Google's Tax Bill

The whole thing is very reminiscent of vodafones mythicsl ‘£6 billion tax bill’

http://www.theregister.co.uk/2015/02/18/once_more_into_the_tax_breach_dear_friends/

Time to radically overhaul the corporate tax system starting with oir exit from the EU as without thst nothing can be done.

Indeed – we are bound by EU tax laws that allow a company to incorporate in whichever EU country they want. We can change that overnight.

Fair enough. But for those that do there are legal loopholes, which is where I believe the problem lies. And why would a global corporate voluntarily pay more tax than it needs to?

Sure – the loopholes will only be closed by co-ordinated international action. Nevertheless, lots of large companies do pay more tax than they “need” to: does anyone think that Costa is financially mismanaged because they don’t route their beans business through Switzerland?

The overseas licensing scam is a scam just as much as if your parents “give” you their house on condition they can live in it for the rest of their lives at a peppercorn rent (so as to evade IHT on death). This is of course something that has been outlawed, there’s no reason why the overseas licensing scam shouldn’t also be clamped down on. Saying “it’s within the law” is missing the point. The law should be designed to be fair.

Indeed – we are bound by EU tax laws that allow a company to incorporate wherever they want. We can change that overnight.

That’s probably the first good reason I’ve seen for leaving the EU. However, if that happened I still don’t imagine there being huge changes to corporate taxation. The government is too scared and corporates are too powerful, especially if it becomes a reality that they can sue countries.

In some ways remaining part of the EU would be better. If a union of that size decided to clamp down on grey accounting and loopholes it would be far more effective, and the UK would be in a position to suggest and influence it.

Just going to chuck this in again (as usual) how many people on this forum run limited companies and use tax allowances/dividends/directors loans/entrepreneurs allowance

These aren’t loopholes. These allowances are there for a good reason, as is the CTW scheme, and things like renewable grants, tariffs etc.

These aren’t loopholes. These allowances are there for a good reason, as is the CTW scheme, and things like renewable grants, tariffs etc.

The government wants us to use those instruments – that’s why they exist!

How would leaving the EU make any difference?

How would leaving the EU make any difference?

How would leaving the EU make any difference?

Have a read of the ECJ Cadbury-Schweppes decision.

I have – so we leave the EU, how does CS react?

If we left the EU ebay wouldn’t be able to pay their taxes in Luxembourg right?

I’m sure they’d still be able to avoid taxes but I would think the UK could change its own tax laws more quickly than the EU.

Even Murdoch is laughing about it

Tech tax breaks facilitated by politicians easily awed by Valley ambassadors like Google chairman Schmidt eg, posh boys in Downing St.”

Google, Starbucks, Apple, Amazon etc all swerve hundreds and hundreds of millions in UK taxes with the help of EU tax law plus in many cases Junker”s personal blessing.

To the extent that there is any harmonisation of EU direct tax law, it has little impact on these structures, structures like this pre-date corporate tax directives which only started being put in place in the early 90s – the Dutch sandwich has been around for way longer than that as have Irish structures. In fact it is the lack of harmonisation that causes problems – not that I would favour more Europe.

How would leaving the EU make any difference?

A little but not as much as the ill informed think.

Have a read of the ECJ Cadbury-Schweppes decision.

I have, still these cases are relatively easy to legislate round.

https://mobile.twitter.com/spleenal/status/690909057360773121/photo/1

I still can’t post a pic, bah

Except our tax laws have changed, but they can’t get around the EU thing which is the Dutch sandwich – sure it might have been around longer, but the purpose it now serves is to move money to a different jurisdiction within the EU, which gets around any offshoring tax. Were we not in the EU, then we could charge taxes on money moved to the Netherlands. If we left the EU tomorrow, then the current structures involving routing money to or via other EU countries with more favourable tax regimes would immediately stop working. There’s a reason the money doesn’t go straight to the Caymans or the IoM.

