Why Google is paying the UK government

Some are saying that Google’s recent payment of £130 million to the UK is a sort of good-will compensation for the fact that the UK doesn’t charge Google any corporate tax and treats it as though it were a small business.

It is my understanding that the payment to UK’s HMRC is nothing to do with taxation of small businesses but is an ex gratia for the helpfulness of the government to various Google schemes in recent years — the last one being driverless cars. That George Osborne chose to characterise it as a tax payment because it was paid to the HMRC (but where else could it be paid?) is his silly fault. He is becoming increasingly desperate that he’s losing ground as the front-runner successor to Cameron.

The fact that small companies need not be charged for occasional small sales in foreign countries is one of the few instances where there is universal agreement by all governments. The anti-tax evasion proposals of the EU, OECD and G-20 will all come to nought because government politicians are well aware of the fundamental competitive nature of nation-states. Major warfare being increasingly expensive these days, competition in corporate taxation is an obvious fall-back that governments will never forego.

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