Google agrees to pay £130m in back taxes after an audit by UK tax authorities

http://www.bbc.com/news/business-35381130

by credo • 11 years ago

99 83 11 years ago

bbc.com

thebouv• 11 years ago

So pretty much nothing to them?

IBM• 11 years ago

And they'll be paying the appropriate UK taxes going forward.

bitmapbrother• 11 years ago

Don't worry. So will every other company.

Isn0gud2• 11 years ago

The term "agrees to" really bugs me...

colechristensen• 11 years ago

But it's likely very accurate. The article doesn't seem to say they were compelled to do anything by legal force instead they worked with the regulators and came to a mutual understanding rather than forcing it to go through a long, complex, and uncertain legal process.

Lots of places are increasingly cracking down on the legal and ethical grey area of tax avoidance/minimization. The outcomes (like this one) are long coming but still positive. Lots of populist folks would like to see heads roll, but what's actually happening is probably better because it balances the interests of the people, the corporations, and the regulators. They're doing good things in a realistic way.

Isn0gud2• 11 years ago

Yeah, I understand your point, but I think something is really wrong when a company is agreeing to pay taxes. Of course you could throw out a sacrificial lamb but that wouldn't change a thing. The way taxes are charged really has to be change for these big companies.

Paul_S• 11 years ago

This usually works like this: company doesn't pay tax, HMRC has to spend lots of money to prosecute them, company settles to pay a fraction of the tax. Doesn't seem fair to me but HMRC already spent lots of money and to get them to pay it all up they would have to spend even more so in the end they would get less making them willing to compromise.

Doesn't this crate an incentive for companies not to pay tax? Worst case scenario is you have to pay a fraction of that tax later.

MLR3• 11 years ago

I think this is a change from that honestly, if I'm remembering correctly UK tax law was changed so that companies deemed to be going against the spirit of the law after an audit could be forced to pay the appropriate amount of tax - I imagine this is a consequence of that.

peteretep3• 11 years ago

    > against the spirit of the law

Those are dangerous words...

Malarkey73• 11 years ago

This is an odd settlement though as it sort of ignores the law. Corporation tax is based on profits - which Google offshore to avoid UK tax (and many other places). Here they have said to them we see what you're doing - make nice. So they have drawn up a special formula (secret too) that pays a percentage of UK revenues - just for Google!

And of course whilst secret it leaves Google open to manipulate their UK sales too - as whilst they clam some Billions in their UK accounts in their US accounts they claim many Billions more.

With their now secret formula the UK public will never be able to pin them down when questioning what they are paying.

meowface• 11 years ago

It's shocking that there isn't an additional fine associated with it.

duncan_bayne• 11 years ago

It's a pretty common spelling mistake.

euyyn• 11 years ago

Isn't the case here that if you loose in court you have to pay the costs of the prosecution? It is in other cases.

With only putting that in place, the prosecutor wouldn't have an incentive to settle if they think they're right.

vixen99• 11 years ago

lose

madaxe_again5• 11 years ago

Don't forget that there's no punishment if you don't get caught, and if you do get caught, they'll ask you nicely to pay. If you don't, they'll forget it for you.

This set of rules only applies if you're a multinational. If you're you or me or a small or medium business, you'll go to prison for decades.

The world is totally fair.

switch007• 11 years ago

All we need to do is vote for a party that doesn't rub shoulders with heads of large companies...oh, we can't, they all do or would do.

dingdingdang• 11 years ago

Why can a super successful company like Google not take open pride in doing a bit of civic duty? The fact that they have to be cajoled into doing what is pretty much standard fare to make society function does NOT enamour me as a customer towards their long term well being in any way whatsoever - quite the opposite: I would happily jump ship if a transparent civilly minded alternative emerged (mostly thinking gmail/google-search here).

skybrian• 11 years ago

What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? Probably you'd wonder why they have that job if they're not good at it.

For this sort of professional, their customers come first.

gozur88• 11 years ago

And, as a shareholder, what would you think of a CEO who didn't hire a tax accountant to make sure you paid as little tax as possible?

It's not like shareholders don't have to pay taxes on capital gains and dividends.

enraged_camel• 11 years ago

>What would you think of a tax accountant who didn't try to save you money on your taxes (legally)?

