Google may face grilling by MPs over 'immoral' tax avoidance Google could be hauled in front of MPs after the 2011 results for its UK subsidiary showed it paid £6m in corporation tax. John Mann, an MP and member of the Treasury Select Committee, suggested the advertising giant should explain itself for its "entirely improper and immoral" behaviour. "This is a company avoiding its …
>This is actually the aim of the Single Market.
So have a single corporate tax rate across the Eu !
The single market was supposed to stop countries keeping out competitors from other countries by unfair tax and duty - shouldn't be too difficult to prevent the opposite.
A single market does not mean a single price. If that was the case you would have a single price for milk or a single price for DVDs.
A market is a way of having multiple prices and the people buying the product or service decide which price they like. The rest of the market sees which is the popular price and heads towards it.
Generally it means it heads towards the lowest price (or tax). But it's not always a race to the bottom as buyers will also take into account quality or many many other factors. So many other factors that in many markets it is impossible to plan ahead of time which factors to concentrate on.
The EU single market allows companies to battle on the same footings, but not to be controlled in what prices they can use. Nor does it force countries to have the same tax rates. The whole problem about why the Euro is failing is because it was a single currency imposed on many different types of economies and it just can't cope. Trying to impose a single tax would head the same way as the Euro - absolute disaster.
I agree. And thank goodness for IR35. Avoiding PAYE on personal earnings under the sham of a 'contract' has finally been nipped in the bud. Only legitimate contractors can now get those tax breaks.
Or maybe tax avoidance isn't such a bad thing as long as it doesn't affect my taxes?
Would you like to define what you term "legitimate contractors" please?
If by that you mean contractors brought in to work on a one-off project or programme for a limited length of time to fill in a short term gap in skills, with no employment rights at all, who can be terminated with no cause & no recompense, are expected to work a "professional" week which means no pay for overtime & no time off in lieu, and can't claim unemployment benefit or statutory sick pay - then you are still talking about people caught in the IR35 trap.
If however you mean it to cover people working for years for the same employer but technically classed as a contractor, most likely because the employer is too tight to pay a permanent person the going rate for the job or because perms come under "current" budgets and contractors under "capital" budgets, you MAY have a point.
IR35 is a piece of spiteful legislation brought in by a chancellor who was unhappy with ordinary people earning a reasonable amount of cash.
The shame really is that the same rule is not applied to senior civil service (or BBC) staff where it really is disguised employment.
Absolutely. Those with little appreciation of the taxation system forget that it is the Government that makes the tax laws. If they don't like what Google, et. al. is doing then they should change the law. The fact of the matter is that successive governments (Conservative and Labor) have failed to pass adequate legislation. If they don't like what Google, Lewis Hamilton, Jimmy Carr, et. al. are doing then they should legislate against it. Only they can do it. No one else can make laws. To try and 'shame' corporations into paying more tax that they legally have to is, put simply, an admission that the Government is powerless (or gutless) to do anything about it.
The loopholes you speak of relates to VAT, not corporation tax.
There are 2 forms of sales relating to Google, The first is sale of google services (advertising is the only one based in UK), the other is shopping and as a payment processor. In these cases Google acts merely as an agent of the seller and would charge the seller VAT on commision (not the sale price).
The £6m coporation tax, the UK treasury should count themselves lucky they got that. Large sums of revenue would be channeled out of the country legally in charges made by the parent on its UK subsiduary to cover the cost of services UK users are using. Without these services, there is no UK revenue generated. It is entirely up to the parent company how much they charge their subsiduaries and how much they leave as local profit.
I wish google would open a branch for accounting services, I would use them in a heartbeat. They could probably do it faster and cheaper then my current accountant and save me more money.
Welcome to the age of globalization. You can bury your head in the sand, plug your ears and shout nah nah nah, but it won't help you. Just like the music industry business model is broken, so it most countries tax systems.
If I can operate from country A and pay less tax there, whilst doing business in countries B, C and D then why wouldn't I? It would actually be remiss of me in my duties to the share holders not to.
