LONDON: Due to UK’s national election in May, big tech companies are finding themselves in the crossfire. An article in the Sunday Times lays out more details around UK Chancellor George Osborne’s proposal for a 25% “Google Tax”. The tax will be included in the UK Budget, due to be published later this month.
It’s unclear how many millions of pounds would be at stake here, or if there will be any attempt to collect taxes retroactively. When Osborne first alluded in December 2014 to his plans for a “Google Tax”, it was estimated that the UK could claw back as much as £1 billion ($1.5 billion) over five years.
The “Google Tax” of 25% will be higher than the usual 20% corporate tax levied in the UK, and it is expected to be applied only to companies whose annual revenues are more than £250 million ($376 million).
Notably, the Sunday Times writes that the tax will be coupled with much stricter corporate reporting requirements. Among them, companies like Amazon, Facebook and Google will be required disclose revenue and profit figures on a country-by-country basis.
This, in turn, would give tax authorities a clearer picture of just how much money a company earns in each market. Matching that up with other metrics like how many people are employed in each country in turn will help paint a clearer picture of a company’s operations in the country.
As the Sunday Times describes it, despite having thousands of employees and business operations in a country like the UK, the tech giants are not deemed to have a ‘permanent establishment’ in Britain. Through this legal accounting ploy, Facebook and Google channel the overwhelming majority of their revenues to their international headquarters in Dublin. The Irish companies then send licensing fees to Caribbean havens, which do not charge corporation tax. Osborne’s diverted profits tax aims to rein in the use of these opaque arrangements.”
