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Google fined £29 million for tax dodge

Google fined £29 million for tax dodge

Google believes its Irish-billed Turkish operation should pay no local taxes - but the government disagrees.

Google has found itself in hot water with the Turkish government, which claims the company owes £28.75M in taxes.

According to an article over on TechCrunch - which quotes local news sources - the Turkish government has completed a one-year investigation into the search giant, and believes that Google owes a substantial amount of additional taxes.

The investigation has found that while Google's European headquarters are in Ireland, the fact that the company has offices in Turkey and runs its profitable advertising services in this country means that it is liable for national taxes on all revenue generated via its Turkish registered arm - resulting in an impressive bill for back taxes of 71M Turkish Lira.

Google, for its part, is disputing the Turkish government's conclusions. It claims that because its European advertising operation is run entirely from its Ireland headquarters, Google owes the Turkish government nothing - whether or not it has offices or subsidiaries in the country, and regardless of any income it might make from providing advertising services in Turkey.

The Turkish government's claims of tax responsibility are given weight by the fact that Google has a fully-owned subsidiary registered as a limited Turkish company called Google Reklamcılık ve Pazarlama Ltd. Şti. (Google Advertising and Marketing Limited). This gives the Turkish government something local to target, casting a shadow on the company's claims that it runs its Turkish advertising empire entirely from its Ireland offices.

If Google does not pay the £28.75M, it could find itself in court, and even banned from operating its services in Turkey for the duration of the hearing.

Do you believe that Google has been caught in a tax dodge, or is the Turkish government just targeting the company with the biggest pockets in an attempt to generate a bit more income? Share your thoughts over in the forums.

30 Comments

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Abhorsen 4th November 2009, 12:38 Quote
Imagine if that figure was in the old Turkish Lira rate!
The Jambo 4th November 2009, 12:44 Quote
Quote:
Originally Posted by Abhorsen
Imagine if that figure was in the old Turkish Lira rate!

71 Billionish?
robyholmes 4th November 2009, 13:24 Quote
That's like pocket change to google
nukeman8 4th November 2009, 13:39 Quote
"If Google does not pay the £28.75M, it could find itself in court, and even banned from operating its services in Turkey for the duration of the hearing."

So if google dont pay turkey will loose access to google?
Whose loosing out more here, my bet is on turkey
smc8788 4th November 2009, 13:43 Quote
Quote:
Originally Posted by nukeman8
"If Google does not pay the £28.75M, it could find itself in court, and even banned from operating its services in Turkey for the duration of the hearing."

So if google dont pay turkey will loose access to google?
Whose loosing out more here, my bet is on turkey

There's always Bing :p
Phil Rhodes 4th November 2009, 13:55 Quote
Grumpy mode on.

'bout time we started enforcing things like this more universally. The UK loses massively in corporation tax based on exactly this sort of dodge. Made eleventy bazillion pounds in the UK last year? Yes we did, y'honour, but we're based in the Cayman Islands so we don't owe you a penny...

I thought I'd never say this, but: go Turkish government.
Mr T 4th November 2009, 14:48 Quote
Surely google has paid tax to ireland instead so its not like they are making an extra 30m out of turkeys loss? My bet is that google simply close down their offices in Turkey.
pizan 4th November 2009, 14:50 Quote
Wow looks like one country is in desperate need of money. Same with the EU fining (or trying to) every major corporation. Some of its deserved, but mostly its not.
ChaosDefinesOrder 4th November 2009, 15:05 Quote
Quote:
Originally Posted by Phil Rhodes
Grumpy mode on.

'bout time we started enforcing things like this more universally. The UK loses massively in corporation tax based on exactly this sort of dodge. Made eleventy bazillion pounds in the UK last year? Yes we did, y'honour, but we're based in the Cayman Islands so we don't owe you a penny...

I thought I'd never say this, but: go Turkish government.

+1

Tax evasion is tax evasion. Nominating a different building as your "offshore" headquarters to avoid paying local tax is evading tax.
DarkLord7854 4th November 2009, 15:42 Quote
Quote:
Originally Posted by nukeman8
"If Google does not pay the £28.75M, it could find itself in court, and even banned from operating its services in Turkey for the duration of the hearing."

So if google dont pay turkey will loose access to google?
Whose loosing out more here, my bet is on turkey

Loose or lose? ;)
Hugo 4th November 2009, 15:44 Quote
Quote:
Originally Posted by ChaosDefinesOrder

Tax evasion is tax evasion. Nominating a different building as your "offshore" headquarters to avoid paying local tax is evading tax.
No, for a multinational company such a Google it is a perfectly normal to have no registered office in a country in which it is operating to avoid (not evade) tax (which it will pay in Ireland, in this case). The Turkish government's argument is that Google has been profiting in Turkey, not Ireland, from its operation in Turkey, without paying tax which Google presumably refutes. Unless the registered office in Turkey is collecting Turkish AdSense revenue, which I bet it isn't, Google is not liable to pay tax in Turkey.