Not exactly shocking news. Not right, but hardly earth shattering. It raised the question as to why MP's are so ready to pull google execs in for a shellacking when it should really be the halfwits who wrote (or at least passed / oversaw) the laws governing taxation. The same muppets who routinely go cap in hand to these companies for campaign funds. Perhaps if they weren't bought and sold like tat on fleabay they might not feel so inclined to pass legislation with so many holes in it. Unlikely, they will continue to be bough, and when caught out they will pretend to be outraged.
> John Mann, an MP and member of the Treasury Select Committee, suggested the advertising giant explains itself for its "entirely improper and immoral" behaviour.
I wonder in what bizarre world tax burden reduction is "entirely improper and immoral". Must be the same world in which it is considered proper and just to destroy economies wholesale by money printing, bailouts and crony-capitalist deals, as well as by entirely unecessary "warfare industrial policy" in which sandpeople are routinely grilled to a crisp in order to justify shifting a few billion of taxpayer money. Seized in a fully moral way, of course.
I think that the theory is that if everyone paid their taxes in full and on time without trying to dodge any of them, the government would then be able to reduce taxes for everyone. Realistically I think that what would actually happen is that government contracts would get more expensive due to companies thinking they can milk it more.
All big companies and rich people do this, they'll move heaven and Earth to avoid paying taxes.
Because they're greedy. That simple.
And the sad thing is, they get away with it and will continue getting away with it. As much as I'm sure these MP's will bluster in front of the cameras, at the end of the day the law makers won't do any serious legislating to stop them from the "legal" tax evading.
And that is why we end up with this crushing deficit in the public finances.
We all know what good that has done to the economy...
Bottom Line: if you do business here, you should pay your tax like everyone else.
If there are loopholes like this then they need to be closed and the system simplified down to limit avoidance.
> All big companies and rich people do this, they'll move heaven and Earth to avoid paying taxes.
> Because they're greedy. That simple.
Companies are not "greedy". They are inanimate entities with neither feelings or morals. The individuals who make the decisions regarding where to locate a company and how to arrange its tax affairs do so to maximise shareholder earnings.
So who are these shareholders, who benefit so greatly from tax avoidance? The quick and accurate answer, if you want to see one, is to look in the mirror. Yes! you and me. We contribute towards pension savings (itself a form of tax avoidance) that are paid to pension funds which invest OUR MONEY in .... you guessed it .... shares in large companies. The fund managers decide which companies to invest in by looking at company profits and earnings per share. So if you want all these large companies to "pay their fair share" of taxes, be prepared to lose a sizable chunk of your future pension payouts.
I agree with the sentiment, but a pension is more of a tax stalling than tax avoidance. When you come to cash it in, you'll have it down as income and hand a proportion of it over to whoever is at No 11 Downing Street.
I think there is an issue that whilst as a pension contributor I do vicariously own bits of companies, I cannot ring up my pension fund manager and demand he sell GOOG because they don't pay enough tax. He's too busy making sure my pension shrinks in real terms every year to do that.
> I cannot ring up my pension fund manager and demand he sell GOOG because they don't pay enough tax. He's too busy making sure my pension shrinks in real terms every year to do that.
I can't understand why somebody whose performance is measured on how well their investments perform would deliberately sabotage your pension, but if you are that paranoid then do your own. It is called a Self-Invested Personal Pension (SIPP).
@AC
Fees. That is all. Performance is not matched to reward, funds are removed via a bid-offer spread, and a proportion taken from every contribution. Even with your SIPP you will be hit by some Financial Services fees, sorry, it's as much of life as death and taxes.
It's not just the investment fees either. When your SIPP (or my pension) ends, have you seen the annuity rates you will get? I will not get back what I paid in, unless I live to be around 173.
Re: Yet Another
The bid-offer spread goes to the market makers, not the fund managers so they make no money from that.
As for fees, they are usually based on the value of the pension. If your pension is worth more then you get charged more. This means there is no incentive for the fund manager to deliberately under perform with your pension and every reason to over perform.
The annuity rates are based upon the BoE lending rate which is currently 0.5%. It is kept this low because the government want you to borrow money and spend it so as to stimulate the economy. They do not want you saving it.
" lose a sizable chunk of your future pension payouts"
Look closely - I think tax is quite small compare with fund management charges these days.
