George Osborne Announces The Google Tax
George Osbourne, the Tory Chancellor, has noticed that large numbers of people are pissed off about the way in which Google pays near damn no tax in the UK. In the run up to the election he’s therefore announced that he’ll jolly well make them pay some more. The problem with this idea is that no one can quite work out how he’s going to manage this:
It is hard without more detail to know what impact the move to tackle tax avoidance by large US tech firms will have. The US and Irish governments have already taken some moves to tackle the so-called “double Irish” arrangement.
Treasury aides say that the move may raise a few hundred million pounds but more details will be given in the Chancellor’s Autumn Statement. Just as appealing to the chancellor as the money, though, will be the headline – Osborne introduces “Google Tax”.
Here’s what the problem is. From the announcement Osborne is saying that companies that use the Double Irish (no, don’t worry, it’s very boring) will be forced to pay more tax in the UK. But Osborne only has power over tax rates and tax laws in the UK. The Double Irish, as the name implies, comes under Irish tax law. So Osborne, and the UK, has no power to change that Irish law.
And it gets worse too. Part of the EU’s single market malarkey is that any EU company can trade anywhere in the EU. And on the same terms as any other EU company. So, the UK must allow any Irish company to trade in the UK on the same terms as any German or French company. And also, it must allow any Irish company to trade in the UK on the same terms as any other Irish company. We can’t say “you don’t use the Double Irish so here’s your tax rate, you do use it so here’s your higher one”. That would absolutely be illegal under EU law.
Do while Osborne has announced something to grab the headlines it’s probable that that’s all he has done. For it’s very difficult indeed to see him being able to make this plan stick.