George Osborne announces 'Google tax' to deal with 'double Irish' loophole
Chancellor of the Exchequer George Osborne has reportedly announced that the government will be clamping down on tax avoidance by technology companies.
Speaking at the Conservative party conference Osborne said: “Some technology companies go to extraordinary lengths to pay little or no tax here,” adding "if you abuse our tax system, you abuse the trust of the British people. And my message to those companies is clear: we will put a stop to it".
The move, which has been dubbed the “Google tax,” is being seen as a response to a corporate tax strategy known as the “double Irish.”
This method involves transferring revenue between different entities in the company structure to shift income from a higher-tax country to a lower-tax country.
MP and chair of the House of Commons public accounts committee Margaret Hodge, claimed that despite Google having an $18bn turnover between 2006 and 2011 it paid the equivalent of just $16m in taxes to the UK government.
In a 2013 report the committee said: “Public confidence in Google will only be restored when it establishes a corporate structure that ensures Google pays tax where it generates profit.”
The California-based search giant is not the only company to have drawn criticism for its taxation arrangements with Microsoft, Adobe, Facebook and Starbucks also having been accused of transferring profits between countries to reduce government levies.
Asked for comment Google referred The Drum to an article written by its executive chairman Eric Schmidt in which he said companies like his own were taking advantage of the competition for inward investment amongst European countries.
Schmidt said that he believed there should be international action to simplify the tax system arguing: "It is for governments to determine the rules. And when they do, companies will respond.”
Meanwhile the Financial Times reported that Apple is to be investigated by the European commission over allegations of illegal tax deals with the Irish government spanning two decades.
If found guilty of receiving illicit state aid the iPhone maker could face a fine of several billion Euros.
In a Drum poll earlier this year 83 per cent of London media buyers agreed that Google should pay more tax in the UK.