diverted-profits tax, would hit multinational companies with a 25% tax rate on any profits earned from activity in Britain that the company attributes to a subsidiary based in a lower-tax jurisdiction. Since the rate is higher than Britain’s normal 21% corporate tax rate, Mr Osborne clearly is hoping companies will stop so-called revenue shifting and pay regular taxes instead.
As The Wall Street Journal put it in their op-ed at the link above,
[i]t’s a strange move because not so long ago the Tories understood the stimulative power of tax cuts. Messrs Cameron and Osborne have cut the top corporate tax rate to 21% from 28%, and have reduced personal income-tax rates and adjusted the tax brackets so that fewer earners pay the higher rates. By keeping more cash in the productive private economy and improving incentives for saving, investment and work, these moves have contributed to a growth rate now expected to hit 3% for this year.
The WSJ claims mystification over the “Google tax,” the nom de guerre of diverted profits tax, but they misapprehend the…thinking…of Messrs Cameron and Osborne. If fact, those fine gentlemen are operating from the false premise that corporate profits actually are the government’s money in the first place, and/or from that premise’s close associate, that the government needs that money.