It wouldn't be up to the tax accountant to make this type of decision. It would be the CEO going to them and saying, "hey guys, I know you have tried to minimize taxes in your past jobs, but we do things a bit differently here..."

re: downvotes. You gotta understand that tax accountants' job is more than just to minimize taxes.

flthrieu• 11 years ago

That's cute. Why don't you set a good example for Google by sending the government double what you owe in income taxes this year? Just call it a gift, because you couldn't correctly call it a "civic duty."

In fact, you're in a better position than Google to do so. Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes if they decided to start giving away extra money (shareholders' money) to the government.

By the way, in 2010 Google paid $2.3 billion federal tax on income of $10.8 billion.

lavezzi• 11 years ago

Why would he pay double his income taxes to set an example? No doubt he is already paying the government what he legally owes in that respect.

Google on the other hand aren't, are they?

jrockway• 11 years ago

Amazingly the government has a form that you can visit to make a gift to the US treasury, should you so please:

https://www.pay.gov/public/form/start/23779454

More amusing is that the FCC has started calling their fines "voluntary contributions to the US treasury".

SixSigma2• 11 years ago

Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes

There is no such duty in law. What they have to do is operate in accordance with the mission statement in the annual report and this is decided by the shareholders at the AGM.

If this said "we will pay maximum taxes in host countries where we operate" then shareholders could sue them for not doing that.

Doctor_Fegg3• 11 years ago

I do, pretty much. I'm a freelancer with my own limited company. I could pay myself pretty much entirely from dividends (=lower tax rate) rather than wages subject to income tax. Many people do. Instead, I pay myself a living wage with standard PAYE income tax/National Insurance, and only use the dividend if I've made a profit in the year.

Am I minimising my tax bill? No. But being a decent human being who contributes to a civilsed society is more important to me. Some of us actually believe in this "don't be evil" stuff.

sandworm1012• 11 years ago

Because they are a US publicly-traded company. By law, Google only exists for the benefit of its shareholders. Everything else Google does, good or evil, is simply a means to that end. That's how US corps work.

joosters• 11 years ago

But since its management own a large amount of google shares, this argument is not very convincing.

gaius• 11 years ago

Companies like Google should be taxed on revenue, if they hide their profits.

nickpp• 11 years ago

Not sure I got this right, but they're saying the rules changed under them and the new rules increased the taxes?!

cpncrunch• 11 years ago

I think that's what google is saying, but HMRC is saying that google was misinterpreting the rules and/or evading tax.

From what I can see, it's down to the interpretation of the rules, and google's interpretation was, perhaps, somewhat creative.

Either way, it makes sense for them to pay up. They could challenge HMRC, but even if they won the UK government could just change the law so they're going to have to pay the tax no matter what.

This is a win for the working people in the UK who don't have the option of devising an elaborate tax shield. Now google is finally paying their fair share of taxes.

madaxe_again5• 11 years ago

Yes, but when income tax goes up, just you try continuing to pay the old amount, using "ah but you changed the rules" as your reason to not pay the new amount.

bootload• 11 years ago

"Despite the UK being one of Google's biggest markets, it paid £20.4m in taxes in 2013."

Squeeze the SOBs. This was the response from Google Australia boss, Maile Carnegie about tax:

"called before the Senate tax inquiry to answer accusations that the company was dodging tax here after revelations its Australian arm paid $7.1 million in tax in 2013 on a profit of $46.5 million and revenue of $357.7 million." [0]

and then:

"criticism of the company’s tax bill was understandable, but failed to recognise the level of investment the company made in the local economy. She pointed to the presence of 450 Google engineers in Australia, who she said conducted work that could easily be done more cheaply elsewhere." [1]

[0] "Google Australia boss Maile Carnegie: People, get ready" ~ http://www.theaustralian.com.au/life/weekend-australian-maga...

[1] "Google boss calls for simpler, transparent global tax system" ~ http://www.afr.com/technology/technology-companies/google/go...

outside1234• 11 years ago

They paid taxes but they were in Ireland likely. This is something you agreed to as legal when the UK signed one of the EU treaties.

If you disagree with that (and I totally understand why you would), that is the root cause, and that is the treaty (aka law) that needs to be revoked.

Alternatively, the UK could choose to have a lower tax rate than Ireland, in which case all of the EU tax bills would flow there instead of Ireland for multinationals. That said, you can see how that would end up being a race for the bottom.

Its not completely that simple but it's pretty much that simple.

olau2• 11 years ago

What are you talking about? These treaties exist to give a fair treatment to companies and individuals that do not cheat on the scale.

yarper3• 11 years ago

That's why Europe needs to commit to either "the ever greater union" (at least in a fiscal sense) or kind of bin it off altogether and engage in the race to the bottom like you say

Marazan2• 11 years ago

They won't have paid taxes in Ireland. that's the point.

