companies make overseas AND grab some tax off of profits made in the UK by overseas companies, I think we are being a bit optimistic.

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By ayazca
04th Mar 2021 14:18

Hi Heather

I agree tax changes in laws shouldn't be retrospective and we need large businesses for employment and the benefits large companies bring for the economy overall.

But we have always had DTR for paying higher of foreign or UK tax i.e. where funds are sent to tax havens to evade tax these DTR do not apply so these funds need to be taxed which have been diverted to offshore havens for companies / individuals / politicians using tax havens to evade tax or funds sent there as proceeds of crime , companies diverting profits using " DR TIM " we accountants have studied this in our professional qualifications & GAAR as existing legislation which should apply to these large corporates / politicians / individuals who I feel have abused the laws.

We do not need retrospective legislation to recover fair share of taxes and proceeds of crime recovered.

Please let me know if you dis agree with my comments or agree ?

Where this is a will there is a way !

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By ayazca
04th Mar 2021 19:29

Hi Heather

Just to add to my above comment all Politicians ( both UK & International ) who monies stashed away in tax heavens be it UK dependant islands ( tax havens ) or other tax havens who have taken bribes all that money should be confiscated from them under Bribery Act 2010: https://www.legislation.gov.uk/ukpga/2010/23/contents

Plus any Bribes they have taken from large corporations and media as well should be recovered 100% not just taxed! These politicians have taken Bribes for weapons and wars around the world, this money recovered should be paid to Civil Servants, Military personnel who have lost lives or have become injured doing their duty towards the UK & also compensation should be sent to victims of wars around the world from the monies recovered under Bribery Act 2010 from the Politicians.

All the large corporations who have evaded tax and promoted Genocide especially Facebook, Fascist / Far Right / Right-wing media who have aided and abetted these criminals should face the full force of law and their assets confiscated under Bribery Act 2010 and Criminal Finances Act 2017: https://www.legislation.gov.uk/ukpga/2017/22/notes/division/10/index.htm

It's about time the laws apply to these criminals in the Parliament and tax is obtained from Genocidical International Corporations like FaceBook as well as all taxes from large multinational corporations paying their fair share of taxes.

Please let me know your thoughts if you agree with my comment or disagree?

Kind regards to all Tax & Qualified Accounting Professionals from professional bodies in UK & Worldwide ( ACCA / ICAEW / ICAS / ICAI / CIMA )

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