Brigida Soriano - Fotolia

Is it Information Technology or Income Tax?

IT used to stand for one thing when it was associated with tech firms. But as Billy MacInnes argues it now has a different meaning for many

Thanks to the huge amount of coverage given recently to very high profile stories concerning the tax affairs of Apple and Google, you might be forgiven for thinking that we've been getting it wrong all these years about IT. It doesn’t stand for information technology, it stands for income tax.

Having your tax affairs questioned in the House of Commons (Google) or by the European Commission (Apple) is not a good look, particularly when your motto used to be “don’t be evil” (Google) or when you’re trying to convince the world that you’re a cool, ethical company (Apple).

The whole point about these types of “sweetheart” deals is that they’re supposed to be made out of  the spotlight. They don’t really work when your company and the government is publicly rebuked for negotiating a deal that leaves the business paying what appears to be a nominal tax rate of 3%. Lower still in Apple’s case, supposedly.

It would be much better for the IT industry if Google, one of its most prominent success stories of recent years, was being talked about in the houses of parliament because of its technical achievements and its effect on the modern world in a positive manner. It’s disappointing, instead, that it’s being discussed because of its taxation strategy and the effect that has on the country.

If there’s one description that the IT industry (and to avoid confusion, I’m talking about information technology here) likes to apply to itself, it’s innovative. Sadly, right now people are more interested in the “innovative” approach Google and Apple have taken to their taxation policies rather than their technology.

Maybe it’s a source of pride that IT industry heavyweights are replicating their innovative approach in technology and shaking up such the age-old practices of the taxation system. Perhaps we should rejoice that technology disrupters like Google and Apple seem to be doing such a fantastic job of disrupting the corporation tax regimes of the UK and Ireland.

At this point it should be stressed that neither of these cases could have been achieved without the complicity and support of the governments of Ireland (Apple) and the UK (Google). Should we be pleased that both governments have been prepared to see beyond the staid boundaries of their old-fashioned, restrictive and uncompetitive tax regimes and arrive at innovative and transformative solutions that best position them to fend off global competition and attract more businesses in the 21st century?

If Google had to pay a sum more commensurate with its earnings in a time of austerity it would provide a welcome boost to the UK exchequer while the €7bn Apple might owe in back taxes would make a huge difference to Ireland but only a relatively small dent (less than 3%) in the company’s massive cash stockpile.

And we could go back to talking about IT for its technology rather than its taxes.

This was last published in February 2016

Read more on Finance and Credit

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

ComputerWeekly.com

SearchITChannel

Close