Multinational tax

In Ireland Facebook paid €14m tax on a turnover of €8b (around 0.2%). The UK did even worse - Facebook only paid £4000 in tax in 2015. We did do a bit better with Google, finally getting them to agree to pay 3% tax on its profits, after tax officials realised that they were only paying 0.5%.

This is all legal - the companies use their multinational presence to move money around internally and then declare it for tax purposes in places that won't tax them heavily. This is one reason why some Brextremists suggest a low tax, low regulation regime will attract businesses - though it is actually more complicated in real life.

Allowing these companies to pay so little tax means that local businesses cannot compete. It isn't really a surprise that Amazon is stealing trade from your local retailers by undercutting them, not when you realise that Amazon only pays 0.1% tax in the UK on UK sales - they declare their income in Luxembourg.

Of course Luxembourg gets a whole lot more tax - tax on sales by UK businesses to UK customers. So the argument runs why don't we lower our taxes below Luxembourg's and then these multinationals will pay tax here in the UK on all their European sales. I hope you see where this is heading, because clearly the fans of this approach don't.

Luxembourg is hardly going to let us steal their golden goose. They will lower their rate below our new rate. And so it will go on. To 'win' we will have to lower our tax rate to such a point that no other country feels it is worth competing for the tax it brings in.

Possibly a sensible strategy for a small country with nothing much else to offer economically.

The other problem with the idea is that it depends upon the rest of Europe sitting back and letting us siphon off what should be their tax income. Sadly for its proponents this is not likely to happen. In fact the EU is now drawing up plans to impose an EU-wide tax rate, with the tax collected going to the country where sales are made, so that companies can't just choose to nominate a HQ for tax purposes.

This doesn't stop us reducing our own tax rates, but it makes the strategy worse than useless, as our tax take would decrease rather than increase.

Of equal concern is the fact that overseas sellers on these sites often fail to pay VAT. Again the only real way to enforce this is with the cooperation of Amazon, eBay and the rest.

Of course keeping taxes at a fair level might be pointless too. Once we have left the EU we won't have the leverage we have now, so even though the EU will be able to enforce a fair rate of tax, imposing fines for non-compliance, we may just have to settle for what we can get.