Google are slated to build a huge multi-£billion building in Kings Cross, in the main site next to the station. Now the government is talking about taxing them – will this stop Gooogle going ahead, either literally if they can’t afford it, or as a political gesture/statement?
Google are going to dig a hole in the ground in Kings Cross and fill it full of money. Reports suggest it will be ultra modern and a bit out there. Google has already rejected one set of plans, reportedly tearing up the architects work (which was admittedly quite banal and nasty glass-slabby thing) and asking for something that will push the boundaries of office design. Why would they want to do this? Surely the money should go to shareholders? Apart from the tendentious arguments that expensive, bespoke wacky workplaces stimulate creativity? (Einstein remember came up with the critical parts of the special theory on relativity while working at the helter-skelter-free Swiss Patent office, possibly the most boring place on earth to work.)
Google and many big American multinationals have a huge cash pile of profits earned overseas that they can’t take back to the USA. USA multinationals in fact according to Bloomberg have $1.95 trillion in cash held overseas – there’s an excellent graphic that shows Google is a mere arriviste in these stakes compared to others. This money can’t easily be returned to American shareholders. Congress is at an impasse on how to tax overseas profits and if companies hang on to them they aren’t taxed yet. Tax is deferred until they try to take it back to the USA. And one suspects this allows multinationals the leeway to splurge on creative buildings.
The UK Chancellor is now talking about taxing profits earned in the UK, in the UK, with particular reference to tech firms that earn profits in the UK squirreling them away in Irish and Luxemougois tax shelters (ie in the EU, but the lowest taxed bits)
A new tax on unpopular historic excess profits isn’t a new idea. In the UK in 1997/8 the new Labour government tackled the excess profits of the privatised utilities with a ‘windfall tax‘ (as a civil servant at the time I was involved in the margins of this, hence the residual interest). Some of the companies taxed then were American and they tried to offset their UK windfall tax bill against their American tax bill when they repatriated the profits on the principle that you don’t pay tax twice. This was contested by the American government and the case wound its way through the courts, finally the Supreme Court decided last year that in fact the windfall tax could be offset against a USA tax bill as a credit when repatriating profits.
So, off the back of the Supreme Court judgement I wonder if a UK Treasury team could devise a structure where they tax Google’s profits (and those of other tech and multinationals) in the UK, giving them a USA tax credit, allowing Google to return money to their american shareholders at little further net cost. Any tax experts out there who can say if this is bonkers – drop us a line in the comments?
And paradoxically the people who would lose would be American taxpayers, but without movement they won’t gain anyway as profits are held outside the USA. Google might, if not come quietly at least be less noisy.
But it’s a zero-sum game. If they are taxed in the UK would Google be pre-disposed to build such a colossal multi-£billion office in Kings Cross? Would we get our bridge across the tracks? The BBC quotes ‘sources’ (most likely HMT special advisors) explaining that previously they hadn’t wanted to scare the multinationals off:
‘A source close to Osborne said the legal changes needed to force multinationals to pay UK taxes on UK profits are relatively simple. If that’s the case, it raises the question of why the government has not acted sooner.
‘The source said introducing the changes earlier may have scared the companies away from the UK and the nation could have lost them as big employers. Now, however, the source said “the tide of global political opinion” has changed and the rest of the world agrees that tax avoidance must stop.
So will the bucks stop in Kings Cross? Who knows? It’s a strange site, quite hemmed in and awkward. What if it were abandoned? Could is be squatted as an ironic HQ for Privacy International, perhaps a craft workshop for parents who sell stuff on Etsy? Fun suggestions for contrarian things to do with an abandoned Google office welcome in the comments.