Except our tax laws have changed, but they can’t get around the EU thing which is the Dutch sandwich – sure it might have been around longer, but the purpose it now serves is to move money to a different jurisdiction within the EU, which gets around any offshoring tax. Were we not in the EU, then we could charge taxes on money moved to the Netherlands. If we left the EU tomorrow, then the current structures involving routing money to or via other EU countries with more favourable tax regimes would immediately stop working. There’s a reason the money doesn’t go straight to the Caymans or the IoM.

Except the UK/Dutch double tax convention would still apply which only allows a withholding tax of 5% in such circumstances (from memory). Since I was involved in the field (1985) the UK has never imposed a withholding tax on dividends. Indeed we had an imputation system which gave you credit for UK taxes paid by the company – this encouraged UK investment. Unfortunately Gordon Brown in an act of fiscal barbarism abolished it so he could get £5 billion per annum from the pension funds who reclaimed it. In misunderstood change he destroyed the private pensions, removed the incentive to invest in the UK for public UK companies and encouraged the use of debt rather than equity for financing corporates. It is the single worst decision a Chancellor has made in my view, but my guess is that he made it because few would ever understand the consequence and very few voters.

Re pensions… Nah Lawson started it….
http://www.saveoursavers.co.uk/government-failure/pulverising-final-salary-pension-funds/

Chancellors don’t want money going into pension funds for some future governments they want it spent now to keep spending high in their own term

Newsnight, discussing Osborn thinking its a sweet deal to get 3% back off Google, as everyone’s filling out their own tax returns and seeing much more taken highlights his out of touch lifestyle and poor chance of being PM

Osborn thinking its a sweet deal to get 3% back off Google, as everyone’s filling out their own tax returns and seeing much more taken highlights his out of touch lifestyle and poor chance of being PM

Jesus I hope he doesn’t become PM

How can anyone defend what these corporations are doing? They are benefiting from our market and infustruture and giving back nothing in return. What’s worse is due to their unfair advantage that they are destroying companies that would contribute.

Saying its legal is moot, they will go to any length to avoid – you cannot write tax law against such greed.

– Osbourne, May or Boris – not a great line up is it! And the cocky upstart in the wings only makes things worse. UK politics is in a sorry state.

giving back nothing in return.

??

Even Murdoch is laughing about it

Murdoch is hardly impartial he is anti-Google as they are destroying his revenue stream, so any chance for him to have a dig and he’ll take it.

In some ways remaining part of the EU would be better. If a union of that size decided to clamp down on grey accounting and loopholes it would be far more effective, and the UK would be in a position to suggest and influence it.

Would this be the EU who’s current president Jean Claude Juncker was the man who – in his time as Prime Minister there – was responsible for setting Luxemburg up as a tax haven at the heart of Europe, in the first place?

I wouldn’t hold your breath for that particular clampdown

Today’s Times cartoon re Google was a bit of an eye-opener!!

Quality stuff from the digger?!?

It genuinely surprises me you didn’t enjoy reading the Establishment THM 😉

It could/should have been a good read – but overly-ranty, falsifiable accusations and the “lets attacks anything we don’t like as being part of The E” was simple sloppy analysis IMO!

Still nice thought from my son! Missed some enjoyable holiday tennis trying to finish the bloody book off.

Missed some enjoyable holiday tennis trying to finish the bloody book off.

I think Owen Jones would love that fact THM 😀

Quite possibly 😉

However given the age of the tennis players, they were perhaps a more suitable target market for the lower sixth-style rants – apologies for possible insulting the young ones!!!

Indeed – we are bound by EU tax laws that allow a company to incorporate in whichever EU country they want. We can change that overnight.

really? how would that work – you’d put a provision in place to stop foreign companies selling to UK businesses/consumers? You are talking “electronic” goods and services (advertising, software, web/email services etc.)… ignoring the practicalities – guess what happens next? Those countries all impose a similar regime on the UK and all our tech business suddenly lose 99+% of their market opportunity. Actually it would probably make more sense (from a Corp. Tax perspective) to go the other way and either (a) have some harmonization across the EU, or (b) have a “compensation” scheme where any company in the EU where the majority of the sales* are to other EU countries has to pay a proportion of its CT income to a central fund that is redistributed.

