UK MPs accuse Google of tax dodge

December 22, 2009 | 13:03

Tags: #google-turkey #tax #tax-avoidance #tax-dodge #vince-cable

Companies: #google

After finding itself accused of tax avoidance in Turkey Google's affairs are being investigated closer to home, with members of Parliament accusing the company of avoiding corporation tax.

The accusations, publicised in the Times Online via IT Pro, come from the Liberal Democrat deputy leader Vince Cable and Labour MP Austin Mitchell and claim that Google's UK arm is using same dodge as the Turkish arm was fined £29 million for back in November to avoid paying tax in its country of operation.

Specifically, Google operates its European headquarters from Ireland, where it pays between 10 and 25 percent corporation tax - a far cry from the 28 percent to 30 percent it should pay to the UK government were it to fully declare its income, thought to be around £1.6 billion in advertising revenue alone from the UK. Instead, the money is funnelled back to its Irish parent company - with the UK arm declaring a £26 million pre-tax loss based on turnover of just £150 million.

Cable decried the practice to the Times, stating that "avoidance like this is hard to stomach at the best of times, but when the country is in recession and everyone is feeling the pain, it really sticks on the through - it means higher taxes for the rest of us."

The Liberal Democrat deputy leader's comments were echoed by Labour's Mitchell, who accused Google of not just "sucking money out of local newspapers and other people who rely on advertising for a living - [but] it's also draining money out of the public finances."

Responding to Cable's claims that "Google's reputation will be severely damaged if it continues to behave in this way[, as] it is ducking its social responsibility," the advertising and search giant responded by stating "Google makes a big investment in the UK, with over 800 employees, and we make a substantial contribution to local and national taxation" and re-iterated that "we comply fully with the tax laws in all the countries in which we operate."

With the UK still ploughing through a stubborn recession, it's hard to see the government ignoring the loss of an estimated £450 million in corporation tax despite Google's claims of innocence - especially following Turkey's whopper fine for substantially the same offence.

Do you believe that Google's shuffling of money represents a dishonest attempt to avoid paying tax, or is the company merely being sensible and maximising its profits for shareholders? Share your thoughts over in the forums.
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