European governments for some time have been trying to collect more tax revenue from US based tech companies. A so-called “diverted profits” tax, popularly known as the “Google tax,” is being included in the forthcoming budget proposal in the UK.
It would levy a 25 percent tax (rather than the customary 20 percent) and require tech companies to report revenues on a per-country basis. Google made $45 billion in global revenue last year, international revenues were just under $26 billion.
Google reported $6.5 billion in UK based revenue last year. It paid only a small fraction of that in taxes; 2013 UK tax payments were roughly $30 million against roughly $5.6 billion in revenue.
British politicians have been agitating for Google and other US-based companies to pay its “fair share” in Britain. Google, Apple, Facebook and Amazon have been accused of skirting European taxation by channeling revenues through Ireland or Luxembourg where corporate tax rates have been lower. The UK proposal would reach beyond tech companies and broadly apply to multi-nationals like Starbucks as well.
According to The Sunday Times, “the new measures will hit companies with a penal tax rate if they are judged to have shifted cash overseas with a view to sidestepping HM Revenue & Customs.”
The new taxation rules are being opposed by the companies themselves and a US lobbying group called the National Foreign Trade Council. The government aims to implement it but it’s still possible the new rules will not go into effect.
The “Google Tax” was first proposed last fall by Chancellor of the Exchequer George Osbourne is expected to raise £360 million ($544 million) per year from Google and others.
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