back to article Google: Do no evil, pay no tax

Google has been accused of swerving UK tax on the £1.6bn it makes in Britain. To be fair, Google does pay some tax - about £140,000 on interest on cash in the bank held here. But its offshore status means it, quite legally, avoids paying £450m in corporation tax. Lib Dem deputy leader Vince Cable accused Google of not playing …

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Anonymous Coward

No tax? No tax credits/benefits to staff.

I've thought about this quite a bit (companies moving their registered office to avoid tax) and here's what I reckon a govt with a brain should do, although admittedly its unlikely to impact Google staff.

Tax credits are just a hidden subsidy to companies right? Allows them to pay less and the taxpayer (personal or corporate) picks up the bill. Same with quite a lot of other "benefits" too.

Now at this point you can go two ways -

If the company doesn't want to pay tax in the UK then NONE of their staff should be paid tax credits. The company should be made to state in all recruitment adverts that since they avoid paying tax in the UK that no positions within their company are eligible for tax credits or benefits.

Alternatively the company should be forced to pay the tax credits/other benefits to staff.

Either way it pushes their costs up and makes them look like scum :)

Don't want to be in the UK tax system? Fine, then don't expect ANY of the upsides (not that there's many) of being in it, and you especially shouldn't expect the poor PAYE sods to subsidise your company profits!

Of course since all these companies do to make issues like this go away is hire a token troughing pig (AKA a Member of Parliament) it'll never happen.

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Tax? I think this is Corporation Tax

Learn about the tax system in the UK before ranting, please.

I'm sure that they are doing the right thing for NI and PAYE income tax for their employees in the UK (HMRC would see to that), it's just the Corporation Tax, and they probably do the same as any number of companies that are not Incorporated in the UK (Dell, eBay etc.)

We don't have a hypothicated (don't know whether this is too obscure for Firefox's spelling checker, or whether I have just got it wrong) tax system here, so it is not possible to work out whether the tax credits are paid from Corporation Tax or PAYE and NI income, but I would suggest that you should expect it to be the latter.

If the average income is 90K, I suspect that few if any of the Google employees would be able to claim any tax credits, anyway, and if anybody is sacked from Google, then the Jobseekers allowance should definitely be from NI.

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Anonymous Coward

Tax credits...?

Yeah, I'd like to see anyone earning 90 grand a year successfully claim tax credits (or any other form of 'benefit' for that matter).

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Well

I'm not sure what the legal construction is for the employees of Google in the UK but I'm guessing that are working for a Google UK Ltd or some similar arrangement. If this is not the case then perhaps the UK should bring in a law that insists that anyone working in the UK (for more than a specific portion of the year) or any overseas company employing more than a certain number of employees, must be employed/must employ via a UK registered company.

OK that is step one. The next step is a European law. It would have to make it illegal to avoid tax by using such daughter companies for employment only. They would need to say that all sales within the European union must go via the local daughter company. So having a Google Ireland and telling the Google UK employees to sell to UK clients via Google Ireland would then be illegal.

I believe another trick they use is to funnel all the profits offshore so that the daughter companies no longer look profitable. Again I'd simply tell them that they need to pay the tax locally before they can pay profits to the parent company.

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@John

If they average £90K, I doubt many are receiving tax credits/benefits

More generally, HMRC should tax UK generated profits (not like at present where Google, News International etc pay nearly sweet FA).

Maybe they would have got more tax if they hadn't been so busy with their own tax dodging schemes (Stuff like where they sold all their buildings to Mapely Steps, who were gave the best price as they pay no UK tax...)

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Dangerous pecidents here

International tax is a minefield.

I think that if HMRC taxed profits where they are earned, not at point of declaration, and other countries followed suit, the UK would probably be a net looser. This is because we are largely a country of service industries, earning most of our overseas revenue from other countries in this manner, and internationally, double taxation is frowned upon.

You woulda thought that the politicians who are proposing this would study it enough to realize the implications.

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Another trick...

... is to sell off all your assets to an offshore subsidiary and then lease them back. Tesco do this with their stores, presumably the leases are jacked up to ensure those pesky profits are sucked overseas.

Again, an easy solution (read: quickly though up and probably more holes than a sieve) here would be to treat expenses paid to daughter/sibling companies overseas for use of UK-located assets as revenue liable to UK corporation tax.

Of course the chances of any (and I mean any) government - present, future or highly unlikely (I'm looking at you, Liberal Democrats) - sorting this out is next to zero. In all parties, the people who get to this level of government are just too well connected with the heads of teh affected companies to ever contemplate a watertight fix to the problem.

