Politicians Bewail The Results Of Their High Taxes
So notes an editorial in the WSJ:
In the crime of the century, Google routed $9.8 billion in revenue through a subsidiary headquartered in Bermuda in 2011. Strike that. What Google did was entirely legal, but you wouldn’t know it from the political uproar that has made the search giant the latest target of the higher-tax chorus.
Last month, Google, Starbucks and Amazon were hauled in front of a U.K. Parliamentary committee to explain why they don’t pay more to Her Majesty’s Treasury. And if you are a lawmaker whose job it is to spend other people’s money, there’s a certain attraction to this logic. The governments of the U.K., the U.S. and most of Europe are deep in the red. Raising taxes on ordinary folk is rarely fun or popular–but getting businesses to pay more is good sport in the halls of Washington and Westminster.
Starbucks’s decision earlier this month to fork over £10 million ($16 million) in a voluntary donation to the U.K. Treasury may have bought the coffee purveyor some peace and good press, but it muddied the debate over corporate taxes. Such a donation–don’t call it a tax payment–reinforces the impression that multinationals are holding out and could pay plenty more if only they were more public-spirited.
But £10 million given to the government is £10 million that Starbucks won’t have to create jobs, or fund expansion, or even give to charities, if it chose to–which might well do more good than giving it to the Chancellor of the Exchequer.
As for Google’s Bermuda billions, they are chiefly a testament to the economic insanity of America’s corporate-tax system. Under the U.S. tax code, American corporations are liable for tax made on world-wide profits–but only if they repatriate those overseas profits to the U.S.
J.P. Morgan estimates that American companies currently hold a cool $1.7 trillion in profits outside the U.S. They keep them there because if they brought them home, they’d be taxed at 35%.