I'm sure this is pointing out the obvious, but it's 'sold' from a Dublin address due to the corporation tax breaks. It's effectively one massive tax dodge - google / amazon / dell etc put all sales through Irish shell companies, really does boil my blood!
It's not a significant tax dodge in this particular case though. VAT is paid to the country of the consumer, not to the country of the retailer. Any corporate tax on the profits of the sale id going to be tiny in comparison.
The fact that on one individual sale the damage is minimal is pretty irrelevant - you don't get to pick and choose what you pay tax on.
Google in the UK had sales of £2.5bn. It has a group wide profit margin of 33% so let's assume profits of £800m and yet paid £3.4m in corporation tax (as opposed to the £220m you'd expect at standard corporation tax rates).
As someone who does pay tax at the full rate in the UK, I'd quite like it if they did too.
Yes, it's immoral and in an ideal world would not be legal. But the decision to sell the Nexus 4 from Ireland clearly has nothing to do with dodging taxes, so it's ridiculous to use the Nexus 4 as an example of this kind of operation. The fact of the matter is that for a Nexus 4 sold to the UK there's about 40GBP of VAT being paid to the UK, and about 0EUR of actual profit for Ireland to tax (or for the Bahamas, or whatever the domicile of the appropriate sleazy holding company is).
No, they're selling it there because that's where they're set up. Just because you have a product you don't expect to directly make money on you don't go and set up a new operation to sell it - the fact you're not making money means that you're going to use whatever you've already got in place rather than incur new costs.
But the fact that this product isn't profitable doesn't excuse it. We're always told that Android drives the Google ecosystem which drives profits.
This phone in of itself may not be profitable but it drives other Google services which are and on which tax is avoided.
You don't seem to understand VAT. Consumers pay VAT on goods and services ( some exceptions ). Without further financial activity, these receipts are simply forwarded and paid to HMRC.
For purchases that included a VAT component, ( and that is or should be all orders ), the amount paid to VAT is deducted. If the balance is positive, the entity pays HMRC. If the balance is negative ( for instance, when making a loss on expenditures vs income ), HMRC pays you.
In other words, it's entirely possible that HMRC pays Google. Customers, ( or those not VAT registered ) always pay the tax.
I understand VAT just fine. Meanwhile you don't seem to be responding to anything that I actually wrote.
The exact specifics of VAT accounting don't matter to the question of whether selling Nexus 4 to the UK from Ireland is sleazy tax optimization or not. I think it clearly isn't, and have argued why not. If you disagree, could you perhaps address that point rather than bicker about the exact VAT semantics?
I'm not trying to bicker. I'm merely pointing out that VAT is completely irrelevant to tax on profits. It needs to be left out of the conversation as it never forms a liability for a VAT registered entity. It's only connection to ethics as far as I can see is to the question of whether a VAT registered entity should arrange accounts so that a continuing pattern of running a loss account leads to payments from HMRC instead of the other way around. But of course in practice this makes no difference. Some other VAT registered entity will pay it instead.
This is important to clarify. There seems to be an idea here and elsewhere that VAT forms part of a companies liability. It doesn't.
As to arranging a lower tax rate on what are liabilities, then I will agree in the main. Ethics as pertaining to corporations are codified. They are a little subtle, but generally they resolve around the best interests of the company. This doesn't imply, as I'm sure you know, that the only consideration is profit. Shareholders are or should be also interested in larger concepts of value.
The fact is that the tax code in the UK provides for decisions that lead to the, in my view, somewhat hypocritical criticisms from these companies interrogators. It is grandstanding on well established and ordinary mechanisms of accounting. It ignores the history of the British isles in allowing tax havens like Jersey to prosper, and completely discounts the philanthropic activities of some of these companies, in particular Google.
Sorry if you thought I was having a go. It wasn't my intention.
