As the Daily Mirror nots this morning:
Google has been accused of using clever accounting to avoid paying around £150million of UK tax last year.
Critics say the internet search giant paid only £11.6million corporation tax on £3billion sales here in 2012.
This was, of course, because Google maintains that its UK arm mainly provides marketing services to its offshoot in Ireland. The consequence was that in its most recent accounts, filed yesterday, Google UK's turnover was £506m. It made profit of £36.8m profit and paid £11.6m of corporation tax on that.
However, as Reuters note, Google has admitted that UK sales were $5.5 billion - a figure likely to be well in excess of £3 billion but only £396 million of value related to that was recorded in the UK accounts - being the sales commission earned here. The result is that, as the Mirror have noted, I have said:
“By accounting for the UK that way, Google may have reduced its tax bill by around £150million last year.”
The logic is that maybe £2.8 billion of Google's sales by value did not get into a UK set of accounts. The margin that Google makes right now is about 23% overall so that's around £650 million or so of profit not recorded in the UK on which tax due would have been around £150 million during 2012.
The argument has been well rehearsed with Google saying this is all just fine and HMRC appearing unwilling to challenge that. But I continue to believe that this is tax abuse and just hope the Organisation for Economic Cooperation and Development BEPS project challenges such arrangements in future. If not, the prospects for tax being paid by those who really owe it and a level playing field for business are remote. And that worries me in both cases. I don't like monopolies and I don't like tax abuse. What baffles me is why anyone, bar a beneficiary of the arrangement, should.
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Daily Mirror the business mans reading of choice.
It would be a fool who ignored it
OR, as reported in the Daily Mirror today, Google has been accused of completely complying with the law. “Clever accounting”? Now that is a new one.
A good description, I’d say
Accurately laying the blame
The OECD’s BEPS has no chance of gaining any momentum in Congress. Without US involvement, it will collapse.
It does not need US involvement
It is bilateral
When one of the party represents 40% of the world economy, and probably 80% of the world’s digital activity, it ceases to be bilateral. Whatever the rest of the world does among themselves becomes completely irrelevant.
This is an Irish / UK issue
You are ignoring that fact
So how does the OECD deal with what you regards as an Irish/UK issue – the only people who can deal with it are…er…the Irish and UK governments.
And both accept OECD guidelines
What guidelines are you talking about – Transfer Pricing?
This isn’t a a transfer pricing issue but one of restriction of domestic taxation in UK.
Permanent establishment
In that case OECD has very little to offer you I am afraid.
The definition of PE in the Ireland/UK situation is governed by a bilateral treaty. Even if OECD recommends changes to the Model Treaty regarding PE – both UK and Ireland will have to sign an amended treaty before changes apply.
OECD is developing multilateral update procedure
Keep up….
In one of your post, you suggest that this issue is bilateral Ire/UK.
In another post you affirm that progress is driven by the development of the OECD’s multilateral convention.
You cannot have it both ways. It is one or the other, bilateral or multilateral.
In the absence of Congressional support for the OECD model, it had better be bilateral.
It is bilateral
The multilateral will update the bilateral
Is it really that hard for you to understand
And UK /Ireland has nothing to do with US, at all
But the party that represents 40% of the worlds economy wont want to exclude itself from the 60% will it ?
Its unfair IMO that Google can structure their sales between Ireland and the UK so that they pay little/no UK tax. No argument about legality, just fairness.
If Google had to pay more tax on sales to the UK do you think that they would leave the market, and not supply ads to the UK or UK companies?
As an example of US compliance with RoW legislation – US companies pay EU VAT under the ESS rules, so what the “rest of the world does” actually does matter and impact, and is in fact relevant.
You are ignoring the fact that both the UK and Irish economies are (i) minuscule, (ii) excessively dependent on US inward investment. There is absolutely no scenario under which the Irish government, and probably the UK’s, will risk upsetting their largest source of investment.
I am ignoring nothing
I am dealing with facts
It is you who is making unsubstantiated claims
From your own blog a few weeks ago (here in case you forgot: http://www.taxresearch.org.uk/Blog/2013/07/24/ireland-isnt-a-tax-haven-according-to-the-oecd-who-get-described-as-a-damp-squib-in-return/)
“….The US killed the OECD’s 1998 harmful tax competition initiative for ideological reasons. It is possible they could kill BEPS too.”
Richard J Murphy. July 24, 2013
Possible and likely are not the sam things
They have signed up to BEPS
I do not foresee a Republican president – not after today
There probably will not be a Republican president for a generation. It has nothing to do with today’s events but with the growth of Hispanic vote in Florida and Texas.
However, there will always be at least 41 Republican senators, and gerrymandering almost guarantees a Republican House until 2022 (next post-census election) at the earliest.
The administration may have signed up to BEPS, but that commitment is worthless until ratified by Congress. Because of Republican control, it will never happen.
Then we differ
Quelle surprise – yet more freeloading by Google – the phrase “it’s all perfectly legal” becomes more and more like the phrase “all done in the best possible taste”.
as each day passes.
Oh dear a rather unflattering picture of Eric Schmidt dressed as Cupid S…. has just entered the mind’s eye!
I recall that the fictional character “Reginald Perrin” had the same problem with his mother in law and a Hippopotamus!