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Google fined £29 million for tax dodge
Author: Gareth HalfacreePublished: 4th November 2009
Google believes its Irish-billed Turkish operation should pay no local taxes - but the government disagrees.
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.
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71 Billionish?
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
'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.
Loose or lose? ;)
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!"
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.
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.
You can't tax tax, that would be like stealing your own chips
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.
lol try paying taxes sometime.. some tax laws have you thinking it was thought up by a facking lunatic
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.
lol
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.
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
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.
So the UK government can have some tax revenue to spend on things, is why.