Madsen Pirie

I went on Adam Boulton’s programme on Sky News on Thursday alongside Richard Brooks of Private eye.  The morning had just seen a new Witches-of-Salem trial by Margaret Hodge’s Public Accounts Committee, and the charge was that firms such as Amazon and Google were manipulating the system to pay as little tax as possible.  I made the point that this is what the law allows.  Indeed, in the case of the European Single Market, it is what the law intends.  Anyone setting up in one EU country can trade equally with them all, and nations are not permitted to tax them again once they have paid in their host country.

A more important point I made as that the value of a company is not determined by the tax it pays, but by the goods and services that it makes available.  My life is enriched every day by Google, and every week by Amazon, and not because the government gets to spend a little of the money they make.  The value to me, and to my fellow citizens, lies in the goods and services that firms like these make available.

I made the point in passing that when firms do have to pay more tax, many studies have shown this comes mostly out of wages.  Richard Brooks described this as ‘contentious,’ but it is well backed up by academic studies.  I also suggested that instead of trying to end low tax jurisdictions such as Ireland and Luxembourg, a better strategy would be to copy what they are doing and make ourselves more attractive.  This whole discussion is a red herring laid by politicians to divert hounds from the real scent: governments are spending too much and taxing too much, and are preventing us from growing richer by doing so.

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