Why should an American company pay British taxes on Irish profits?by John McTernan / January 29, 2016 / Leave a comment
Whisky represents 25 per cent by value of UK food and drink exports. Sales are rising rapidly—with two-thirds of growth coming in the massive markets of the growing Indian and Chinese middle classes. New distilleries are being opened, old ones re-opened. It’s boom time. And it is very profitable. Where should those whisky distillers pay their taxes? In China and India where the sales are made? After all, both countries need tax income to build up public services. Of course not. British companies should pay British taxes on British profits. So why are we getting quite so upset about Google and demanding that an American company pay British taxes on Irish profits? The reason is simple—we are angry and confused in equal measure.
The anger is economic in origin and, appropriately is endogenous and exogenous. We are angry in ourselves at what is going on in the world. There was a financial crisis—the Great Recession—which nearly became a Depression. It was, we believe, caused by the banks, but they weren’t punished. Instead they were bailed out. No one went to jail. Bonuses continued. Real wages have been squeezed. We feel like Howard Beale’s audience in the film Network leaning out of their windows and screaming: “I’m as mad as hell, and I’m not going to take this anymore!”
Here’s where external factors come into play. The main one is political dishonesty. No politician told the truth. Which is understandable when you see what happened to Alistair Darling when he warned about the looming recessions—the “forces of hell” were unleashed on him, apparently from his own side. What was that truth? There was a Global Financial Crisis, caused by sub-prime mortgages in the United States, but rapidly transmitted through the world because of the interconnectedness of finance. The banks had to be saved because they are utilities as fundamental as gas, water and electricity. The alternative was the dystopian world of Alan J Pakula’s 1981 paranoid thriller Rollover where money is rendered worthless in a financial crash. The UK economy took a battering—it was a recession after all—and we lost 7 per cent of GDP. Probably permanently. And because the UK lost that wealth we were all going to suffer.