There has been more wailing and gnashing of teeth this week because Google has not paid its ‘fair share’ of tax. We heard much the same about Starbucks & Amazon, it’s a story that comes around every few months and is met with the same hysterical lack of logic. All these companies pay tax here in the UK. It is called employer National Insurance, or more accurately an employment tax, Google last year an estimated £8 million. So headlines or tweets claiming they pay no tax is demonstrably false. The debate is really if they have paid enough tax.

In any industrial democracy, there is a system of tax law, it is an industry in itself, mainly because democracies complicate law in order to manipulate their friends in a crony capitalistic society, what was known in the old days as mercantilism. Indeed, it was ever thus.

I used to work in the investment and tax avoidance industry in one form or another. I did so for over forty years. I feared that one day the chancellor and his treasury mandarins would simplify the tax system and put us all out of business. They never did because that would also mean mass sackings of revenue staff. A bit like cops, they need robbers. When it comes to big international firms they can operate anywhere in the world. It should come as no surprise that Google’s Finance Director and his team consult their tax lawyers and decide on the lowest tax authority commensurate according to the law. This is a duty to their employees, shareholders and customers. Their responsibility is not to any particular state where they trade or offer services.

This is where some folk find a problem. They believe a company has a moral duty to contribute to the state. This is as absurd as it is unenforceable.

Morality is subjective. An Austrian School economist believes that the state is an institution of theft. A socialist believes in high taxation pro bono publico. Most folk would fall somewhere in between. It is, therefore, impossible to run a system on that basis. There, therefore, has to be tax law. A company either owes tax or it doesn’t. If there is a dispute it must be settled in a court of law, it is a fundamental principle of a democratic system. Morality must be set aside. You might ask yourself if it is moral to take money from people who work in order to give it to people who choose not to work. Or to send £ billions abroad with no audit trail and largely to no purpose. Or you might question £ billions being spent on aircraft carriers, dodgy charities, subsidies for rich landowners, and so on. The list is truly endless.

For those who get hot under the collar on this issue, it might be fruitful to consider an alternative to law, perhaps some sort of government sponsored quango headed up by yet another member of the great and the good to adjudicate on a subjective basis. Consider this if you will. Imagine your accountant completes your tax return. He sends it off to your regional tax office. You are a bit surprised when they call you in for a chat, look – they argue – we do not dispute you owe us £10k, your accountant has done a perfectly good job and you have attached a cheque for which we thank you. But as you know the government is deeply in debt and it’s getting worse. We don’t seem to be able to control it unless we stop giving money away, an idea we have rejected, so we would like another £10k.

In reality, they want a sort of voluntary contribution or they will use their press office to tell your neighbours you are a mean tax dodging scoundrel who wants children to starve in the streets.

This is no way to run a tax collection system, but this is an option being seriously contemplated. Would a government with this weapon stop at multinational corporations? That is naive.

If governments want multinational companies to pay more tax they must simplify the tax system so it can be collected under the law. There is no room for emotion or subjective morality in tax law. As in all matters, the law is the shield of the citizen and protector of property rights, it must not be tampered with just because the state gets the occasional result it does not want.


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