I only put money into the stock market via pension contributions because I am effectively forced to fund the stock market by the tax breaks companies get for forcing me into contributing. I say forcing - I don't have to but they wont give ME the money if I don't join the scheme.
And as for future payouts - dream on - the system is fucked. £350 Billion of taxpayers money cant keep it afloat and 0% growth over the next 10 years (if we're really lucky) is not going to pay the fund managers charges: which WILL be paid. You can rest assured of that.
> the tax breaks companies get for forcing me into contributing.
The company doesn't get tax breaks for this. If the company puts £x into your pension scheme then the revenue will not tax it. If the company puts £x into your pocket then you have to pay NI and PAYE and the company has to also pay NI.
> £350 Billion of taxpayers money cant keep it afloat and 0% growth over the next 10 years
You sound like you are in a private company. Should your private pension fund have a shortfall the government will bail it out with exactly £0 of tax payers money. On the other hand, if you worked for the government then any shortfall will be funded by other tax payers. There is no upper limit as to how much they will spend to bail it out.
As for my pension, it has an average growth over the last few years of about 4-5% per year and is now more than it was before the markets crashed in 2009. The management fees are less less than 0.05% and the tax is about 0.6% or ten times more than the fees. The tax paid is the cut the government takes from dividend earnings
Do you have an ISA or PEP? Premium Bonds? Fixed interest savings certificates? Index linked saving certificates? How about a private pension?
If you have any of the above then you are taking part in a tax avoidance scheme.
Personally, I will avoid every penny of tax I can.
When I want to donate my money to a worthy cause I give it to a local charity. I don't consider the inland revenue to be a worthy cause and every penny I give them that I don't legally have to is no different than a donation.
A company is obliged to do this. Its directors are required to seek to maximise the return for its shareholders. If they fail to take advantage of obviously legal opportunities to save tax, they could be sued by their shareholders!
As someone said above, operating throughout the EU out of Eire (lowest corporation tax) is pretty much a definition of what the EU is for!
The government should start by changing company law so that a company is no longer obliged to minimise tax paid (and work through diplomatic channels to try to get that change made in all developed economies). Then, maybe Google would do the right thing rather than the legal thing.
Much easier for attention grabbing MPs to distract the public with show trials than pressure their parties to stop giving business (primarily finance) these tax dodges to stop them fleeing abroad.
These idiots collaborated in creating an 'immoral' tax system, they have no right to complain when companies actually use it. It's OK when these idiots are protecting our banking and finance industries by letting them avoid tax, it's much more immoral if anyone else does it.
These MPs need to quit attention grabbing show trials and get of their lazy arses and force real change. That or keep taking the bribes and just STFU.
In a way, this serves the general public right for ignorantly acquiescing to a tax system which taxes earnings (the results of effort) rather than passively received benefits. The tax system is deliberately designed to tax producers rather than net economic beneficiaries and the only producers who are powerless (immobile) enough to be taxed significantly in this way, are the poor. Meanwhile, trillions in economic benefit (value) flow from the community and the taxpayer into the coffers of the rich and yet this flow remains virtually untaxed ironically because it is not *earned* by anything the rich are doing. The tax system is upside down and this is just one of the many consequences
"Google could be hauled in front of MPs after the 2011 results for its UK subsidiary showed it paid just £6m in tax on a turnover of £395m. It effectively paid a 1.5 per cent duty when in fact the top-end UK corporation tax rate is 24 per cent."
There's Google again, helping the UK improve its economy! You need to thank your lucky stars that Google didn't make elimination of corporate taxes a central plank of the Hargreaves report along with the expropriation of all copyright holders in favor of Google (and a gaggle of other tech companies). So that the UK would, as you chumps so colourfully put it, go "titsup" even sooner.
But that £90m that Google put into its own pockets instead of the government coffers wouldn't save you anyway, as the official establishment of Soviet Britain is still right on schedule!
What was the profit on £395m? I doubt it was 100% profit, maybe 10%...
Also How much VAT was paid? think about it, on a £395Million turnover (i.e. income from customers) they collected around £79Million in VAT, you REALLY want to complain about that kind of tax income!
Personally I think VAT is a much better way to collect tax than corporation tax..