Bear in mind that everything “we” hate about these overseas companies making profit and not paying (as much as we would like in) local tax works the other way round too. UK companies are paying tax HERE on profits they generate overseas – be careful what you wish for!

(* sales being easier to measure on a per transaction basis than profit).

How can anyone defend what these corporations are doing? They are benefiting from our market and infustruture and giving back nothing in return. What’s worse is due to their unfair advantage that they are destroying companies that would contribute.

NOTHING back in return? So where appropriate there will be VAT on transactions**; thousands of jobs, each paying 13.8% of salary in employers NI; several large offices, each paying Rates.

**As google mostly makes money business-to-business that is largely irrelevant.

If for every pound spend with google: 10p is work in the UK, 10p is work done in Ireland, and 54p is work done in the USA (and 26p is profit). Then how much tax should google pay in the UK? Now bear in mind that the UK has various incentives for business (designed by the treasury to encourage certain activities) so that even businesses which solely do work in the UK don’t actually pay the headline % of profit (because R&D, Capital expenditure, charity etc can be offset against tax). And finally whilst the media emphasis is on “ten years” of tax – google have not been making huge profits over that entire time – they have been growing steeply.

teamhurtmore – Member
Today’s Times cartoon re Google was a bit of an eye-opener!!

Quality stuff from the digger?!?

that peter brookes is a cheeky one…

the point is ‘its alheeh 5th largest economy in the world, he should have more clout than £130m over a ten year period

Google reported operating 25 subsidiaries in tax havens in 2009, but since 2010 only discloses two, both in Ireland. During that period, it increased the amount of cash it reported offshore from $7.7 billion to $47.4 billion [£5 billion to £30 billion]. An academic analysis found that as of 2012, the 23 no-longer-disclosed tax haven subsidiaries were still operating.

but they arent the worst

[Apple] would owe $59.2 billion [£38 billion] in US taxes if these profits were not officially held offshore for tax purposes. This means that Apple has paid a miniscule 2.3 percent tax rate on its offshore profits. That confirms that Apple has been getting away with paying almost nothing in taxes on the huge amount of profits it has booked in Ireland.

NOTHING back in return? So where appropriate there will be VAT on transactions**; thousands of jobs, each paying 13.8% of salary in employers NI; several large offices, each paying Rates.

]

Except they do even meet these bare minimums. Amazon for example routes payment to Luxembourg so VAT is charged at 3%.

Just going to chuck this in again (as usual) how many people on this forum run limited companies and use tax allowances/dividends/directors loans/entrepreneurs allowance to reduce taxation on you and your business – glass houses and all that

Not accurate.

We/I pay 20% on profits all day long.

Wages come out of those profits. (Which are taxed too)

If I was in a partnership (which I was) I would still effectively pay 20% on my profits.

Directors Loans are a means of moving money that you owe the company or the company owes you. They are not a means of Tax avoidance.

We are a LTD company for trading status.

I’ve never seen any real tax advantage for being a LTD company – other than Class 4 – hardly a deal breaker considering the cost of being a company.

Except they do even meet these bare minimums. Amazon for example routes payment to Luxembourg so VAT is charged at 3%.

Amazon are not google. Your percentages are wrong anyway (most Amazon.co.uk products do pay UK VAT).

Not accurate.

We/I pay 20% on profits all day long.

Wages come out of those profits. (Which are taxed too)

If I was in a partnership (which I was) I would still effectively pay 20% on my profits.
you probably need an accountant.

There’s an interesting difference though – the companies declaring profits here are paying tax, and I doubt very much that there is much profit being generated overseas which is declared here. You seem to be completely missing the point – profit is taxed where it is made, not where the head company is based, it’s just that these multinationals in question are using wheezes to move their profits offshore. Nobody is using such wheezes to move their profits here, and therefore there are far less profits being officially made here than are actually being generated here, because there’s a huge amount of money being paid for offshore IP.

If for every pound spend with google: 10p is work in the UK, 10p is work done in Ireland, and 54p is work done in the USA (and 26p is profit). Then how much tax should google pay in the UK?

