Online search firm Google has been in the spotlight recently due to its UK corporate tax scheme. The technology firm, which derives its income from online advertising, is alleged to have diverted billions of dollars of UK-based income through its Ireland office in order to avoid paying UK corporation taxes.
Google executive Eric Schmidt has claimed that the corporation’s tax operations are completely legal and ethical, and that the firm’s Ireland office is responsible for all of its operations in the UK. The former Google CEO also recommended that the UK tax code be simplified in order to make it easier for foreign technology firms to comply.
Google is by far the UK’s largest search engine, boasting a market share in excess of 90 percent. Its Adwords product has earned over £11 billion in revenue during the past five years. MPs and investigators have claimed that Google’s total tax payments on the £11.5 billion in turnover amount to little more than £10 million.
While the company’s tax arrangements are widely considered to be legal, MPs have called for the online search giant to pay more in UK taxes. Margaret Hodge, Chair of the Public Accounts Committee, claims that Google has an obligation to contribute to society through its tax payments.
The Labour MP also claimed that Google’s strong sense of morality in other areas – a corporate culture encapsulated in the firm’s ‘do no evil’ slogan – should be causing it to lead the way in paying corporate taxes. Ms. Hodge has called for HMRC to ‘staff up and toughen up’ in the way it approaches tax avoidance by foreign corporations.
Google is one of several foreign companies that pay very little in corporation tax. A wide range of international corporations, including coffee chain Starbucks and US-based computing firm Apple Inc., are also alleged to engage in tax avoidance.
