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UK MPs accuse Google of tax dodge

UK MPs accuse Google of tax dodge

Google's reputation could be "severely damaged" if it doesn't start paying UK corporation tax in full, says Vince Cable.

After finding itself accused of tax avoidance in Turkey Google's affairs are being investigated closer to home, with members of Parliament accusing the company of avoiding corporation tax.

The accusations, publicised in the Times Online via IT Pro, come from the Liberal Democrat deputy leader Vince Cable and Labour MP Austin Mitchell and claim that Google's UK arm is using same dodge as the Turkish arm was fined £29 million for back in November to avoid paying tax in its country of operation.

Specifically, Google operates its European headquarters from Ireland, where it pays between 10 and 25 percent corporation tax - a far cry from the 28 percent to 30 percent it should pay to the UK government were it to fully declare its income, thought to be around £1.6 billion in advertising revenue alone from the UK. Instead, the money is funnelled back to its Irish parent company - with the UK arm declaring a £26 million pre-tax loss based on turnover of just £150 million.

Cable decried the practice to the Times, stating that "avoidance like this is hard to stomach at the best of times, but when the country is in recession and everyone is feeling the pain, it really sticks on the through - it means higher taxes for the rest of us."

The Liberal Democrat deputy leader's comments were echoed by Labour's Mitchell, who accused Google of not just "sucking money out of local newspapers and other people who rely on advertising for a living - [but] it's also draining money out of the public finances."

Responding to Cable's claims that "Google's reputation will be severely damaged if it continues to behave in this way[, as] it is ducking its social responsibility," the advertising and search giant responded by stating "Google makes a big investment in the UK, with over 800 employees, and we make a substantial contribution to local and national taxation" and re-iterated that "we comply fully with the tax laws in all the countries in which we operate."

With the UK still ploughing through a stubborn recession, it's hard to see the government ignoring the loss of an estimated £450 million in corporation tax despite Google's claims of innocence - especially following Turkey's whopper fine for substantially the same offence.

Do you believe that Google's shuffling of money represents a dishonest attempt to avoid paying tax, or is the company merely being sensible and maximising its profits for shareholders? Share your thoughts over in the forums.

12 Comments

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Bursar 22nd December 2009, 14:35 Quote
Quote:
Mitchell, who accused Google of "draining money out of the public finances."
Says the man who claimed biscuits, alcohol and sofa covers as part of his expense allowance...
wormy 22nd December 2009, 14:48 Quote
Quote:
Originally Posted by Bursar
Says the man who claimed biscuits, alcohol and sofa covers as part of his expense allowance...

lol touche ;)

I'm not a tax lawyer but if the rules allow Google to do this then the politicians should either change the rules or shut up. Yes it would be nice if some companies had more of a social conscience...but if they were to use that as a business model, they would be charities and not what they actually are.

I'm all for taxing the rich to Heaven but this smells of quasi-electioneering and, as Bursar highlights, reeks of outright hypocrisy.

Democracy? Pah! Stick it...
Veles 22nd December 2009, 15:10 Quote
Quote:
Originally Posted by wormy
lol touche ;)

I'm not a tax lawyer but if the rules allow Google to do this then the politicians should either change the rules or shut up. Yes it would be nice if some companies had more of a social conscience...but if they were to use that as a business model, they would be charities and not what they actually are.

I'm all for taxing the rich to Heaven but this smells of quasi-electioneering and, as Bursar highlights, reeks of outright hypocrisy.

Democracy? Pah! Stick it...

Problem is the law isn't always black and white on things like this. It's usually up to a high court judge to decide where the law stands on this, whose ruling will then go on to be used as an example in any similar cases in the future.

From what I understand, Google UK are just syphoning all their profits (and a bit more) over to Google Ireland so Google as a whole has to pay less tax. That is wrong IMO, that cash is generated by a subsidiary company based in the UK, so it should be paying UK taxes, not Irish taxes. Not only is Google not paying enough taxes, but they're paying it to the wrong people too. They should pay up IMO if they are syphoning cash to another company.
mikeuk2004 22nd December 2009, 15:25 Quote
Lots of business set themselves up as a charity in order to avoid tax, there are alot of bogus charities out there.

Most big corporations have clever accountants that find loop holes and ways to avoid paying tax. They should just pay like everyone else has too and stop abusing the system.
lp1988 22nd December 2009, 19:21 Quote
how do they estimate a loss of 450 million in tax from a 150 mill turnover? if they do not break any laws I don't see the problem, a company pays tax in the country in witch it has its headquarters. the one problem GB may have is that their tax i too high.
Viper355 22nd December 2009, 19:54 Quote
Mp's are just trying to shift media attention from their own swindling of the systems.
oasked 22nd December 2009, 20:58 Quote
Quote:
Originally Posted by Viper355
Mp's are just trying to shift media attention from their own swindling of the systems.

Their expenses is a mere trifle of the value here.

I wish people would stop going on about such pathetically small amounts of money that MPs may have claimed, they are mere peanuts compared to other inefficiencies in the system and loopholes such as this one.
RichCreedy 22nd December 2009, 21:23 Quote
they cleaned out some of the tax evasion loopholes a few years ago, anyone remember the "i was payed in coffee beans" loophole, which no longer exists?

I'm sure there are many more loopholes, which could be closed.
Shagbag 23rd December 2009, 00:10 Quote
As someone who was in the industry for 13+ years devising and marketing these types of schemes to UK corporates, I can speak with some authority on the subject.

There is nothing illegal in what Google has done. They have simply structured their tax affairs as the the existing tax laws allow them to. Those laws were passed by Parliament and successive UK Governments have had ample opportunity to fix them.

To me, the travesty in the story is not that Google is legally exercising their right - like every UK citizen - to structure their tax affairs as they please. No, the travesty is that successive UK governments have had ample opportunity to change the tax laws they don't like and have neglected to do so.

I see the MPs' comments as nothing more than electioneering, at best and, at worst, a pathetic attempt to deflect the attention of the public away from the appalling 'pigs at the trough' behaviour of UK MPs and their expenses. Why journalists continue to fall into this trap is beyond me.
fodder 23rd December 2009, 09:55 Quote
I wonder how many MPs are on the boards of other companies doing the same thing? That may be why the law has been left alone for so long..... Not that I'm cynical or anything.
eddtox 23rd December 2009, 10:22 Quote
Welcome to capitalism , people. This is what happens when a company's primary goal is making money. It's not just google, it's virtually every profit making organization. They do it because they can, and if they didn't then shareholders would be up in arms. If the law is tightened up, or a legal precedent set which stops them from doing it, that's different . But for the moment, this is the system we have created and we should not be surprised when news like this emerges. It's a bit like playing CS and complaining that someone shot you. http://valleywag.gawker.com/5015528/eric-schmidt-denies-existence-of-google-evil-meter
eek 23rd December 2009, 15:02 Quote
Nothing illegal about avoidance...
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