UK prepares 25% 'Google Tax' to stop tech giants' tax avoidance

By Scorpus
Mar 9, 2015
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  1. One issue that many governments face around the world is tax avoidance by major tech companies. Clever accounting methods by these companies sees profits from local operations diverted offshore, which keeps their tax bills low, understandably annoying governments that lose out on tax revenue. 

    The United Kingdom is one such nation sick of losing tax revenue to diverted profits, and their solution is to implement a 'Google Tax'. This tax, which is currently just a proposal set to be introduced with the UK budget later this month, will capture 25% of major companies' profits from UK operations, so long as the company accrues more than £250 million in annual revenue.

    More importantly, the Google Tax will be accompanied by far stricter corporate reporting rules, which would require major companies to disclose their revenue and profit from operations in each country they operate in. This would result in the UK government knowing exactly how much a major company such as Google makes in the country before they shuffle profits away to tax havens.

    This new tax is specifically targeted at major tech companies such as Google, who operate in the UK, employ thousands of people, generate billions in revenue, yet don't have a "permanent establishment" which then allows them to divert revenues overseas. Although this tax avoidance is technically legal, it draws strong criticism from many who deem it unfair.

    While Google isn't the only major company being targeted - Facebook, Amazon and Apple have been scrutinized for avoiding tax as well - their financial reports paint a damning picture. In 2013, Google reported £3.6 billion in revenue from local operations in the UK, but only paid £20 million in tax. This new tax, combined with stricter reporting rules, will cut down on this level of tax avoidance.

    Unsurprisingly, these companies are warning the UK government not to implement the Google Tax, saying it will result in less investment in the UK. 

    Permalink to story.

  2. seefizzle

    seefizzle TS Addict Posts: 269   +138

    At what point is tax avoidance regarded as criminal, or maybe immoral?
  3. yRaz

    yRaz TS Evangelist Posts: 1,826   +877

    When I pay a larger percentage of my smaller income because "3.58 billion isn't enough money".

    Well, that's how most people see it. I see it as this billion dollar corporations draining many country's economies of money and hording it somewhere else. And let's keep in mind that these practices are only legal because of billions of dollars lobbied to these countries governments. I wouldn't say that paying less in taxes is immoral, but buying off the governments of different countries so you can make more money certainly is.
  4. nazartp

    nazartp TS Enthusiast Posts: 178   +12

    "employ thousands of people, generate billions in revenue, yet don't have a "permanent establishment" which then allows them to divert revenues overseas."

    Incorrect statement. Without going into details the profit structure is set up in a way that the intellectual property is owned in a low tax jurisdiction, while the majority of functions are performed in places like UK, US, etc.
  5. Axle Greese

    Axle Greese TS Enthusiast Posts: 30

    The UK government has always had a voracious appetite for taxing and spending and bureaucracy and is after *additional* revenue. Siphoning off tech company's earnings will NOT lessen the tax burden on the people who work for a living. Those people have my condolences.
  6. Evernessince

    Evernessince TS Evangelist Posts: 1,100   +526

    You'd be surprised how dumb the internet can make people. I once had a guy argue that because they weren't breaking any laws, they were fine. In contrast to that, he said that what aereo did was wrong because the court said so. Long story short, there are some blind ding-dongs out there (this was on this website by the way).

    Tax avoidance has always been immoral. Many of these companies are receiving the benefits from the countries they are in but not paying taxes to receive them. Hell, the IRS will pursue the average citizen for tax avoidance and interest. Why do companies continue to be above the law?
  7. Win7Dev

    Win7Dev TS Evangelist Posts: 537   +152

    At what point is it absolutely stupid for a businessman to pay more in taxes though when they can otherwise avoid doing so 100% legally? Businesses are run to make profits, not to act as charities to governments and poor people. There is no argument as to why a business should pay more if they don't have to. It doesn't benefit them to make less money.
  8. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 8,430   +2,822

    There is the problem right there. If they employ thousands, they have a permanent establishment. There is nothing virtual about that, but yet on the other end of the stick we will argue Bitcoins are real. What is so hard to understand that any establishment that operates year after year, should be considered permanent. If the establishment is not deemed temporary, it is therefor by nature a permanent establishment. What we need is guidelines set forth to deem any establishment permanent if it surpasses a set length of time (set a length of time for a temporary establishment). I'm willing to bet politicians (how else would they get bought out) don't want to, or else it would have been done already.
  9. Evernessince

    Evernessince TS Evangelist Posts: 1,100   +526

    Yeah, you keep touting that tired line of businesses exist to make money. Moral and socially obligations be dammed! It's the peasants that prop us up and now those who we trot upon.

    How many business owners do you know start a business to make money? There a few and usually they concentrate on profits and make sub-par products (they don't really care anyways). Last time I checked, many of the most successful businesses start from a passion (Microsoft, apple, IBM, pretty much every game studio, ect.).