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It's HMRCs. They have poor legislation and are always going after the little companies (who don't wine and dine the senior civil servants and who can't offer them a lucrative job when they leave the civil service).
Legislation is the key. Also, stopping senior Civil Servants from letting the companies off (http://www.guardian.co.uk/uk/feedarticle/10310206) would be a good start.
HMRC - overpaid civil servants who don't want a stressful life and go after the soft targets.
"The firm said in an emailed statement that it makes a "substantial contribution to the UK economy through local, payroll and corporate taxes".
"We also employ over a thousand people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in East London...."
Emailed? Don't they use letter-head any longer? Substantial contribution to the economy at 1.5%?
And with the mention of employment, the extortion threat. They are indeed immoral. No social responsibility. Just modern day robber barons.
What to use instead ?
Bing ? - do Microsoft pay their fair share of tax ?
Yahoo - I'd do anything for Marissa (https://en.wikipedia.org/wiki/Marissa_Mayer). I doubt they pay any tax (you need to make a profit first).
Duck Duck Go - will they be around in 2014 ? (http://duckduckgo.com/)
It's largely irrelevant. Profit, for international companies at least, is pretty much what you decide it to be. You ship your expenditure and revenues around the international tax system until you magically realise a small profit in the country with the lowest rate of corporation tax.
The answer is to tax turnover (in the UK) - it's much harder to hide or divert offshore. We already have business taxes that are not based on profit - employers' so-called NIC and business rates for example. Roll it all into one, simplify the administration and compliance. If you then want to give companies a tax break, you can do it against investment in equipment, R&D, training or whatever positive activities you like. Anything else just results in the system being gamed.
That's what the current set up is. You offset all your expenses against your income. You pay tax on the difference. That difference is called profit.
Now how about taxing BMW on their profits. They are paying their tax in Germany, not in the UK.
Mind you, the Germans might decide they can raise tax from Rolls-Royce.
Then it's legal.
How many commenters here would seriously, voluntarily fork over another £1 million of their earnings (assuming you were fortunate enough to be in e.g. Jimmy Carr's position, etc) to uk.gov if they didn't have to and could just keep it instead.
Oh of course. All of you would. With great big moral high ground grins on your faces.
Yeah right.
....sounds like someone's been avoiding paying tax....
Here's another question, how many commenters here would seriously claim they're based in Luxembourg via a contracting company based in Ireland to avoid paying tax on work done in the UK?
Yeah, of course, all of us do. With great big houses made of gold.
Yeah right.
I would too. I want to pay taxes to make the country better for everyone and not just me. I'm more than happy to support those less fortunate than me through the state (I wish the state was better organised, but that's not quite the issue).
For me, that's what a civilised, humane person does as part of a modern, progressive society. I appreciate other people have different points of view, and I'm not saying they're wrong, this is just my opinion.
If you're not happy with the level of tax that you are paying and want to pay more, just write a cheque to the HMRC and send it to The Treasurer, HMRC, 1 Horse Guards Parade, London. They'll send you a receipt so that you can proudly show off that you have paid more tax than you needed to and that you've done it for the good of the country.
Me, I think the the state is the most inefficient disorganised method of wealth distribution. I would prefer lower taxes, even no taxes for companies. That would mean that the money I give to companies (in return for something) which then means that other people are employed in providing me with that something actually goes to the employees rather than to the state who take their cut and then pass it on to the workshy. The state thinks it's gainfully employing people, but a lot of them are diversity and equality officers and climate change officials - in other words a waste of space.
"How many commenters here would seriously, voluntarily fork over another £1 million of their earnings (assuming you were fortunate enough to be in e.g. Jimmy Carr's position, etc) to uk.gov if they didn't have to and could just keep it instead."
Me. Because in any other country in the world I would not have had the education to get there, nor the free healthcare that perhaps allowed me to be alive long enough to do so.
Don't judge me by your own morals. I feel that I have a debt to this country that is reflected by a chunk of my earnings. I'd be a lot happier though if I wasn't the poor mug paying my share and reinvesting in the future economy while others work hard to dodge it.
@ AC
"Me. Because in any other country in the world I would not have had the education to get there, nor the free healthcare that perhaps allowed me to be alive long enough to do so."
