Google Denies UK Tax Avoidance

by Jason Gorringe, Tax-News.com, London

22 April 2009

Internet search engine Google has rejected suggestions that it is not paying enough tax to the United Kingdom Treasury.

An investigation by accountant Richard Murphy for the Sunday Times newspaper claims to show that Google avoided paying GBP110m in UK tax in 2007 by channelling its revenues through an Irish subsidiary, which, according to the report, is owned by two entities established in the low tax jurisdiction of Bermuda.

Ireland, with its 12.5% corporate tax rate, has one of the best corporate tax regimes in the European Union, and has served as a platform for many large multinationals, particularly from the United States, for investment, to access the European markets. Ireland has also benefited from a steady stream of UK multinationals crossing the Irish Sea to set up headquarters in Dublin and take advantage of a tax regime which is seen as increasingly more competitive than the UK, where the corporate tax rate is 28%.

A spokesman for Google was quoted by the paper as saying that the company was not breaking any laws in the UK.

"Google complies fully with the tax requirements in all the countries in which we operate,” the spokesman said. “In the UK and elsewhere we make a very substantial contribution to local and national taxation.”

Google has reported total revenues of USD5.51bn for the quarter ended March 31, 2009, an increase of 6% compared to the first quarter of 2008 and a decrease of 3% compared to the fourth quarter of 2008. Net income for the first quarter of 2009 was USD1.42bn as compared to USD382m in the fourth quarter of 2008. Revenues from the United Kingdom totalled USD733m, representing 13% of revenue in the first quarter of 2009, compared to 15% in the first quarter of 2008 and 12% in the fourth quarter of 2008. The company reported an effective tax rate of 25% for the first quarter of 2009.

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