King of Google Eric Schmidt has written in The Guardian about how unfair it is that people don’t think Google pay a fair share of taxes.
He makes three pretty good points.
- Companies only pay tax on their profits.
- Politicians shouldn’t make laws with loopholes.
- International laws need harmonisation.
I agree with his second two points – although no-one is forcing Google to exploit the loopholes that it finds – but I am not sure I agree with the first.
Fairness, so it seems, is hardwired into our brains and our societies. People naturally get very angry when they encounter unfair situations. Even monkeys react badly when they see other monkeys being treated with favouritism.
I think that’s what’s happening here. As an individual, I don’t get to only pay tax on my profits – I have to pay income tax and National Insurance on every penny I earn.
There are, as far as I can tell, only a few exceptions. If I donate money to charity through Payroll Giving or put money in my pension – I get a small measure of tax relief. If I receive rental income, I can offset any interest on a mortgage against it. That’s pretty much it.
The tens of thousands of pounds of student loans that I owed did not count against the amount of tax I paid.
It cost me £3,000 to get a train to work and that severely cuts into my “profit” but doesn’t count against tax.
I have to live somewhere – but mortgage relief was abolished by the Labour Government in 2000.
Heating, electricity, education, food – these are all legitimate expenses which I cannot offset against the amount HMRC wants to take from me.
I’m sure you can think of dozens of other examples. Expenses which a business can use to reduce their tax liability but which ordinary people cannot. And we haven’t even touched on the inability of the average citizen to stuff their loot in an off-shore tax haven!
HMRC produce a great Android app which tells you roughly how the Government spends its money. It also shows you where it gets its money.
Business, so it seems, pays a rather modest share by way of corporation tax. I’m sure they pay lots of other taxes and invest in other ways but guess what so do I!
I’ll leave it to the armies of lawyers to figure out of Google, Amazon, Vodafone, and the like are acting correctly. But it is undeniable that a large number of people have trouble with large scale tax avoidance not because of its legality but because it is unavailable to ordinary individuals.
Fairness is really hard to codify, it’s true. But when a multi-billion pound corporation gets to pay tax only on its profits, and individuals get no such relief, that feels profoundly unfair. And, like the chattering monkeys that we are, it enrages us.