1.) There are plenty of other countries that provide good education. Though I understand your point in that you feel your patriotic duty to continue to provide that education to other citizens.
2.) Healthcare isn't free. Your paying for it, it's just not labeled as "Healthcare" on your taxes.
2.) Healthcare isn't free. Your paying for it, it's just not labeled as "Healthcare" on your taxes."
Healthcare is free when I need it most, without condition, nor waive for age or existing illness. And nothing is more important in life than one's health.
"1.) There are plenty of other countries that provide good education. Though I understand your point in that you feel your patriotic duty to continue to provide that education to other citizens."
And all the other things that my country has provided me with over the years: A safe environment in my younger years, green fields, roads that aren't full of holes [*rising strains of 'Jerusalem' in the background*], free speech, a vote, internet, money when times were desperate, potable water, et cetera: All the things that I've not seen another country on Earth provide so well for it's inhabitants. What I owe my nation isn't limited to a set number of thousand pounds per year, but is indeed a fair proportion of my income. I don't begrudge it (despite having no kids, attending Public School for half of my education, never having gone to uni, never spend a night in hospital (touch wood) and never being a long-term benefiter of social security, and hence 'not getting my fair share' in many's eyes). I just want to see it fairly levied from all.
Maybe people who are happy to live here but see that it should be free or less for them because they have money should just piss off to Ireland or somewhere in the Pacific and bring their kids up there, if they only want to pay tax there.
@ AC once again
"Healthcare is free when I need it most, without condition, nor waive for age or existing illness. And nothing is more important in life than one's health."
If you're in the US (which you may not be. Forgive the assumption if you're not.) this statement is false when it comes to age and illness. I specifically know a an elder gentleman that are now being refused dialysis to keep him alive. His literally words to me were "I guess I'll just go home and die now". This is a direct result of the 'affordable healthcare' law. I can also tell you that personally my insurance premiums have gone up significantly for less coverage. The birth of my little girl went from costing $300 out of pocket (had she been born in '11) to costing me $2,000 out of pocket. Again thanks to the same law.
If your from another country, I'm glad you're healthcare system seems to be working so well for you. I can tell you from both happenstance and personal experience, ours has been royally messed up, and we're now paying an arm and a leg for it.
I would. And in principle I do. I could save money by avoiding paying some of the tax I do in the UK (note, that's avoid by legal means, not evade by under reporting etc.) It's not the £1million you use in your example, but I voluntarily pay tax that I could get out of. The reason being that whilst there are legal ways out of it, I don't see it as ethical to get out of the tax.
Not everyone thinks like you do whether you believe it or not.
Absolutely, except then the idiots have to balance it off against how many taxable entities take ALL their money out of the country as a 'stuff you' for removing the only incentive to keep any money in the UK/wherever in the first place.
They've made a rod for their own back, as usual, and getting beaten with their own stick. The carrot, as ever is still absent from the whole damned equation (did the UK ever have one, been too long used to the stick to remember?)
Yet another misleading, sensationalist article by which appears to be doing so by deliberately conflating turnover with corporation tax and comparing a 1.5% "duty" directly with 24% corporation tax. The latter is, of course, paid on profits and not on turnover.
This is not to say that there isn't an issue here. Tax law has undoubtedly not kept up with many aspects of online business. In the case of on-line advertising, perhaps the government might consider bringing forward a tax on the turnover of advertising in the UK. The technology exists to get a very good estimate of where on-line advertising is being targeted and the related turnover (after all, it's related to the way Google will bill advertisers). Companies offering on-line advertising (or similar intangibles) could be faced with effective bans on doing UK business should they not co-operate and try and stay outside of UK tax administration for the purpose of assessing turnover.
Also, taxation is based on turnover then that also makes it rather more difficult to avoid than using profit figures which are inevitably going to be based on international company structures and where they choose to be based.
Of course it may be possible that there's some EU tax law which will make such a thing difficult, but perhaps the MPs should give some consideration to the fitness and effectiveness of the laws they pass rather than grandstanding over "morality" issues which are really just issues of commercial management.
"Yet another misleading, sensationalist article by which appears to be doing so by deliberately conflating turnover with corporation tax"
Never attribute to malice that which is adequately explained by stupidity, or so the razor goes. The article has been amended.
