
Google agrees to pay £130m in back taxes after an audit by UK tax authorities - credo
http://www.bbc.com/news/business-35381130
======
bootload
_" 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...](http://www.theaustralian.com.au/life/weekend-australian-
magazine/google-australia-boss-maile-carnegie-people-get-ready/news-
story/c7f432b8ad242da640d9d7b37cd982f3)

[1] _" Google boss calls for simpler, transparent global tax system"_ ~
[http://www.afr.com/technology/technology-
companies/google/go...](http://www.afr.com/technology/technology-
companies/google/google-boss-calls-for-simpler-transparent-global-tax-
system-20140611-ix2rk)

~~~
outside1234
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.

~~~
Marazan
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.

~~~
jackweirdy
Why are European profits declared in Ireland untaxed? I don't understand that
part

~~~
madaxe_again
You don't declare profits. You just invoice or lend between international
elements of your group with timing such that at the end of
year/quarter/reporting period in each jurisdiction you've lost money or made
none.

A lot of money vanishes this way, a lot of money is invented this way.

~~~
jackweirdy
Ahh. That's smart. I guess that's related to the other strategy I've heard of
national HQs charging each other made-up sums in 'branding fees' to use the
company logo.

------
Paul_S
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.

~~~
MLR
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.

~~~
peteretep

        > against the spirit of the law
    

Those are dangerous words...

~~~
umanwizard
Why? That's a core part of the definition of what it means to have a common-
law legal system

------
dingdingdang
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).

~~~
flthrieu
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.

~~~
Doctor_Fegg
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.

~~~
pyvpx
ahh but you can't pay yourself entirely from dividends. at least, if you are
speaking form the standpoint of a US citizen/tax payer. there is a vague but
very well litigated stipulation that your wages must be "fair" and
commensurate with the work you do for the corporate entity you own. if not,
they'll just say your dividends were wages and you owe back taxes + interest
and penalties.

~~~
Doctor_Fegg
I'm in the UK (hence the reference to National Insurance). The (roughly)
equivalent legislation here is IR35 [1]. But it's not too onerous and there
are plenty of people who successfully pay fairly minimal tax while complying
with IR35.

[1] [https://www.gov.uk/guidance/ir35-find-out-if-it-
applies](https://www.gov.uk/guidance/ir35-find-out-if-it-applies)

------
Isn0gud
The term "agrees to" really bugs me...

~~~
colechristensen
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.

~~~
Isn0gud
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.

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

~~~
simonswords82
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.

~~~
seanwilson
> 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.

------
yarper
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.

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

~~~
Guyag
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.

~~~
SEMW
> 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](http://www.legislation.gov.uk/ukpga/2013/29/part/5/enacted)

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

Or, in other words, you can't actually follow what the law says, you have to
anticipate what the government would prefer to be paid and pay that, or you
might get prosecuted. That doesn't seem "fortunate" to me at all. How can
anyone reasonably follow the law if the government can't even manage to write
it down?

Personally, I'd favor the idea of a tax code that fits on a single page of
normal-sized text, but everyone wants the myriad exceptions they've bought and
paid for. And now it's not even sufficient to understand and follow the tax
code as written? If people take advantage of "loopholes" written into the law,
and the government doesn't like that, then they should _fix their tax code to
say what they mean_.

~~~
MAGZine
Law: You must not do A. You may do b-zB-Z.

You: I'm doing a. Law doesn't say I can't. Just a, not A.

I don't see an issue with a fine. "Creative accounting" is a nice title for
"finding loopholes." Loopholes, by their very nature, are UNINTENTIONAL gaps
in the law.

Politicans draft the law. Tax firms merely collect on it. So you're asking
politicians to foresee all possible loopholes. You might as well as a
programmer to write bug-free software, except the programmer doesn't have any
say or get to ask any questions about the implementation.

~~~
clort
> Loopholes, by their very nature, are UNINTENTIONAL gaps in the law.

Cynical me says "Unintentional? I don't think so.."

I have read that in the UK it has been fairly common for people to work for
the HMRC for a couple of years on secondment from large tax companies. They
help make the laws, and then they go away and help the tax avoiders.

[http://www.theguardian.com/business/2013/apr/26/accountancy-...](http://www.theguardian.com/business/2013/apr/26/accountancy-
firms-knowledge-treasury-avoid-tax)

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

~~~
cpncrunch
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.

------
thebouv
So pretty much nothing to them?

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

~~~
bitmapbrother
Don't worry. So will every other company.

------
Neil44
It should be pointed out that this £130M is intended to cover the last ten
years.

~~~
simonswords82
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
Second paragraph of the bbc article.

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

