Googling Google’s latest tax figures
Siobhan Kennedy
Washington Correspondent
Google has come under fire for its tax affairs in the past. As the company publishes its financial statement for 2012, Business Correspondent Siobhan Kennedy pores over the figures. Do they add up?
Google has revealed it paid nearly twice as much tax for 2012 as it did the year before – but let’s not celebrate just yet.
The taxman managed to extract £11.6m for 2012, up from just £6m in the prior year. At least some of the increase, it turns out, is due to HMRC cracking down on the way Google accounts for the share options it awards its staff as incentives (presumably to sell more).
They were previously treated as expenses which of course lowered sales and profits and hence taxes. But in a sign – perhaps, let’s not be too generous – that the taxman is finally getting wise to such arrangements, the company was forced instead to treat them as revenue which in turn increases profits and taxable income.
But the truth is this is small beer for a company the size of Google. The fact it’s had to pay £11m in taxes versus £6m is negligible in the grand scheme of things.
The fact it’s had to pay £11m in taxes versus £6m is negligible in the grand scheme of things.
Remember this is a company that generates more than £3bn in sales here in the UK. Yet the way it sets itself up – entirely legally – means that the bulk of those sales, while generated here, are technically “closed” in Dublin by Google employees who have had absolutely zip to do with their origination.
Dublin then pays a fee to Google Inc in the US for the right to use its name and trade under its brand, etc, while the rest, it seems, is squirreled away in Bermuda – that well known off-shore tax haven where corporates pay no tax at all.
That all happens under internationally recognised and approved rules known as transfer pricing. in the UK, HMRC is carrying out an investigation into Google’s use – some would say exploitation – of these rules. And internationally the OECD has acknowledged they leave the system open to abuse.
Its proposed changes are introduced to close loopholes and stop corporates like Google using the system to aggressively minimise its tax bill. But international consensus is required. Because for every American company that is forced to pay more tax here, there is a British company having to pay more somewhere else.
So vested interests need to be put aside for the sake of the greater good.
And if that all sounds a bit worthy and very complicated, it is because it is. Hence no-one is expecting the rules to change any time soon.