C.
Big hotels company I worked for has the list of their companys on a screen in their reception, it flicks over seemingly forever.
A few hundred companys set up all "earning" under the 60k or so required so they dont have to be VAT registered.
People who earn large amounts in this country do not pay tax, we know this. While Jimmy Car made himself an easy target by being to cocky, we KNOW the majority of them do the same or use similar schemes.
I would suggest that most Politicos are in the same boat, set up as a limited company in the same way and thiething the country as much as everyone else is.
The trouble is its not something that the normal person can do, you need to bring in a certain amount to make it worthwhile, but after that its plain off shore sailing.
If you can afford a room full of accountants to manage the books on 3-400 little companys you can save billions in either not paying VAT or by not charging it to your customers while your competors do.
unless your a famous football manager, when you can end up in front of the beak and just laugh, plead ignorance and come out being polled as the next england football manager.
We laugh at Greece for not paying taxes and crying, but if the average UK tax slave realised that, actually, only little people do pay taxes then they would be crying too.
A quote from a previous Lord Chancellor - "Taxation is an enforced extraction, not a voluntary contribution. No-one is under any obligation, legal or moral to arrange his affairs for the benefit of the taxman". The same applies for companies.
Part of the issue is that the tax law changes with every Budget (or even interim Budget) and sometimes with the enactment of other laws. The book that is the official HMRC guidelines has more than doubled in size in the last few years; because they make all of the interpretation of the law so complex. And those companies that can, use every means at their disposal to reduce their tax bill. If the law changes, they just look for the loopholes in the new rules.
Before MPs start whinging about companies not paying tax, they should set out to make the rules simpler to follow and therefore harder to find ways around. But one suspects that they are not too keen on that; after all, they often use the same tactics to avoid paying tax themselves.
The failing economy is due to the tax avoidance of global brands like Google.
What's that Vodafone, no no that's quite OK
Sometime it makes you wonder who the politicians friends are.
**Thanks to some tax avoidance, last year I officially earned 12K - although the stress of accounting for everything was very tiresome, hence why I am now an employee again.
The government makes the rules; the companies obey them(1). The rules effectively say "If you're based in the UK, you pay this much. If you're a subsidiary of an Irish company you pay that much. You choose.". Up to the MPs to get the rules right rather than whinge about it.
(1) OK, some don't, but that's a different issue.
So it's that very parliament that created a banking haven in London -- allowing Big International Finance to bypass pesky local taxes and regulation in other countries -- that wants to query Google over some pithy hundreds of millions of profits?
Is that sanity returning into politics, or is it just a nice case of "don't do to us what we do to you"?
Perhaps we should actually cut or corporation tax rate so that companies will start paying more taxes in the UK rather than Ireland?
The obvious danger is that the more you make large business pay the less likely they are going to want to do business here, is there anything stopping google pulling out of the UK completely? Do they really need staff and offices in the UK?
Not more of this rubbish.
Tax is on profit, not turnover. £6m tax suggests £25m profit, which is a margin of what, 6%? Sounds OK, given that all Google do in the UK is tout for advertising. No risk in that, so there should be no margin. All the value comes from the US: Google UK would be nothing without it.
If the MPs don't understand that, they really shouldn't be investigating anything.
Never mind the question of what the £6m is: accounts tax charge, or tax paid, or what? If it's tax paid and there's been anything in the way of capital allowances or R&D, then what do you expect?
This is a technology site and it shows. Many of the commentators know very little about how taxation really works, how companies work, and the legal systems involved.
Even I don't know much. But I do know that Google are following the law to the letter and to the spirit. They are not doing anything illegal, cause if they were they would have already been up in court.
And morality doesn't come into the equation. There is nothing immoral about paying less tax as much as there is nothing moral about paying more tax than you have to. The law is not a moral compass. If it was then homosexuality would never have been illegal.
Just because Ireland is getting Google's tax money doesn't mean that UK politicians have start crying and saying it's not fair. If they want Google, or any other company's taxes, then lower the tax rate to make it attractive for companies to set up HQs here. The UK is in competition with Ireland and every other country in the world for tax money. The UK is NOT entitled to tax money, it has to work for it.
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