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Neat theory Naismith.

Naismith, what you fail to understand is capital mobility. If the UK ramps up taxes on Google and Google like businesses, they'll simply fire all UK staff and move elsewhere. Ad sales are easily outsourced, and there are plenty of former British colonies which speak fairly good english and have people who will work for less. Australia and South Africa for example. Both have Google offices.

So if you try to 'force' or 'shame' Google into doing what you want, it's not going to matter. All that's going to happen is that 1000+ UK jobs providing a lot of PAYG revenue will simply disappear.

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Average?

Can I be an average Google worker please? I'll even file my horns off.

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Go

Me too

I wouldn't even mind being slightly below average... for that sort of money.

The question is, which sort of average: mean, median or mode?

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Title

These "average salary" figures are usually the mean, and therefore largely meaningless.

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Troll

Trollish article!

...que some readers jumping to protect the darling, others half smug about these news.

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Grenade

I'm sorry?

What about the hundreds of other companies also registered offshore for the purposes of tax? Most much more British than Google? Even HMRC's buildings are owned by an offshore company for tax purposes. Even when our own government sells its assets in a PFI scheme it doesn't make sure that the purchasers will pay tax on the profits it will make on the deal.

Please, I'm happy to see a politicial standing up and talking about the problems of offshoring as a tax avoidance measure - even one that is never likely to be in Government - but please, some balance is due. Is this El Reg editing to make it an IT headline, or Vince Cable making a Google-specific point?

As a sweeping ignorant statement that could probably be shot down by any tax or economics specialist: Why not change the rules so that tax on profits for sales in, say, the UK, if the company has a presence in that country, physical or legal (physical would be staff, offices; legal would be companies, partnerships etc).

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Anonymous Coward

"not playing fair"

Vince Cable's about the only MP who could get away with this sort of thing, atm.

Re "Trollish article!": Que?

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Pay no tax?

They "pay no tax" or "only pay tax on the money from interest"? Well, I think that's is definitely wrong. Wrong in the fact that they will pay the employers tax for their staff salaries for the people employed in the UK (and if the average pay is 90,000 that's quite a bit of tax), will have to pay their employers National Insurance contributions as well (ok, not technically a tax, but..), and will have to pay VAT when they buy stuff in the UK (I can't recall if office rental comes under this) [if they don't, they'll be paying VAT at the Irish rate of 19% - bit higher than the UKs!]

Google is asking the UK taxpayer for nothing, but is at least contributing something (ok, their staff /might/ be pulling tax credits - but that will be on the employee basis and will have very little to do with Google). And they will be paying tax in Ireland and the USA. I suspect that many other multinationals (from banks and energy companies all the way down to footballers and their "offshore" holding companies and even certain MPs) avoid paying "UK Tax" by using companies in other countries.

Perhaps the government should entirely stop this - but then they'll be paying more tax as they "sold" the HMRC's physical offices to an offshore company to save paying tax... What's good for the goose...

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VAT is probably offset

They are certainly over the threshold where VAT registration is compulsory, so any VAT they pay will be offset against what they charge. No tax loss/gain there, it's mostly neutral.

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Anonymous Coward

Pay no tax - doing no Evil

They "pay no tax" or "only pay tax on the money from interest"? Well, I think that's is definitely wrong. Wrong in the fact that they will pay the employers tax for their staff salaries for the people employed in the UK (and if the average pay is 90,000 that's quite a bit of tax), will have to pay their employers National Insurance contributions as well (ok, not technically a tax, but..), and will have to pay VAT when they buy stuff in the UK (I can't recall if office rental comes under this) [if they don't, they'll be paying VAT at the Irish rate of 19% - bit higher than the UKs!]

Yes Google will pay VAT on any purchases made in this country - and like any business which is VAT registered will be able to claim that total against what they invoice from their customers - reducing the VAT payment to HMRC. So Google do no more evil or good than any other company in regards to VAT, PAYE collection and NIC contributions, but the argument that Cable is making is their evil offshore activities - reducing the tax that they pay due on the company profit - an option not available smaller companies. The question as always with Google are they so benign that they make themselves out to be?

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Grenade

Ahem...

The majority of revenue from UK-origin advertising is escaping untaxed from the country. The money lost here far outweighs the tax they will pay in other ways, given the degree of profitability of Google. And, if Google are undertaking tax avoidance here, you can be damned sure they will also be undertaking it in every other country where it is still legal to do so. I can't comment about Ireland or the US specifically.

