The collapse of tax

A story on an Australian new site about Google grabbed my eye as I flicked through, mainly because it mentioned tax, something that I am dealing with at the moment for my business, something I am am obligated to pay in order to keep operating.

Google settled their 10-year (2008 to 2018) debt with the Australian Tax Office by paying a 481.5 million dollar lump sum. Sounds like a lot doesn't it? Last year Australians handed over 4 billion dollars to Google and for reference, with a population of 25 million, that averages that every man, woman and child spent 160 dollars at Google. While the 480 million payment to cover ten years is great, the problem is that the corporate tax rate in Australia is 30% , meaning that for 2018 alone the tax liability in Australia should be 1.2 billion. Hmm.

Google and every other corporation on earth limits the tax liabilities through creative accounting, and in thee case of Google, they send their finance off-shore to Singapore where the rate is 17% instead. And, they don't pay anywhere near that there either.

As I have mentioned earlier, this is one of the core problems with government economics as they are only able to control what they have within their reach. Now, I am not going to get into the discussion of "tax is theft" here, just look at the issues with being able to move money across borders in order to avoid taxes.

The economic systems that governments use are Keynesian in nature and designed around one hundred years ago. The problem with the system is that they were built for a different time, a time where no one could imagine (let alone factor) companies that generate trillions in revenue, have very little tangible product and can shift their wealth across borders easily and instantly to find the best tax deals. This means that the available financial resources for the governments are limited to what stays in the country, and that means the largest earners who can creatively account their business can avoid their grasp. However, we as citizens can't.

For a little perspective, the average salary in Australia is 80,000 dollars a year (It used to be 36,000 when I was there in 2003) and that means in order to generate the same tax liability as Google did in 2018, there would need to be 50,000 average worker salaries. Again for reference, that is about 0.5% of the entire working population in Australia. Google employees 1500 people or so in Australia. Do you see the issue?

Those 50,000 employees can do very little to reduce their tax exposure, but on the same 4 billion, Google paid just 26.5 million, or the equivalent tax of 1090 average Australian worker salaries. This means that instead of having the tax availability of 1.2B from the 50,000 workers plus the 1.2B from Google for 2018 making 2.4B, the Australian government has 1.2265B. Not much difference. This means that all of the government (often useless I know) actions need to be covered by the people themselves, not the corporations that bleed the people dry.

This isn't the only problem of course though is it? Because while the tax is not available to the government, it isn't available in Australia either, as it goes off shore. That means that pretty much all of the 160 dollars for every Australian that was earned in Australia, went overseas - 4 billion extracted in a year - by one company. And they all do it. And then on top of this, the governments have to take loans from the various banks that are invested into and profiting from the same companies that are extracting the tax amounts. The system is pretty broken is't it?

It is likely working perfectly for those who designed it.

While I do not think that this is going to happen any time soon or likely ever, I wonder what would happen if governments demanded (it would have to come from citizens demanding first) that all corporate finances had to be blockchained and all rules would be applied by the codes as required automatically? Again, there is so much corruption surrounding this that it won't happen (at the corporate or government level), but I wonder how much would be able to be uncovered and, I wonder if all the corporations of the world paid their full tax liability, would the citizens need to pay anywhere near as much?

Regardless of this blockchained scenario, what is obvious is that the economic systems of a country are highly inadequate to deal with the global corporations and conglomerates that can shift their wealth and shop for better deals, essentially laundering their tax liability to then reinvest into themselves and other companies that are going to increasingly do the same thing. Collapse has to happen, it is inevitable.

Where will people turn?

Taraz
[ a Steem original ]