Small print.

So Amazon, that well known global e-commerce company based in Seattle, doesn’t pay any corporate tax in the UK and avoids VAT on various products by having a “corporate centre” in the thriving metropolis that is Luxembourg City (twinned, apparently, with the London Borough of Camden Town). This revelation has spurred a great deal of hand-wringing in the UK, but has also introduced the subtle distinction between a vendor and an “order fulfilment operation” to our ever-evolving sacred texts of business-speak

@Stebax (the Enemies of Reason bloke) set a hare running in my mind on twitter by suggesting that, as his business in Britain was merely “blogpost delivery”, he would henceforth be basing himself in Luxembourg. I wondered if he, along with many of us, are in fact in the business of idea delivery and thus were only taxable within our own minds.

I blog on Posterous, which is based in San Francisco and is now owned by Twitter which is split between SF and New York. Both organisations graciously allow me to retain ownership of my “work” (such as it is!) which is hosted by their platform. To be more specific, I voluntarily supply ideas to Twitter and Posterous, granting them a global non-exclusive and transferable royalty-free license to publish my work. To put this another way, I have entered into a contractual relationship with both organisations to provide them with content that I permit them to monetise as they see fit, and in return for this they provide a stable hosted platform for me to publish on to.

In both cases the model is either to use my content to sell ad space, or to use the promise of their ability to use my content to sell ad space to raise venture capital. These ads are bought (or will be bought) by global companies, who hope that they will be seen by a particular demographic of viewers filtered by earnings, interests, geographic location, gender or a million other variables.

In simple Marxist terms I create value via my labour which is exploited in return for profit, but all of this happens on a global basis. I sit at a desk in the UK, some guy sells ads from a desk in the US, some woman buys ads space from a desk in China but all of these transactions are actually stateless.

Corporate Tax law, as it currently stands, levies a charge on net profits relating to a trade conducted within a particular country. Section 6.(4)(a-b) of the 1988 Income and Corporation Taxes Act defines this:

“(a) “profits” means income and chargeable gains; and
(b) “trade” includes “vocation”, and also includes an office or employment or the occupation of woodlands in any context in which the expression is applied to that in the Income Tax Acts.”

Trade is here seen to include “Goods, Services, Income & Transfers“,  all of which concern the exploitation of commodities (“the products of human labour”, after Marx).

Regarding posterous or twitter, the person producing the commodity in all this is me. My renumeration (as above) is the free use of the platform – a benefit which is not taxable, and/or is also the means by which the commodity I create can be exploited.  You could imagine if I was C19th homeworker I would produce a certain number of ladies undergarments without pay in order to cover the cost of a sewing machine. This is the same, except I never get to own the sewing machine or get any wages.

[Going deeper, am I actually creating the commodity at all? I’ve been inspired by news on the Guardian, commentary on twitter and content from the UK government, Wikipedia and the town twinning association so far. So, in the same way that I’m adding value to what Posterous do, all these people are adding value to what I do. And what about the likes of Google selling ads alongside search results and aggregation…?]

So trying to locate where the “trade” happens, who is “trading” with whom and where profits are taxable is by no means a simple matter. I’d be tempted to argue that, as we move to increasingly global business models, that we need a global corporation tax collected by an international agency and spent for the benefit of the entire world – which in the short/medium term would be primarily aimed at the developing world in order to reduce global inequality. Eventually we could move for a global minimum wage and then some kind of sustainable and controlled use of natural and human resources. But I’m just a smelly hippy and I don’t understand finance or business…