Tech giants' offshore cash-stashing is only ever a delaying tactic

Flog gear from Ireland and pay no tax? Come on, what's the catch?

So, sell everything from Dublin, pay the legally required amount of tax in this single market and then park it in Bermuda. Which is where US-domiciled companies face the same problem Vodafone did. They can't get that money back to their shareholders without paying US corporate income tax. Which is 35 per cent, minus whatever foreign profits tax has already been paid: not a lot, as above. At this point companies can't dodge taxes in the sense of not coughing up at all; they're only able to delay paying them.

This is where the different laws come in. US tax law is, on paper, not that different from UK law. But as Eric Schmidt has pointed out, he'd be staring down a bunch of shareholder lawsuits if he wasn't being aggressive in curtailing Google's tax bill. So there's certainly pressure on US managers to be as aggressive as possible, in a way in which UK-based people simply don't experience.

Unless there's a tax amnesty of course, as there has been in the past. And probably should be again, in fact. These US companies have $1.7 trillion piled up offshore and they'd love to get that back into the US so they can pay it out to shareholders.

The entirely bizarre argument against an amnesty is that if there is one, then the companies will just pay it to shareholders. Err, yes, this is the point of a company.

And if US shareholders suddenly get an extra $1.7 trillion they can do one of two things with it. Spend it, which would be a nice stimulus (well over twice the size of the fiscal stimulus that the Obama government actually came up with) or they can invest it. And investment is good; it's what produces the next generation of gadgetry and jobs.

Oh, and Amazon? They're not even using the EU law excuse. The standard international double taxation treaty means that warehouses don't lead to taxation. Obviously, on the way to your customer your goods will indeed stop in a warehouse at some point. Going to make exporting damn difficult if you owe profits tax in every place you've used a warehouse.

Whether the law should be this way is another matter: this is the way that it is currently. It's terribly easy for a non-UK company to not pay corporation tax in the UK on profits made by selling into the UK. That's because the basic assumption about corporation tax is that you pay it where the company is based, not where the sales are. It's also very easy for a company to delay paying tax on foreign profits, but almost impossible to never pay such tax: as soon as you try to get it to your shareholders, which is the point of the game, then it's going to get taxed.

Some people get very upset by this.

I'm afraid that I don't. For two reasons: the first being that even if we collect the tax from the company, it's not really the “company” itself that pays it. It's some combination of the shareholders and the workers that bear the actual burden of it. How that is apportioned between the two is indeed a matter squabbled about amongst economists, but two basic points are accepted by all:

Companies don't pay taxes, people do.

We have only ever taxed corporations because they were a convenient place to pick up the cheque. Given that, as above, they're obviously not a convenient place now, we may as well drop the pretence and just tax the people – which is what ultimately happens anyway, at the moment.

The second point is this bizarre idea that the tax an organisation pays to the Treasury is the measure of good that it does the country. Which is, frankly, insane.

The NHS provides no corporation tax at all, but we all think that it's a pretty good idea to have a healthcare system – even if it's not exactly the same as the one we've got now. Thus, the value of the NHS must be expressed as something other than the tax that it doesn't pay. That value being that it has been known, occasionally, to cure people of illness and disease.

And it's just the same for companies: the value of their existence is in the goods and services they provide. The value of Google is that we get to, well, google. Amazon sells us cheap reading material; Starbucks peddles bad coffee; and I'm sure someone can find some use for Facebook.

We must value all of these things at more than we pay for them, precisely because we willingly use them. That value, over and above what we do pay, is called the consumer surplus; a surplus which is vastly larger than whatever tax is or isn't being paid.

One entirely serious academic paper claims that the consumer surplus is actually 50 times the profits of the people providing the goods. With those sort of numbers, who in the hell cares about the tax? ®