If you'd like a basic understanding of (a) tax avoidance and (b) the extent to which it is fleecing the UK of tax then I suggest you start buying Private Eye - the best way to find out all those things that companies, councils and MPs rather you didn't know about.

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Anonymous Coward

Far from unusual

Admittedly the charity figure is piss-poor, but the locating of the HQ for tax advantage is surely what all multinationals do, right??

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Badgers

Yep just take a look at any of the multi-nationals whether IT or other

For example, Dell is based in Ireland, probably soon to move. Itunes based in Luxembourg, Skype either the same or Switzerland. Because of the tax laws across Europe allow for a company to be only taxed in their HQ country to avoid complications means Companies take advantage and position their billing in a low tax country. Ireland deliberately set their corporate tax low to attract business, ditto luxembourg and Switzerland (by virtue of their bilateral agreement with the EU).

There is an argument to require companies to pay tax in the country in which the customer is located, this would be a nightmare for many companies but it would ensure a fair allocation across the EU.

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Murdoch Strike Again

Another pro Google article from the pro Google Times, Mr Murdoch must really love 'em

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Sigh...

Company taxes are an exclusive "European competence", and the ability to pay your tax in any EU country is a feature of European law. Frankly, Mr Cable should STFU since he's merrily advocating further European integration including single currency membership, or has he suddenly decided that Libdem policy is now to leave?

R

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£5600 to charity? That is insulting.

That really sucks. Giving just 0.00035% of their UK profits to UK charities is like a 2 finger salute to us all, whether you're a paying Google customer or not. That is the tightest donation I've ever heard of.

According to an IPSOS poll 92% of Britons gave to a charity in a 12 month period and the average donation was £165 per person which is 0.75% of an average salaray. You'd think a big corporate like Google would be more generous than individuals at giving but this statisic shows they are adverse to supporting charities.

If Google were to match the generosity of the average Briton they would be giving £12m/year to charity which still doesn't sound much for a company of their size but it would be the decent and right thing to do.

Google have just dropped down a few pegs in my book. I will punish them by using Bing Maps (Beta with Silverlight) from now on. But I can't pull myself away from using Google search. Damn.

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Headmaster

Insulting donations?

What the hell are you talking about? Google supporting charity shows they are adverse to supporting charities?

No company is under any obligation to make a donation to charity; they may choose to do so, for business purposes, pr or even as a genuine generous thank you, but claiming a donation is insulting is really taking the piss.

You don’t seem to realise what charity is. (Hint: it’s not a compulsory tax) Criticising anyone’s charitable donations is highly insulting.

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Corporate social responsibility

Running a business isn't just about take, take, take. While you can do that, many corporates participate in social responsibilities which can include supporting local communities and charities. They don't have to, but that's what makes a company a better company.

Greed isn't a nice thing but it can its perception can be offset by supporting charities. Microsoft and Bill Gates have been generous in that department and I've worked for corporates who also do their bit. In return they see their reputation increase, or at least the image of a corporate monster changes as scales turn into fluffy fur. Sort of.

If you're going to extract large profits from a country then at least give something back, especially if you choose not to pay taxes in that specific country.

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And on the other hand

Many, many thousands of UK companies trade is various parts of the world but pay all of their taxes into the UK treasury. You win some, you lose some. Unless you want to stop benefiting from the corporation taxes of the overseas operations of Tesco, M&S, BAE etc then I'd suggest keeping your feckin mouths closed and hoping this dick-head of an MP, who clearly knows nothing about Tax, gets a serious slapping from his party whip very soon.

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it's not the fault of Google

They are based in the place that's most advantageous. If our government made britain attractive to anyone other than bankers we might see more of the cash landing here.

We'd need a skilled workforce though :-(

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Anonymous Coward

Competative tax rates

The UK has agreements in place with many countries so that people and companies dont pay tax twice on the same income. This means that companies that operate in multiple countries can pick the country they pay tax in (I know, its not quite that simple).

If the UK government want google to pay tax here then they should offer competitive corporation tax rates Eire offer a low rate of corporation tax so they have many multinationals paying tax there rather than the UK. Whats this means is that some countries can increase their tax revenue by lowering their tax rate (and hence attracting more multinationals).

Microsoft also arrange their tax affairs so as to pay tax in Eire rather than the UK.

Tax avoidance is 100% legal.

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Anonymous Coward

90k ?

Enough compensation for joining what appears to be a good company with decidedly cultish overtones (based on the three employees I know)

No thanks.

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so which UK tax paying search engine can we use

so which UK tax paying search engine can we use ?

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Turnover tax?