    Since when did you convince yourself that avoiding taxes and making money is the moral high ground?
    cartera likes this.
  10. cartera

    cartera TS Addict Posts: 276   +67

    At what point will people realise in the country involved taxes pay for Police, NHS, Fire Brigade & benefits + many more things. All of these things are a handy safety net for those who have been attacked, injured, lost a job, even just travelled from one part of the country to another (infrastructure - who knew taxes paid for it huh).

    You make a hell of a lot of money from a country and its people you should contribute to the country's prosperity and development.
    Evernessince likes this.
  11. Hexic

    Hexic TS Addict Posts: 271   +127

    I'm not sure what world you may living in, but the - entire- purpose of starting a business is to make money.

    Supplemental reasons may very well be solving a particular problem, helping individuals or groups of people, supporting a cause, or anything you can imagine.

    You must be realistic.. This concept is Econ 101.
  12. Axle Greese

    Axle Greese TS Enthusiast Posts: 30

    Morally is vital but it has nothing to do with what some call "social obligations" which is being made to feel you owe every sponge and their children a living and see your money thrown down government money holes to keep the public sector large and prosperous. Screw that.
  13. Bigger profits, bigger corruption.

    Apple won't stop selling iPhones in the UK just because they are forced to pay their fair share of tax.
  14. cartera

    cartera TS Addict Posts: 276   +67

    become an MP and fix it then?

    I understand your point butsurely the bottom feeders are not dissimilar to the handful of massive corporations avoiding paying there fair share? They are at the same end of the spectrum in my opinion.
  15. Evernessince

    Evernessince TS Evangelist Posts: 1,100   +526

    That's ironic because I know plenty of successful business run by men and women who never even touched a business course. People seem to forget that business follows the ideas, not the other way around.
  16. Evernessince

    Evernessince TS Evangelist Posts: 1,100   +526

    The idea of social obligations I was referring to is giving back what you take. The government does with the money what the people will it to. If there's a great number of leeches attached to the government, get rid of they by voting. To me it appears that the average american likes the do nothing congress very much, they keep voting in more guys who only walk party lines and constantly bicker with democrats and the president. If they can't have their way, they go and whine to the press. That's in between the massive "contributions" they receive from top lobbying groups during their terms and when running.

    I guess that whole process kinda comes full circle for companies doesn't it? If you can't legally do something, just throw some money at a politician.
  17. Emexrulsier

    Emexrulsier TS Guru Posts: 503   +42

    As if the UK believe they have the power to force a non UK company to divulge their financial status of their business in other non UK countries. Sure they can make it some terms and conditions for companies wanting to trade in the UK to divulge this information but some companies are just gunna say bollox you're loss I simply wont trade in your country. This is all down the government struggling to pay of the deficit so they are trying to hit some of the larger corporations and fleece them for some large annual cash sums
  18. Hexic

    Hexic TS Addict Posts: 271   +127

    Whether you've taken business courses or not, isn't the point. Business follows the ideas, of course - you have to have an idea that you want to achieve in order to proceed in a particular direction when starting a business.

    It doesn't change the fundamental concept of "Why do you start a business? To make money." It's how the world works.. It's a very, very easy concept...
  19. Evernessince

    Evernessince TS Evangelist Posts: 1,100   +526

    You shouldn't project your own ideals unto others. You may only start a business to make money but that's far from the fact of the real world. Most successful businesses are started from a passion. Steve Jobs made apple because it was something he loved doing, not to chase some stupid fiat paper.

    Your "Why do you start a business? To make money." logic is inherently flawed because you are casting business in your own subjective, absolute mold.
  20. Brewskie

    Brewskie TS Rookie Posts: 28   +6

    Instead of complaining about their own punitive taxes, the public in Britain want to go after companies who are only trying to keep what they legally earn.

    Sounds like the "Progressives" in America
    Axle Greese likes this.
  21. Axle Greese

    Axle Greese TS Enthusiast Posts: 30

    Except for Google no other tech company has been named. Nobody has claimed they've leeched anything off the government let alone taken more than the government has taken off them. They generate lots of wealth, and by that fact alone there are creatures among us who assume the government has a divine right to pocket a chunk of it. Some people's philosophy amounts to unthinking crap on stilts but anyway... With regard to the U.S, there was once a clear separation between the public sector and private sector. Clinton's Third Way has created a lot of overlap. That's where much of the political pull and dispensing of donations for favours comes from. I loathe it to bits. The U.S. has always been a mixed economy but it's much more mixed now after Clinton fondled it. And you can't vote something like that away as it's pretty well entrenched, including the human leech. One gives politicians large donations, the other gives them his vote. It's poison to any society

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