The Australian government intends to amend the 31-yo transfer pricing provisions of the tax legislation to collect more tax from internet portals like Google and Apple who collect a high volume of sales online. This revision to the tax code is just one of a litany of measures which purportedly closes another ‘loophole’. Australia is not the only country seeking to close such loopholes - Britain and China are also targeting the likes of Amazon, Apple and Google.
Treasurer David Bradbury has asked Treasury’s head of revenue, Rob Heferen, to develop a brief on possible measures it can take, before being presented to an advisory group comprised of representatives from business, tax agents, academics and the broader community.
Treasurer David Bradbury: “It is not my usual practice to mention companies by name or to publicly canvass the tax position of particular taxpayers. Nor is it my normal practice to publicly discuss strategies employed to minimise corporate tax. However, I will be departing from my usual practice today as I believe there is a strong public interest in drawing attention to practices that have the potential to undermine the future sustainability of Australia’s corporate tax base”.
Why would any member of the public have any specific interest in how much tax a company pays unless (i) they are parasites sanctioning extortion, (ii) corporations living in fear or disdain of a system that extortions. There is limited public interest in this issue; and those effected are easily consulted through their industry associations. The Treasurer’s sole interest is scoring political points.
Treasurer David Bradbury said that increasingly, governments were discovering the lack of effectiveness in the digital age of international tax concepts created for the industrial age. “This has been highlighted by the compelling evidence revealed by the UK Public Accounts Committee examination of the Taxation of Multinational Corporations”.
Did it occur to him that the extortion of funds from companies is also a legacy of the pre-Industrial era, and that such extortion of wealth was customary in the Middle Ages, and persists only today at a much larger scale because governments distort the economy to such an extort that they precipitate boom-busts that offer a defence for the welfare system…and other elements for tragic liberals.
“Cranking up the scrutiny on big companies is a vote winner, particularly when it is aimed at companies that pay minimal tax or whinge about the tax they are paying, such as multinationals engaging in elaborate transfer pricing rackets”.
I am at a loss to hear of occasions when Google has complained about its tax rate. I suspect there will be no complaint….and it is perfectly within their right to complain….is it not…or should they be guilted into compliance. But note how the government lumps all multi-nations in the same bag. The mining multinationals were pays 37% tax before the government raised it over 50% because it was so impressed with their earnings power. The government had no qualms undermining the interest of shareholders. The minerals boom was 2 decades in the making – why could it not act before miners were so profitable, that it had to extort wealth without notice from shareholders, and in the process undermine the sovereign credit rating and perceptions of Australia. Because fascist governments are:
1. Centralised and slow
2. Non-empathetic with the people’s interests they presume to protect
This all goes to advance the argument that representative democracy is a framework for extorting wealth. There are legitimate justifications for having a resource rent; but the time to apply it is not at the peak of the boom; it’s when earnings are modest (for income tax), or when titles are issued (for indirect taxes/charges).
“Treasurer David Bradbury cited media reports that Amazon paid no tax in the UK yet made more than £3 billion in sales. It did this through an elaborate “routing” of transactions through Luxembourg, where it faced an effective tax rate of 2.5 per cent”.
We might welcome competition between governments in the realm of administration and taxation…after all is that not the best means of achieving efficient government…if we must have it. The problem is that we have unprincipled governments ‘ring-fencing’ earnings in order to collect taxes which result in businesses having to play circus in order to minimise taxation. It’s a false economy. Why not just adopt ‘user-pay’ charges? The reason is because:
1. Politicians have demonstrated that they are of no ‘use’
2. Politicians cannot enslave people for dubious ends if they cannot extort a surplus they cannot earn
Treasurer David Bradbury would have you believe that these companies have acted against the law. This underwrites his justification to apply the tax revision retrospectively from 2004.
“It is a complex web but governments in need of revenue will pull out all stops to get back what rightfully belongs to the country”.
The problem is – it’s not rightfully the governments. It’s not even the people’s. The role of government is to protect people; not to extort wealth from them, and use some notion of ‘mandate’ or majoritivism to achieve it. That is ‘mob rule’, and is akin to the type of politicking we expect from unions, not governments. This is why Labor in government is dangerous. The bulk of Labor Party supporters come from the union movement; and they enjoy the support of many in the media. So in what sense has Google and others acted contrary to the law. If they broke the law, why does the law need to change? If the government was ‘rightful’, why did they lose a litany of court cases?
Treasurer David Bradbury: “Many in business reject the notion that paying a fair share of tax forms part of a broader social compact, instead believing that it is just another cost of doing business. On this point, I vehemently disagree”.