Like Apple google negotiated a deal that only Ireland profits are taxed in Ireland but European profits are declared there but are untaxed.

The UK could reduce it's tax rate to 1% and they'd still have their Irish tax structure as that gives them 0% across all of Europe.

It's hard to go lower than 0.

jlangenauer• 11 years ago

What disingenuous horseshit. Google hires engineers in Australia because the engineers it needs are in places like Australia, London and Silicon Valley. It's rot to present this as some sort of public benefit when it's pure self-interest on the part of Google.

Google in Australia has benefitted from the security and institutions of Australian society, thus it should contribute to them.

revelation• 11 years ago

So from £30m to >£130m? How do you do that without tax evasion? Seems like the company officials need to be prosecuted.

Guyag• 11 years ago

Creative accounting which follows the law to the letter. They're not doing anything illegal (you'd imagine at least - I doubt it would be an easy task to decipher exactly what they're doing to determine legality) but certainly immoral.

SEMW2• 11 years ago

They're not doing anything illegal (you'd imagine at least - I doubt it would be an easy task to decipher exactly what they're doing to determine legality)

Fortunately (if a bit paradoxically), in the UK, for taxes, following the letter but not the spirit of the law is against the law.

http://www.legislation.gov.uk/ukpga/2013/29/part/5/enacted

wbl• 11 years ago

Let's say I have a mortgage instead of renting, max out my 401(k) contributions every year, marry a nonworking spouse and file jointly. Compare to someone who does none of those things: the tax rate will be a lot less.

d4rti• 11 years ago

You don't get mortgage relief as an owner occupier in the UK. The tax treatment of rental properties is somewhat complex depending on structure. There is no filing jointly here either. You can get tax relief for pension contributions up to a limit.

These are all using the tax system as designed.

MLR3• 11 years ago

IIRC the tax law in the UK was changed to more of a spirit of the law idea a while ago and this is presumably the first signs of that being applied.

I think it's related to this, but this is just what I can remember from some articles in the paper.

https://www.gov.uk/government/publications/tax-avoidance-gen...

warrenmiller• 11 years ago

Genuine question: what would happen if my small UK company didn't pay its corporation tax?

pbowyer• 11 years ago

You'd be fined, sat on with a ton of bricks and spend thousands on accountants' fees as they decided to 'investigate' you.

simonswords822• 11 years ago

HMRC would launch an investigation in to your business. They would devote enough resources to make sure that you and your accountant were sufficiently overwhelmed. Most business owners can't afford the time and £'s it takes to defend such an attack, and will most likely pony up the cash.

Ninja edit: Most accountants in the UK offer up an insurance that covers your accountants fees if you are investigated by HMRC. It's about £120 per year for the insurance and in my opinion a very sensible form of protection. HMRC don't always need a reason to investigate, some "high risk" businesses are selected randomly.

peteretep3• 11 years ago

I was about to reply after your first comment that this is why small business accountants are always pushing their insurance on you, but your ninja edit got there first.

seanwilson• 11 years ago

They would devote enough resources to make sure that you and your accountant were sufficiently overwhelmed.

Is this strategy not extortion?

For freelance earnings, I've been offered similar accountancy insurance as well. I was told that if I was investigated (not because I'd done anything wrong, just from random selection) it could cost several thousand to pay an accountant to do the work an audit would require. This always struck me as a broken system.

tombrossman• 11 years ago

Asked and answered in this recent BBC iPlayer video, "The Town That Took On The Taxman": http://www.bbc.co.uk/iplayer/episode/b06ygl19/the-town-that-...

peteretep3• 11 years ago

Didn't pay, or ran its affairs so as not to perhaps not be liable? Big difference there...

Neil44• 11 years ago

It should be pointed out that this £130M is intended to cover the last ten years.

simonswords822• 11 years ago

Really? I'm not saying I don't believe you but I'd love to see a source for that. I thought 130M for one financial year was a drop in the ocean but 10 years is fucking outrageous.

drothlis• 11 years ago

Second paragraph of the bbc article.

yarper3• 11 years ago

The absolute worst thing about this is that large corporations get a solid tax advantage in the UK compared to small businesses without the money or swing with HMRC to compete.

lukasm• 11 years ago

I'd love to see an experiment with 1% revenue tax.

Google agrees to pay £130m in back taxes after an audit by UK tax authorities

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