Tax doesn't have to be taxing -- but it could land Google in trouble. An MP has hit out at Google's "entirely improper and immoral" tax arrangements after the search giant coughed up just £6m last year -- less than 2 per cent of its UK revenue.
John Mann MP intends to haul Google bosses in front of the Treasury Select Committee some time before next spring, The Independent reports, in an attack on tax avoidance, loopholes and tax havens.
Google managed to pay such a small amount thanks to the entirely legal practice of tax avoidance, which involves minimising the amount of tax you pay by structuring your company in such a way that you're liable to pay less -- as opposed to tax evasion, which is dodging tax by illegal means.
Google employs a bit of financial jiggery-pokery called the 'Double Irish': UK revenue is shunted to Ireland, where the corporate tax rate is 12.5 per cent, before it's squeezed through a loophole to tax haven Bermuda.
Google only pays tax on the 10 per cent commission paid to the UK arm of the company by the Irish arm -- which works out at £6m for the taxman out of revenue of around £395m in 2011.
That is more than previous years, however. Between 2004 and 2010 the search giant paid just £8m to the Exchequer.
"We make a substantial contribution to the UK economy through local, payroll and corporate taxes," Google says. "We also employ over a thousand people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in East London. We comply with all the tax rules in the UK."
Paradoxically, Google could get in legal trouble if it didn't avoid tax. Like all public companies, Google is obligated to maximise the money it makes shareholders, so if it were to stop exploiting legal loopholes, investors would be up in arms.
Of course, it's not just Google -- everyone's at it. Other tech companies in the spotlight over tax include Apple, Microsoft and Vodafone.
Meanwhile, Google has just been slapped with the largest fine ever handed out by the US consumer protection authority over tracking cookies.
Should companies be brought to book when they don't pay enough tax, or should companies be allowed to just get on with it as long as they're within the law? Tell me your thoughts in the comments or on our Facebook page.
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Comments 16
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anonymous 13 August, 2012 13:25
why don't MPs consider lowering the tax rate ?
anonymous 13 August, 2012 14:00
Google is only doing what makes good business sense. To be honest by paying more tax to the uk treasury only allows our government to be more corrupt with more financial power. British Citizens and business operating within the uk pay far to much tax for far to little in return from the country.
At least if the treasury has a lower income then the politicians will be able to claim for less in expenses
anonymous 13 August, 2012 14:11
Isn't the simple solution to change the apparent expectations of shareholders? Are shareholders purely lacking in morals when it comes to their own selfish wants? They should accept that tax should be paid fairly, not squeezed for every penny that may drop into their wallets. I'm tired of stories stating that businesses are forced into questionable practices because of their duty to shareholders and the general need to increase profit above all other possibilities. Imagine if the money which looks as though it has been siphoned off to the coffers was actually used productively to the country/world at large. A PC in each primary school class > a child who wouldn't have otherwise finds a love of computers > invents the next internet. I'm only saying that it could.
I know Google don't have to do anything but satisfy shareholders, but they should want to. People are going to want shares in Google regardless and perhaps even more so if they were seen as shining beacons of humanity. But probably not.
anonymous 13 August, 2012 14:17
Tax avoidance is just good business, ISA's are tax avoidance but the Government say they are fine.
Streamline the tax laws, get rid of the surplus civil servants, reduce the tax bills and bring business to the UK.
anonymous 13 August, 2012 14:20
Your entire post(s) is only valid for your own definition of "questionable practices".
Now, I wonder if John Mann fully advertised the office manager role he currently employs his wife in (according to the register of member's interests).
anonymous 13 August, 2012 14:26
Hypothetical question:
Let's say that UK law requires you to pay a minimum of 25% of your income, and that is all you are legally required to pay... BUT the government says that good citizens should voluntarily pay 45%. You don't have to by law.. but you should WANT to. How many of us would really pay more than we are legally obliged to pay?
anonymous 13 August, 2012 14:38
But it isn't the same thing. It is A) is how much you should pay but you can get away with paying B) if you are rich/have the resources to pay some clever dicks to put your money through a series of loopholes.
All comments based on morals or questionable practices can only come from a personal perspective, though the majority rule usually matches my feelings.
The MPs are just as bad as business and indeed only keeps such loopholes open to satisfy their business friends (backers), though publicly condemn it when they can i.e. Jimmy Carr. What about Sir Philip Green the avoidance for him must be in the hundreds of millions but he escapes pressure from government because he helped more than most in putting them in a position of power. I feel ill at the corruption in all aspects of life, whether it be acceptable or not to some.
Mat Greenfield 13 August, 2012 17:08
I hate the use of the term "immoral" when the government describes tax avoidance. It suggests that whilst the company in question COULD trick the system, their better nature should stop them. No! If there's a way around paying taxes then stop them doing it, don't try and shame them because it won't work.
anonymous 13 August, 2012 17:48
uk's government sucks
alfstar 13 August, 2012 21:32
Indeed, anon.
Ultraman1966 13 August, 2012 23:31
MPs should moan less and actually fix the root by closing the loopholes but they won't because at the end of day you don't bite the hand feeds you. This media furore is just a puppet show with no real actions other than to pretend to care that big business can pay proportionally less tax than the average working person.
antonravioli 14 August, 2012 09:33
MPs complaining about immorality? They really must assume, I know they don't think, that the public are as stupid as they are. Screwing/massaging the system to get away with claiming excess expenses at the taxpayers expense. Then starting this smoke screen pretend outrage at individuals and companies who legally keep their tax obligations to a minimum.
So all those "outraged" by these "immoral" practices pay all their taxes and never try to reduce the amount by using the legal and legitimate means available.
So when completing their tax returns they don't enter anything in the boxes that allow them to claim expenses that will reduce the total amount due? Here you are Mr Taxman, take 100%, I don't want to keep a few extra quid. I'm "honest" and "moral". I'd sleep much better at night knowing I'd paid you £18,000,000 more than I needed to.
Yeah and the moon is made of green cheese and there is a Santa Claus.
Whether a global corporation or single person, no one in their right mind pays any more tax than they need to.
anonymous 14 August, 2012 13:15
So an MP thinks its imoral to comply with the laws that MPs create? That explains a great deal.
anonymous 14 August, 2012 14:46
I think it says more about the government. They need to close the loopholes.
anonymous 15 August, 2012 10:35
Our tax system is totally defunct. It contains over 11'000 pages. The government should scrap our tax system and start again with a flat tax, such as the one proposed by the 2020 tax comission. Everyone pays 30%, no loopholes and a swathe of other taxes abolished (such as inheritance tax, stamp duty, national insurance etc). The government should not be moralising tax, it should be fixing the inefficient system that lead to the loopholes in the first place.
anonymous 22 August, 2012 10:48
The openinig paragraph is very misleading; you don't pay tax in revenue, you pay it on profits, so quoting tax paid as a fraction of revenue earned gives a very false view of how much Google "ought" to pay.