You seem to have missed off all the “work” they do in Bermuda 🙄

The correct mathematical answer is clearly 20% of 0.26 * (0.1 / 0.74) for every pound spent. But they’re paying way, way less than that, and also rather less than the X% of 0.26 * (0.54 / 0.74) they should be paying in the US. It’s been mentioned before, but they do generate lots of income here, which is quite quantifiable because it’s direct payments from UK businesses rather than anything more ephemeral.

I’m not too worried about the Bermudan/USA split or how much tax they do, or don’t, pay in the USA – so long as they pay the appropriate amount in the UK. If the system allow companies to move intellectual assets into other countries and cross license them then so be it. I believe google sought permission from the IRS (in the US) in advance of the move. Are you honestly suggesting that the google brand or underlying technology IP aren’t valuable commodities that merit a license?

The answer to your mathematics is they would pay tax at UK_Sales x 20% x 0.26 x 0.1 / 0.74 . With an annual turnover of $6BN USD (from UK sales) does that not equate to roughly £32M GBP. That seems to be very roughly the sort of number they have paid? (bearing in mind my calcs were just guesses, and we don’t know what they offset legitimately against tax – such as previous losses, R&D, and exchange rate fluctuations which are hard to include in a back of envelope sum).

Now I do think Google (and probably everyone) should be more transparent about tax affairs, but I think pointing the finger at Google is probably misplaced, the framework allows it, possibly even encourages it.

I’m fairly sure I’ve not suggested anywhere that they’re worth nothing…

bearing in mind my calcs were just guesses

Indeed they are – there doesn’t appear to be much doubt amongst those who know more about these things than you or I do that their effective tax rate on profits generated in the UK is way, way below 20%.

Now I do think Google (and probably everyone) should be more transparent about tax affairs, but I think pointing the finger at Google is probably misplaced, the framework allows it, possibly even encourages it.

Encourages is going way, way too far – it’s a loophole being exploited, nothing more, nothing less – far from being something deliberately in place to encourage certain behaviour in the way some of the straw men mentioned earlier are. If any other context the amount they are paying for the IP would quite correctly be described as fraudulent.

I listened to John Culliance of the CIOT this morning and unsurprisingly he made the correct points:

(1) The system is outdated as it was designed very different economic activity; and
(ii) The way to resolve it is at the international level – there is little we can do on our own.

My understanding of Google’s office in the UK is that it is a service centre, which does not have authority to conclude contracts – this is disputed by a whistleblower – and therefore it remunerated on the cost plus basis. It therefore isn’t paying licence payments. If it did conclude contracts then that would bring the activities of the Irish company into the UK tax net. A tiny contractual change with far reaching consequences – not a loophole – the whole basis of establishing whether an entity has a taxable presence in another country under International Double Tax Conventions.

you probably need an accountant.

Can you elaborate?

We have an accountant.

Now I do think Google (and probably everyone) should be more transparent about tax affairs, but I think pointing the finger at Google is probably misplaced, the framework allows it, possibly even encourages i

Jesus wept, that reads like a tax version of “she was asking for it”

At the end of the day Google and the other multinationals are never going to pay more than they have to. Why would they. In the same way I employ an accountant to do my company tax. The issue really is that it has been clear or should have been clear to HMRC and therefore the government, for a long time that some very large companies were doing a lot of business in the UK and then not paying much tax.

The government has had years and years and years to try and sort this out and if needed get any international agreements. Funny how David Cameron can renegotiate the terms of our EU membership in the space of a year but this tax issue has dragged on for for so long.

HMRC should have a team of people whose only job is to monitor how society and business is changing and whether the tax rules need to change. This should be reported to government on a regular basis so any changes can be made to the law. This is not rocket science and it is the type of things that business do all day long. Fundamentally we are a rich country and HMRC want an easily life. They are not incentivised to gather as much tax as possible so why make life difficult by chasing big companies that have teams of the best accountants and lawyers.

Personally I think all of this is not the fault of companies like Google but the incompetence of HMRC and successive governments.

Is there v not a reviving door between the top corporate accountants and hmrc advisory positions nicely facilitated by MPs knowing that directorships await them upon retirement?