The Guardian in the UK is reporting that Google is using “a cross-border network of subsidiary companies to ensure it did not pay a penny in corporation tax on its £1.6bn advertising revenues in Britain.”
The publication says that most of the UK-based revenue is recognized in Ireland where tax rates are lower:
While much of the costs linked to the running of Google’s British operations are recognised for tax purposes in the UK; revenues from customers in Britain, however, are diverted to another Google company in Ireland, where the corporation tax rate is between 10% and 25%. British corporation tax is levied at between 28% and 30%.
Some MPs are upset and have criticized Google accordingly for not “paying its fair share” of taxes in the UK.
While the practice is undoubtedly perfectly legal it may land Google in hot water politically in the future. In the article Google defended its actions, saying that it employed hundreds of people in the UK and made a “substantial contribution” to the economy in this and other ways.
Related Topics: Google: Critics | Google: Legal | Google: Outside US
Premium member since 07/2009
In this case I don’t think Google is the ‘bad one’ here. All the different rules in Europe make this possible. Get the rules straightened out first and then complain.
Premium member since 01/2009
I’m no European but I tend to agree with Bas. We think our tax system has loopholes — the E.U. would seem to have them in spades. I am surprised the E.U. would allow such a discrepancy in corporate taxation between member states.
This is nothing new and has been going on for years – the same issue applies here in Australia but the press are only now making a story of it because Google has become so big! As the article says, it’s commonplace and legal so Google is only following best business practice under the current system. It might not seem ethical but then the system needs to be changed….
Premium member since 07/2009
You’re right Clive. To be absolutely honest it’s nothing new at all. Big companies are doing things like this all the time. That’s probably one of the reasons they became so big ;).