Google and Corporation Tax

The Sunday Times investigates Google\’s tax arrangements in the UK. Well, actually, they have Richard Murphy read the accounts for them.

In a nutshell when you buy an ad from Google you do so from Google Ireland rather than Google UK. Thus tax on any profits ends up in the Irish Treasury rather than the UK one.

How awful.

Now, can we actually identify how this state of affairs has come to pass? Why, actually, yes we can. It\’s called the European Union.

Part of this Single Market thing is that any company registered anywhere in the EU can trade anywhere else in the EU. VAT is to be collected and paid at the rate of and to the government of where the sale takes place (the physical location of the customer).

Corporation tax is paid at the rate of and to the government of the country where the supplier is located (legally located and registered that is. The brass name plate.)

That\’s it. Google is simply doing not just what it is allowed to do under EU law but what it is positively encouraged to do under EU law. Take part in the Single Market.

Strangely, we don\’t see any of the federasts complaining about Google paying Eire instead of the UK pointing this out. That it\’s an inevitable consequence of the EU and the Single Market.

10 thoughts on “Google and Corporation Tax”

  1. If that’s correct, Tim, all small UK IT consultancies should close down and open again in the Republic. Although as a small business the rate would be 20-odd percent rather than 28, 12.5% is still a decent reduction.

  2. This issue is not EU derived. The manner in which Google has arranged its affairs is for them to have a non-UK co (could be anywhere, in Ireland, elsewhere in the EU, or further afield) which has a business suitably controlled from outside of the UK, together with a local, rep office company situated in the UK.

    Google is not trading in the UK but, rather, trading with the UK. So, the self proclaimed expert has unearthed nothing more than a classical cross border trading structure which has been widely adopted for decades.

    If the foreign co, in this case the Irish one, had a branch (strictly, a permanaent establishment) in the UK, the profits attributable thereto would, indeed, be liable to UK corporation tax, but to offer up the possibility as a ground of challenge is laughable. Google and its advisers would have made their arrangements bombproof in this regard, and HMRC would know as much.

  3. Anon,

    Mostly correct, except that in places in the world that are not part of the EU you’d have to pay withholdingtaxes and other evil stuff . So it is indeed EU induced

  4. As a CPA, I would love to see the “documents” given to Murphy that served as a the basis of his [shudder] “analysis”. Given Murphy’s frequent (and usually losing) battles with basic accounting and taxation concepts, I’d be less than completely surprised if the numbers he comes up with wouldn’t stand scrutiny. In any event, his analysis is the standard Murphy mix of fantasy and garabage: Evil multinationals are destroying the world and starving the children by not paying taxes that are not owed.

    Thank God you’ve got him. It’s bad enough here with Obama…

  5. News International must be in dire straits if the only tax consultant it knows who can get to the bottom of a plain vanilla tax avoidance structure (per Anon and Emil) is Richard Murphy. NI’s auditors/tax advisers or any half-way decent bookkeeper – let alone a member of the Institute of Chartered Accountants who (as Dennis the Peasant notes) appears to have some difficulty with basic accounting and tax principles – could have told the Sunday Times what it wanted to know ie that this is a non-story

  6. Umbongo-

    The fact that is a non-story is precisely why the Sunday Times went to Richard Murphy in the first place… A competent, responsible Chartered Accountant wouldn’t play the games Murphy does.

  7. I am shocked, shocked that any multinational company would choose to minimize their tax bills by parking their company in one part of an economic area which has the lowest taxes. It’s a EU federalist conspiracy against the UK, I tell ya!

    Its a good job that the United States doesn’t allow this, which is why the State of Maryland doesn’t have any offices outside of its borders despite its low corporate tax rates.

    Tim talks some complete euro-bollocks sometimes. Really.

    Tim adds: *Sigh*. Try Delaware, next state over…..

  8. *sigh* Yes, Delaware.

    Now tell us all that this is *different* from the situation of the Single Market in the EU.

    Bet you won’t.

    Tim adds: there is a difference. In Delaware the company still has to pay federal taxes even if there is no State corporate income tax.

    But as to the larger point, I wasn’t trying to say that this was part of some federast plot to do down the UK. Rather the opposite. This is an inevitable outcome of the way that the EU is organised. And there are people (like Murphy) who love the whole idea of a federal Europe…but who then complain bitterly about one of thee inevitable consequences.

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