IMO the Turkish government is simply hoping that Google will take the easy way out, pay the fine, and (if it was even ever at fault) amend its modus operandi to avoid future issues.
thehippoz 4th November 2009, 16:15 Quote
yeah double taxed.. they do it all the time- if they can tax money that's been taxed.. and then tax the taxed money- you get the point
ChaosDefinesOrder 4th November 2009, 16:18 Quote
Quote:
Originally Posted by HugoB
Quote:
Originally Posted by ChaosDefinesOrder

Tax evasion is tax evasion. Nominating a different building as your "offshore" headquarters to avoid paying local tax is evading tax.
No, for a multinational company such a Google it is a perfectly normal to have no registered office in a country in which it is operating to avoid (not evade) tax (which it will pay in Ireland, in this case). The Turkish government's argument is that Google has been profiting in Turkey, not Ireland, from its operation in Turkey, without paying tax which Google presumably refutes. Unless the registered office in Turkey is collecting Turkish AdSense revenue, which I bet it isn't, Google is not liable to pay tax in Turkey.

IMO the Turkish government is simply hoping that Google will take the easy way out, pay the fine, and (if it was even ever at fault) amend its modus operandi to avoid future issues.

yes, I'm aware it's a common practice, but it's still used by large corporations to avoid paying the taxes in that country. Avoiding and evading are VERY similar. Google clearly has a registered office in Turkey, so no matter how they try and claim it's all going via Ireland, they still have a registered Turkish company (as mentioned in original article) and therefore saying that they're going via Ireland is like saying "nuh-uh, look over there!"
[USRF]Obiwan 4th November 2009, 16:33 Quote
And to the Irish government Google probably says: "We are in turkey, so there is the tax going" lol
ThunderBob 4th November 2009, 16:45 Quote
Sounds like a cash strapped country trying to get some easy money from a big cash rich company to me.

If this goes through we will probably see every cash hungry little country targeting what companies they can.

I hope that nothing comes of this.
SMIFFYDUDE 4th November 2009, 18:42 Quote
Perhaps the Turkish authorities will take some of google's jewelry, like the italians did with footballer Maradona.
Hugo 4th November 2009, 18:53 Quote
Quote:
Originally Posted by ChaosDefinesOrder
<snip>they still have a registered Turkish company (as mentioned in original article) and therefore saying that they're going via Ireland is like saying "nuh-uh, look over there!"
Not at all. If the arm of the company registered in Turkey doesn't make a profit there it doesn't need to pay tax there regardless whether its parent company profits from its operations in Turkey or not.

Google has a registered UK office, too, but it pays no taxes here. All the company's profit is funnelled into Ireland where it pays taxes and where, entirely coincidentally I am sure, there are massive tax breaks available to it.

It's precisely because of the legality of tax avoidance that so many companies trading in UK - Play.com being a notable example - have registered offices in the Channel Islands.
Quote:
Originally Posted by ThunderBob
Sounds like a cash strapped country trying to get some easy money from a big cash rich company to me.
This is pretty much my view of what Turkey is doing.
Veles 4th November 2009, 19:01 Quote
Quote:
Originally Posted by thehippoz
yeah double taxed.. they do it all the time- if they can tax money that's been taxed.. and then tax the taxed money- you get the point

You can't tax tax, that would be like stealing your own chips
steveo_mcg 4th November 2009, 19:39 Quote
You pay tax on tax every time you buy petrol
Phil Rhodes 4th November 2009, 20:09 Quote
Quote:
for a multinational company such a Google it is a perfectly normal to have no registered office in a country in which it is operating to avoid (not evade) tax....If the arm of the company registered in Turkey doesn't make a profit there it doesn't need to pay tax there

It may be legal, but it's wrong, and the law should be changed to accommodate it. It's becoming more and more of an issue with ever greater globalisation. Under these rules it's only sheer practicality that stops a company setting up in a state where there's no corporation tax, making billions worldwide, and not paying anyone a penny, despite benefiting directly from the taxpayer-funded infrastructure of the places where it does business. This is not right and I think it's being shown to be not right more and more in cases like this.

