How Google UK clouds its tax liabilities
Google and its accountants, Ernst & Young, are to face a fresh grilling about tax avoidance after Public Accounts Committee chairman Margaret Hodge said a new investigation had raised “very serious” allegations.
The internet giant is facing mounting scrutiny because it generates more than £3 billion a year from sales in Britain but pays virtually no UK corporation tax because revenues are diverted via Ireland.
From 2006 to 2011, Google generated $18 billion in revenues from the UK, according to statutory filings, and paid just $16 million in taxes.
Google insists that its UK offices, which employ more than 1300 people in London, are involved in “the provision of marketing services” and all sales are made in Ireland.
But an investigation by news agency Reuters, published on May 1st 2013, claims to show that many of Google’s UK staff have jobs which “actually target, negotiate and close sales of Google’s advertising products to its customers”.
Reuters interviewed more than a dozen Google customers and former staff as well as looking at job advertisements and CVs on networking website LinkedIn. If it were proven that Google has made sales in the UK, it could mean it was liable for a huge tax bill.
The internet company said: “Our advertisements for UK staff sometimes refer to sales skills and many of the roles include sales in the title as we are seeking to attract people with those skills and that background. We accept that the wording of some adverts may have been confusing and we are working to make it clearer.
“We comply with all the tax rules in the UK and in every other country in which we operate.”
Google Ireland Ltd. reported sales of 12.5 billion euros ($16.4 billion) in 2011, but profits of only 24 million euros, and an Irish corporation tax bill of 8 million euros. The low profit comes from the fact it pays most of its turnover to an affiliate in Bermuda, which levies no income tax on foreign-controlled corporations, for the right to use the computer algorithms.
Britain is Google’s biggest market after America, representing 11 per cent of group sales.
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