Google has sparked outrage as it has emerged that the firm has evaded paying over £100m in UK tax through employing an elaborate revenue billing structure.
According to the claims, Google processes most of its sales to UK citizens through its Ireland division, allowing the company to legally pay very little tax because of the resulting small UK turnover.
Accountant Richard Murphy pointed to Google’s UK turnover making up just 10 per cent of the company’s UK sales, while 91 per cent of sales the firm conducts outside the US take place through Ireland. For example, in 2007 Google generated revenues of £1.25bn from the UK but only paid £600,000 in corporation taxes, said Murphy.
Meanwhile, Google also pays very little tax in Ireland, which Murphy suggested was possible because Google is owned by an intermediate Bermuda holding company.
“This can only be explained in my opinion if the Irish Google subsidiary makes substantial payments to a low or no tax jurisdiction whose activities are undertaken intra-group and are not disclosed in the group accounts as a result,” noted Murphy in his blog.
Murphy, who was asked to follow up the issue for a Sunday Times investigation, said he had decided to analyse Google’s accounts because not only is Google the biggest brand in the world but it also strives to achieve recognition for holding a position of corporate responsibility.
“In fact it is not acting with the degree of responsibility one would expect,” said Murphy.
“Of course, Google can say that it has not avoided tax – the tax paid is the result of the structure it uses. But what I do show is that if tax paid is a measure of corporate social responsibility to the communities from which it generates its income – and in its case it generates more than 15 per cent of its total revenue from the UK – then it is not acting in a responsible fashion in this county where its activities are, however, having significant social consequence."
The claims emerged just weeks after governments around the world pledged to tackle tax evaders at the G20 Summit.
“We stand ready to deploy sanctions to protect our public finances and financial systems,” concluded the G20 leaders in The Global Plan for Recovery and Reform. “The era of banking secrecy is over."
UK chancellor Alistair Darling is set to build on the pledge and reveal a new crackdown on UK tax evaders in Wednesday's budget. Tax evaders that deprive the government of income greater than £25,000 are expected to be named and shamed by the government.
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