I've always wondered why corporations don't pay a turnover tax based on their income within the UK. It then wouldn't matter so much where they declared their profits. After all, people get taxed on their income, not on how much money they have left at the end of the year and businesses have to pay their employer's NI and rates regardless of whether they're profitable.

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Anonymous Coward

Because that is one of the dumbest ideas I have heard.

How would they ever make a profit?

If a company has £100m in sales (ie turnover) but spend £80m in buying raw materials, manufacturing, paying wages etc then their profit is £20m which they would pay tax on of £5m leaving a net profit of £15m. Your idea would mean the company pays tax on the £100m which would be £25m. If you add this to the £80m payed out for manufacturing the goods then the company would be paying out £105m every year to get an income of £100m. ie. It would quickly go bankrupt.

Every company that has low profit margins would have to either dramatically increase prices to stay in business or move the business to another country.

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Questionable

The issue is that services in the UK are supplied by Google UK Ltd but revenues for those services are collected in Ireland. It does look a bit dodgy, although not as dodgy as the revenues in Ireland, which are collected by a Google subsidiary in Bermuda.

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Anonymous Coward

Turnover Tax? Are you mad?

Because different companies have vastly different operating expenses. Someone might have a high turnover but low profit due to their costs of doing business and profit margins and of course vice versa.

Until there is international agreement on a fixed rate of corporation tax this is always going to be an 'issue' but as highlighted by other posters there are many situations where companies choose to pay tax in the UK rather than abroad for their own tax reasons.

Tax is a minefield, made even more so by the ever expanding tax laws introduced by our beloved leader.

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I don't understand

it's not a troll attempt, I truly don't understand it.

If they are paying what they are legally due to pay, that's this bit of the article " But its offshore status means it, quite legally, avoids paying £450m in corporation tax", then how can they be swerving/avoiding paying tax.

I whole heartedly agree with the rest of the article, and partly with the quote accredited to Vince Cable, if it is accurate. Google could indeed afford to step up it's charitable contributions, that in itself would pay for itself with good press etc,etc,etc. However, as far as social responsibilities go, they should be directed at staff made redundant. After all, we don't see the likes of Barclays bank showing much in the way of social responsibility either, and they employ thousands, and £1.6 billion to them is but pocket change. And nobody complains about that, do they now?

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Anonymous Coward

Barclays

> we don't see the likes of Barclays bank showing much in the way of

> social responsibility either

Google (appropriately!) tells me that Barclays gave £12 million to charity in 2008.

This is the sort of amount that I would hope to see from most companies of this size in "normal" economic conditions. Of course they're not obliged to do it, but it's the sort of thing that we can all consider when deciding where to take our business and where to work.

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Other US companies are worse

Dell, and IIRC HP, were doing even more. They supposedly lost money on every computer they sold in Europe because they bought them wholesale from Dell-Eire for more than the retail price. Not only did they not pay tax anywhere except Ireland they made money on the difference in Vat rates.

The reason Ireland can do this is that foreign multinationals make up most of it's income (until recently!) so the gain by having Google HQ there offsets the loss in tax from the local businesses - if the UK dropped it's tax tot he same rate it would have to attract a lot of foreign businesses to make up for all the tax it would lose from existing UK firms.

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Gun in the room

It's interesting that no one ever mentions the gun in the room. Let's not question the morality of taxation, that might mean we would need to face facts. Taxation is the forcible extraction of property from an individual or group. In other words, theft. If you think there's nothing wrong with this situation, just stop for a moment and think about it. The government taxes everyone. Let's say you don't pay your taxes. You will get a letter in the mail asking why you haven't paid them. You ignore it because taxation is wrong. It's your money and no one else can have it unless you say so. You get another letter telling you that you must pay your taxes, plus interest and fines. You ignore it again, you are principled after all. You get another letter, telling you that you have been assigned a court date. You don't go to court. The judge finds you in contempt and sends out his lackeys to go get you. A few days later the cops turn up to come and kidnap you. You have two choices: defend or give up. Option 1: You try to defend against what is in effect a home invasion. You pull out your gun, because let's face it, they have guns too and it wouldn't be fair otherwise. You get a few shots off, but they shoot you down. You're dead, or at best seriously wounded, and you end up in jail, where you get beaten, abused, raped, maybe even killed. Option 2: You give up. All your property is taken from you. You go to jail, where you get beaten, abused, raped, maybe even killed. Now tell me, is taxation moral?

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Boffin

Morality

So you were not schooled in a government-funded school, have received no goverment-funded health care, don't drive on any government-maintained road, don't benefit from government subsidies to any energy system, etc, etc?

