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back to article 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 …

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I think it is about time

This sort of tax location shopping was cracked down on. Morally I think tax should be paid in the country the revenue is earned in. And if that makes international trade difficult without having local agents - well I'm not sure that's really a problem...

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Re: I think it is about time

For an example of what happens to an economy when there is widespread tax avoidance, look no further than Grecce.

None of us like paying tax but like it or not it goes a long way to making an economy work, and mass avoidance can mean disaster.

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Re: I think it is about time

Be difficult to do that. EU law is deliberately set up so that a company only needs to have one EU outpost. From which it can sell to all 27 EU countries.

This is actually the aim of the Single Market.

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Anonymous Coward

Re: I think it is about time

> For an example of what happens to an economy when there is widespread tax avoidance, look no further than Grecce.

Get your facts straight. In Greece it is widespread tax evasion.

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Re: I think it is about time

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?

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Re: I think it is about time

Next time you're on sick leave, or holiday (with full pay), or a bank holiday (with full pay), or that subsidised company gym, or those paid training courses with the nice hotel to stay in, or the company Xmas party... think about how fair IR35 is then eh?

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Meh

A way to put the blame on someone else

The Government attempts to distract the public by blaming google for doing something that is perfectly legal.

Is this a bury the bad news day?

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Anonymous Coward

Re: A way to put the blame on someone else

And look how easy it is to turn the mob on. They do nothing illegal or they would be punished for it yet the mob bays for revenge courtesy of Govenrment propaganda.

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Re: I think it is about time

So the tax payer, not the employer, should pay for a contractor's sick leave, holiday pay and gym membership? I don't think that'll fly in the Commons (maybe the Lords, but not the Commons).

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Re: A way to put the blame on someone else

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.

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FAIL

@Shagbag

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.

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Re: I think it is about time

>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.

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Re: I think it is about time

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.

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Re: I think it is about time

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.

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Re: @Shagbag

I didn't realise I had to spell it out for some people, but I guess I have to:

It's hypocritical to moan about other's tax avoidance when all they are doing is legitimately planning their tax affairs. The 'morality' of tax avoidance is not limited to large corporations.

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Mushroom

Re: I think it is about time

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.

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Anonymous Coward

Re: I think it is about time

...Or told to leave at the end of the week 'cos the project's been cancelled, no comeback or arguing.

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Re: I think it is about time

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.

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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.

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Big Brother

Taxfeeders in revolt!

> 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.

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Re: Taxfeeders in revolt!

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.

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Re: Taxfeeders in revolt!

Agreed. The hypocrisy of a UK Politician saying others are 'immoral' while those same Politicians have just been caught in snout-filled feeding frenzy over their expense claims.

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All big companies do this

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.

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Re: All big companies do this

I'm sure Google is being picked on because they have not contributed to the MP retirement fund to the same extent as all the other corporations that use the same loopholes (created by the MPs) to avoid paying tax.

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Anonymous Coward

Re: All big companies do this

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.

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Re: All big companies and tax collectors do this

Like Vodafone and their multi billion pound tax avoidance thing where HM Customs settled for a comparatively paltry sum as they thought it was a good deal for us tax payers?

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It's your money

> 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.

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Anonymous Coward

Re: All big companies do this

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.

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Re: It's your money (Pete 2)

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.

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Re: It's your money

I couldn't agree with you more Pete.

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Anonymous Coward

Re: It's your money (Pete 2)

> 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).

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Re: It's your money (Pete 2)

@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.

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Anonymous Coward

Re: It's your money (Pete 2)

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.

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Re: All big companies HAVE to do this

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.

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Re: It's your money

" 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.

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Anonymous Coward

Re: It's your money

> 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

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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.

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of course they wont do anything...

and close the loopholes they and their donators all use? dont be silly. its much easier to go after the unemployed and disabled, even though they cost us a fraction of what is being evaded/avoided.

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FAIL

The top-end UK corporation tax rate is 24 per cent

And maybe if Her Majesty's Revenue & Customs would enforce it, the rest of us plebs wouldn't have to endure such high taxes.

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Anonymous Coward

Re: The top-end UK corporation tax rate is 24 per cent

Is corporation tax really on turnover?

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Is corporation tax really on turnover?

No, it's a tax on profits *after* all expenses and costs have been taken care of.

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Anonymous Coward

Nearly ALL Tech Corps...

...use Ireland as their EU headquarters for this reason.

At least they pay some tax. Unlike Vodafone et al who use totally artificial shell companies in Luxembourg to completely avoid paying tax they owe.

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Jolly good

Can we add some more to the list?

Every major supermarket.

Every major bank.

Every major accountancy firm

Every major...you get the idea.

Well hear some noise, see a few headlines but sod all will change. Just the Working and Lower-middle classes getting it in the neck as always.

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Re: Jolly good

More importantly - every major media outlet

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Re: Jolly good

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

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Anonymous Coward

There's Google Again!

"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!

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Anonymous Coward

Re: There's Google Again!

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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Anonymous Coward

Who's fault

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.

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Flame

He Said, She Said

"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.

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