Under a deal which will keep it clear of the diverted profits tax, Google has agreed to pay tax on an element of future revenues from UK advertisers as well as on profits. However, the company will be able to keep taxes low by continuing to book advertising deals with UK clients through its international headquarters in Ireland.
Tax expert Richard Murphy, who was a prominent backer of Jeremy Corbyn’s leadership campaign, estimates that Google should be paying £200m a year in corporation tax, based on the firm’s declared profit margins and sales 2014 sales in Britain of £4.5bn.
“I can’t understand why the deal with Google is so cheap. I’m worried if they are going to repeat that with other companies. What was agreed is far removed from what is required for sustainable corporation tax in future,” Murphy said. “They are undermining the new international tax consensus which David Cameron and George Osborne have worked for, supposedly.”
The important point there is that this deal leaves Google free of that diverted profits tax. And so all Ritchie’s a’screamin’ an’ a’wailin’ has managed to recoup £13 million a year. Fun but not exactly important, is it?
Or, as we might actually put it, now that Google has been investigated for tax avoidance we find that, except at the trivial margin, it hasn’t been doing so. Thus Ritchie’s numbers for tax avoidance look to be out by an order of magnitude.