What do you think pays for all this rubbish?*

Governments are the original non-profit organizations**. They exist solely for the common welfare, and yes, when they fail in that purpose, it is a moral failure. But even non-profits must have income to pay for expenses and services offered.

* A direct quote [I believe I have it correct...] from one of the greatest British minds of the 20th century.

** Hard to believe, but governments are non-profit. Politicians, on the other hand...

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Don't be stupid

"Now tell me, is taxation moral"

Yes. Yes it is. Paying taxes is a moral obligation. If you don't want to pay taxes, you're (usually) free to move elsewhere.

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Stop

Smoking gun? More like what are you smoking?

While we can all pass sarcastic comments on taxation, the basic boring fact is that - greedy MPs aside - taxation in its various forms is what keeps the country running. Schools, hospitals, dentists, fire and police services, rubbish collection, working streetlights, roads and motorways, and all those silly little local council initiatives like a skating "park" for bored teenagers.

Sure, you can probably pick flaws in each of those points (i.e. police who are more interested in speeders than crimes; NHS dentists? where?!?) but the premise still stands. There is a lot of the infrastructure of society that isn't directly owned by private companies (yet), but which must be paid for from something. That something is taxation.

I pay taxes. I don't mind paying my taxes. Because I know that for every headline-grabbing story, there's a myriad of things that everybody otherwise forgets.

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Grenade

It's settled

"Do no evil, pay no tax"

This is only one more bit of proof of what every taxpayer already knows. Taxes are evil. Those who make their living coming up with new and ingenious ways to raise, levy and spend taxes (pols and the like) are evil. Those who vote for pols are either ignorant, receiving the tax money spent or trying to make the best of a bad situation, while not necessarily evil, aren't helping.

I already know I'm evil, but joke 'em if they can't take a fsck.

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@Various Anonymous Cowards

"Your idea would mean the company pays tax on the £100m"

Of course not. I didn't say that a turnover tax should be set at the same level as corporation tax. Actually, a low single figure percentage would probably be more than adequate.

"different companies have vastly different operating expenses"

Your argument would equally apply to employer's NI and business rates. And I didn't say that corporation tax should be entirely replaced by a turnover tax - though it might usefully replace NI.

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IT Angle

No Taxation Without Representation

Didn't the Colonies rebel over "No Taxation Without Representation"?

Should Google has the right to vote?

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Unhappy

one of many

Google are not the first/only company to do this - Microsoft/Dell have their HQ in Ireland if I'm not mistaken. I don't think it's EU thing only either as I've heard of banks moving their profits around the world.

Makes me sad that the government/press makes such a big deal of relatively low scale issues with benefits/etc but big corporations get away with 100s of millions of pounds.

Does make me wonder if you can have a single economic market if their is such disparity in taxation? Our Irish cousins must be chuffed with the situation however.

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simple solution

the UK should reduce the rate of corporation tax to be just below that of Eire - companies flock to UK, tax income actually increases overall, unemployment drops, problem solved.

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DR

obvious solution

with dell, ebay, paypal, google etc all registering overseas to avoid paying higher corp tax the answer is surely obvious...

reduce corporation tax in the UK, then you won't have companies like google turning over (taking out) 140 million quid without putting anything back in terms of corporation tax.

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Gates Halo

Money-grabbing at its finest

So Google has registered itself offshore to allow it to keep its mitts on a substantial chunk of cash; and this is being pointed out by the corrupt money-grabbing twits in Parliament, who no doubt could do with some of that cash for second-second homes and, oh, it's been at least a year since that guy had his moat cleaned...

...am I the only one who finds this all rather ironic?

Speaking of irony... Sunday Times? As in NewsCorp? As in Murdoch? As in He Who Hates Google?

St. Bill icon because lots of Microsoft-made-millions go to charity, and I am patiently waiting for The Times to counter with how good Microsoft is, and "oh, by the way, BING is an alternative to Google after all..."!

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FAIL

770 borgs employed by The Gurgle?

770 of them? What are these 770 loompas paid to do? They don't respond to their customers, press releases or anything else. As far as I can tell all they do is write blogs, overhyping features that nobody can access.

I got tired of Google's arrogant attitude and went elsewhere to a service that actually works out the box, has support and doesn't have a two-faced Gerry Ratner at the helm.

Fuck 'em. They grew in the naughties, they sunk in the 10s. Pricks.

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Can I do it please?

Does that mean I can setup an Irish or Isle of Man/<insert low tax region> company that owns a UK limited company through which I contract? That way I get more retained profits or is the cost too high? If the difference in corporation tax rates is 10% then that could mount up.

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