Business leaders are goal-orientated. They are good in business because they just get in and do it. It is fair to say that they would be far less functional if they concerned themselves with ‘taxation issues’ or politics over which they know they have little control, because they are a minority. For this reason, business plays just one card – the ‘pragmatic, nation’s interests’ card, and it’s played against ‘common good’ proclamations by organised unions. It’s a shame, because there are compelling moral arguments to be heard in defence of capitalism, and they are not made because you have business and union-liberal interests attempting to extort influence over an unthinking electorate whose framework for engagement is anything but rational. Given that this extortion system creates the sanction for legislation, you have judicial officers interpreting laws which are anything but rational. This juxtaposes two forms of law in conflict:
1. The principled, common law applied to specific contextual issues, i.e. This gives rise to the ‘spirit of the law’
2. The unprincipled statutory law which is arbitrary, and not able to apply to any context which is not defined. i.e. this demands a ‘letter of the law’ interpretation that gives rise to a constant stream of amendments to prevent loopholes, which create more loopholes.
3. The unprincipled or pragmatic teleological ‘intent of the law’; which is another foundation for context-dropping.
Treasurer David Bradbury: “These businesses benefit from operating in an economy built on social and economic institutions — our markets and regulators, the rule of law and our judicial system — not to mention physical infrastructure and human capital that is funded or supported by the taxes paid by others”.
No they don’t; they are greatly penalised by the institutions which tax and regulate them. If the Treasurer is so convinced that government is so good for corporations; why does he not give them the discretion to pay for the services which companies use or sanction? The reason is because our tax and regulatory system is not a system of justice, but a system to extort and to justify the existence of politicians. The government is functioning on the premise that:
1. Government is a value – irrespective of whether its constituted to protect or to extort.
2. Government services to the extent that Google and others use them; are paid for. i.e. Google, if it goes to the High Court, to challenge a tax, will pay fees for such services.
3. Government has a legitimate position to interfere in the voluntary trade between a counterparty and these companies. Google has offered a service to these counterparts, and voluntarily received payment from them. The same cannot be said of government. No one asked for the government to act; it just assumed that role because:
a. It is embarrassed by the unfairness of its ‘unprincipled’ tax system
b. It needs the money to ‘pragmatically’ fill a hole in its budget…because it cannot meet a ‘promise’ to its union thug-members.
Now, if you are not convinced that our politicians and tax collectors are a pack of thieves….read this:
“Where some multinational businesses enjoy the benefits of these public goods but refuse to pay their fair share, they are free riding on efforts of others”.
How possibly can a politician or tax bureaucrat who depends on the ‘extorted wealth’ of companies complain about companies, who engage in voluntarily relationships with their counterparts. Well, I’m aghast. Knowing that the tax commissioner is not an extortionist, but a man of principle, I shall duly ask him to reflect on his position if I ever meet him in the High Court. Rest assured that the government does not have the courage to confront me in court. If they did; rest assured that they would persecute my by using your hard-earned taxpayer funds to keep me in court for a decade…until my hair falls out…or goes grey like other ‘defendants’…like Julian Assange. Institutions for protection or preservation of illegitimate, unprincipled, self-interest….you decide.
No this government and the media will not allow principled people like me to vent our opinions because we are an embarrassment to them. We challenge people to think. They need people’s mindless acquiescence; so they will use any trick in the book to keep people like me ‘off radar’. In the old days they would just persecute or imprison non-compliants; today, they just simply stop you have any effective voice. Your ‘right to associate’ or ‘freedom of speech’ means nothing if you have an ‘arrangement’ with media to preserve their market dominance.
What is wrong with this framework? Well, I would suggest that there are several problems with this regime:
1. The tax office’s advisory group comprises ‘yes groups’, i.e. Business passes through its costs to consumers, and gets generous tax concessions on the way through. The complaint is that these internet companies are getting it ‘too good’. And yes, that is probably the case at 2.5%, but there is no such thing as a ‘good slave’. So the ‘solution’ of the tax office is entirely untenable if good slavery means taxing Google et al like other slaves at 16-30%. The solution is to end slavery and give people to pay for the services they use; and having an objective framework for determining those rates, and an ‘objective judicial’ process for assessing their rates if they want to challenge the rates applying to them as a ‘trader’.
2. The efficiency of the tax system given that it has been 31 years since the government sought to amend it. Yes, government is so efficient that it takes 3 decades to arrive at solutions. Consider that gambling laws in Australia took 3-4 decades; and NZ is still waiting for legislation to regulate offshore shipping after its ‘letter-of-the-law’ framework failed to hold the owners of HMAS Rena accountable for damages.
3. The spectre of a court which functions as the lap-dog of the legislature. I ask you whether it sounds like justice when you have a government enduring ‘a string of losses in the courts’ prompting a ‘unpopular government’ to revise the law. In what moral context did the courts reject it; and upon what moral premises will they be obliged to accept the revisions in future. The basis is political extortion.
Source of quotes: “Knives sharpened to cut Google's sandwich” by Adele Ferguson, SMH Online, website, November 22, 2012.
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