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.
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.