The entire concept of setting up a corporate subsidy that you will intentionally cause to never ever make a profit is beyond ludicrous, and an obvious tax dodge. God forbid I suggest that the current government enact yet more laws, but an alteration of the rules to claw back at least some of this money would seem in order. You need to be a bit careful so as not to make the UK an impossible place to run big business, but at the end of the day this is why greater world (not European, world) harmonisation of this sort of law is a good idea.
pizan 4th November 2009, 20:45 Quote
Quote:
Originally Posted by Phil Rhodes
Quote:
for a multinational company such a Google it is a perfectly normal to have no registered office in a country in which it is operating to avoid (not evade) tax....If the arm of the company registered in Turkey doesn't make a profit there it doesn't need to pay tax there

It may be legal, but it's wrong, and the law should be changed to accommodate it. It's becoming more and more of an issue with ever greater globalisation. Under these rules it's only sheer practicality that stops a company setting up in a state where there's no corporation tax, making billions worldwide, and not paying anyone a penny, despite benefiting directly from the taxpayer-funded infrastructure of the places where it does business. This is not right and I think it's being shown to be not right more and more in cases like this.

The entire concept of setting up a corporate subsidy that you will intentionally cause to never ever make a profit is beyond ludicrous, and an obvious tax dodge. God forbid I suggest that the current government enact yet more laws, but an alteration of the rules to claw back at least some of this money would seem in order. You need to be a bit careful so as not to make the UK an impossible place to run big business, but at the end of the day this is why greater world (not European, world) harmonisation of this sort of law is a good idea.

If the law was changed then they would just fire everyone in turkey and close the offices. I know the government really wants that.
1ad7 4th November 2009, 22:50 Quote
Google needs to buy a private military and just threaten to invade....
thehippoz 4th November 2009, 23:05 Quote
Quote:
Originally Posted by Veles
You can't tax tax, that would be like stealing your own chips

lol try paying taxes sometime.. some tax laws have you thinking it was thought up by a facking lunatic
Phil Rhodes 4th November 2009, 23:55 Quote
Quote:
the law was changed then they would just fire everyone in turkey and close the offices.

Fine, then they aren't allowed to do business in Turkey.

All I'm suggesting is: if you do business in a place, you pay tax in that place.
dark_avenger 5th November 2009, 00:15 Quote
Quote:
Originally Posted by 1ad7
Google needs to buy a private military and just threaten to invade....

lol
Lazarus Dark 5th November 2009, 01:02 Quote
I understand that there is some office in Turkey. However if that office is not making any money, it shouldn't be taxed. If the office makes no money, it's the same as the office not really being there and what turkey is really saying is the Google owes taxes because google.com is available to the country. Imagine if every country tried to tax every site that is "available" for its citizens to view. Do you expect Google and every other site to pay tax to every single country with internet? Google would be paying 4000% taxes on it's revenue when all said and done, paying more in taxes than they make.

It's different when you produce a physical product, you can tax the product at the border, and at most any product is only going to be taxed at one or two borders. In my opinion the internet is untaxable. It's too non-central.

Google is apparently providing Turkey with a couple jobs (plus the income those employees spend within the country). They should take that and be happy.
Phil Rhodes 5th November 2009, 01:28 Quote
No they most certainly shouldn't, because what you're saying is that no intangibles should be taxed. With developed countries (which Turkey is only debatably) making more on their information economies than on goods, you're setting yourself up for a situation where most of the economy goes untaxed, which is crazy.

It is not the same as the office not being there. Presumably Google run this office for a reason, and the only reason they have is that it makes them money. But really, the fact of local employees and buildings makes no difference. Google is making money out of putting ads out in Turkey, and in doing so it is using Turkish infrastructure. It should pay its way.

P
Hugo 5th November 2009, 01:53 Quote
Quote:
Originally Posted by Phil Rhodes
Quote:
for a multinational company such a Google it is a perfectly normal to have no registered office in a country in which it is operating to avoid (not evade) tax....If the arm of the company registered in Turkey doesn't make a profit there it doesn't need to pay tax there

It may be legal, but it's wrong, and the law should be changed to accommodate it. It's becoming more and more of an issue with ever greater globalisation.
It is not wrong, it is simply
good business sense. Why pay 20% tax (say) on your profits in the UK when you can pay 15% by having the transaction take place in Ireland? If the UK government lowered the tax rate to 15% as well Google would probably happily pay taxes in the UK. Unless you want global regulation of a single global economy this way of working for multinational companies isn't going to change. Besides, we forget the money is still being taxed at various stages before and after it reaches Google. UK Google employees will all be paying income tax, for example.
Phil Rhodes 5th November 2009, 13:56 Quote
Quote:
Why pay 20% tax (say) on your profits in the UK

So the UK government can have some tax revenue to spend on things, is why.
Hugo 5th November 2009, 14:43 Quote
Quote:
Originally Posted by Phil Rhodes
Quote:
Why pay 20% tax (say) on your profits in the UK
So the UK government can have some tax revenue to spend on things, is why.
I hope that was supposed to be ironic. There is no reason for Google to want to support the UK government when it isn't a reciprocal arrangement. The Irish government is kind to tech companies (Dell and Apple certainly seem to agree with Google, for example) and the tech companies reciprocate by paying their taxes in Ireland.
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