TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, June 13, 2013

U.K. Lawmakers Slam Google Over ‘Contrived’ Tax Strategy

GoogleBloomberg:  U.K. Lawmakers Slam Google Over ‘Contrived’ Tax Strategy, by Robert Hutton & Jesse Drucker:

U.K. lawmakers attacked Google for defending a “highly contrived” strategy of booking advertising sales through Ireland to reduce its tax liability in Britain.

Parliament’s Public Accounts Committee said in a report [Tax Avoidance -- Google] published in London today that “public confidence” in the company “will only be restored when it establishes a corporate structure that ensures Google pays tax where it generates profit.”

The cross-party panel attacked British tax officials for not challenging Google, which it said paid $16 million in U.K. corporation tax between 2006 and 2011 on $18 billion of revenue. It urged leading accounting firms to “provide responsible advice” instead of focusing on “artificial structures which serve only to avoid tax.” U.K. Prime Minister David Cameron is pushing for a global agreement to overhaul company taxes at next week’s Group of Eight summit in Northern Ireland.

“Google brazenly argued before this committee that its tax arrangements in the U.K. are defensible and lawful,” the panel’s chairwoman, Margaret Hodge from the opposition Labour Party, said in an e-mailed statement. “It claimed that its advertising sales take place in Ireland, not in the U.K. The company’s highly contrived tax arrangement has no purpose other than to enable the company to avoid U.K. corporation tax.”

Even so, Hodge said she didn’t wish to “single out” Google, Amazon or Starbucks for criticism over their arrangement to minimize tax, as these are “illustrative of a much wider problem.”

Mountain View, California-based Google, the owner of the world’s most popular search engine, has avoided billions of dollars of income taxes around the world using a pair of shelter strategies known to lawyers as the “Double Irish” and “Dutch Sandwich,” as first reported by Bloomberg in October of 2010.

Google’s overall effective tax rate dropped to 19.4 percent last year. That compares with the average combined U.S. and state statutory rate of about 39 percent.

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