Google has come under fire from politicians after it was revealed the company doesn't pay a penny of corporation tax in the UK - despite earning 1.6 billion from advertising in this country.
The search giant diverts all of its British revenue to its European headquarters in Ireland. This means it only pays corporation tax at a rate of 10 per cent to 25 per cent, instead of the UK's more punitive rate of between 28 per cent and 30 per cent. Consequently, the UK Treasury has missed out on around 450 million of revenue.
Google UK Limited is actually run at a substantial loss, according to the company's accounts. The company has bases in London and Manchester, but their principal activity is officially listed as "the provision of marketing services to Google Ireland Limited and the provision of research and development services to [US parent company] Google Inc," according to a report in The Guardian.
Consequently, the UK arm of the company posted a pre-tax loss of 26m on turnover of only 150m.
Politicians have reacted angrily to Google's tax tactics. "Avoidance like this is hard to stomach at the best of times," Vince Cable, the deputy leader of the Liberal Democrats told The Sunday Times, which broke the story. "But when the country is in recession and everyone is feeling the pain, it really sticks in the throat it means higher taxes for the rest of us."
"Google's reputation will be severely damaged if it continues to behave in this way. It is ducking its social responsibility," Cable added.
Labour MP Austin Mitchell echoed Cable's condemnation, claiming that "Google isn't just sucking money out of local newspapers and other people who rely on advertising for a living it's also draining money out of the public finances."
Google claims it's doing nothing untoward. "Google makes a big investment in the UK, with over 800 employees, and we make a substantial contribution to local and national taxation," the company told The Sunday Times. "But the fact is that our European headquarters is in Dublin. We comply fully with the tax laws in all the countries in which we operate."
