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Amdyn
 
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Google and taxes

12 February 2014, 07:23

This is a very interesting topic because it covers the idea that "tax" just like anything else is a competitive environment.

Why do I say this ? Well, the assertion is that google doesn't pay "enough" tax to the SA government because it is based in a tax haven.

This raises an interesting question : If google was based in a different country such as say India or China (i.e. not a tax haven) - would it pay any more tax to the SA government ? I doubt that it would - it will pay tax in the country of origin. If anything it is the US which should be looking for the missing tax money - not SA.

Now the next point made is that local suppliers of advertising have to pay lots of tax on their profits and so are uncompetitive because google pays less tax. The answer proposed by local suppliers is that we must find a way to increase the tax which google pays in order to "level" the playing field. This is possible but I believe BAD for the average consumer because although google would hand over the "additional tax", they would simply pass on the cost to the consumer - thereby effectively increasing OUR taxes- not google's. The cost of the products we buy would increase by the additional advertising cost. 

Similarly : Lets say I produce gold. Can I can argue that we should force other internationally based gold producers to pay the same tax as I do in SA, so that my gold is more competitive ? No, I can't do that so why do digital media feel that they can ?

So the question then becomes : Why are our media houses unable to compete ? They point to how much tax they pay. We are therefore tax uncompetitive.

Just as our productivity is bad a leads to economic issues, so our tax regime is uncompetitive compared to international taxes. So instead of calling for an additional complicated tax to try to capture what is ultimately R140 million out of R750 billion in tax (or 0.01%) which we as the taxpayer ultimately foot - I think we should be calling for lower taxes in order to make us more competitive.

Feel free to disagree, but hopefully I have made you think.


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