Google's UK division paid a tax rate of 2.6 percent on non-U.S. income because it designates its UK operation as primarily marketing with its Irish operation taking most of the profits, with these profits being channelled to a subsidiary in Bermuda.
Google has come under fire again for its UK tax arrangements after it was revealed that the firm paid £11.6 million in corporation tax on UK sales of £3.5 billion in 2012.
Google’s numbers are a bit confusing. While the firm revealed that it earned pre-tax profits of £37 million on a turnover of £506 million, its annual report doesn’t quite match. Instead, the report shows that the UK accounted for 11 percent of Google’s global revenues of $55 billion in 2012.
The company’s accounts show that the firm paid a tax rate of 2.6 percent on non-U.S. income in 2012, because it designates its UK operation as primarily marketing with its Irish operation taking most of the profits, with these profits being channelled to a subsidiary in Bermuda.
Richard Murphy of Tax Research UK said in a statement that by accounting for its operations in the UK that way Google might have reduced its tax bill by around £150 million last year.
Google has been quick to defend its UK tax arrangements, saying that it works the same way as other multinational companies and follows tax rules.
“Like most multinationals we pay the bulk of our £1.2 billion corporate tax bill where our business originated, in our case the U.S. That’s a rate of more than 19 percent, roughly what a UK based company must pay,” a Google spokesman said in a statement. “We are also a significant contributor to the UK economy, having created over 2,000 jobs.”
This isn’t the first time Google that has come under scrutiny regarding the amount of tax it pays in the UK. In August last year it came under fire for paying just £6 million in tax on revenues of £3.95bn.
As pointed out by Sky, “The Public Accounts Committee called for an HMRC investigation amid evidence from apparent whistleblowers while a Reuters investigation alleged that Google’s UK staff were responsible for sales rather than marketing as the company has always insisted.”
This article was originally published on the Inquirer.