The Diverted Profits Tax [DPT] announced in 2014 was designed to “deter and counteract” companies that “seek to avoid creating a UK permanent establishment” for purposes of avoiding UK corporation tax, and exploit tax arbitrage. The DPT tax rate is 25% and was deliberately set higher than corporation tax currently at 20%.
It was instantly dubbed the “Google Tax” as multinationals that book profits through another EU member state, and claim to have no UK presence, were clearly its target. Google argues it has “no fixed base” in the UK, despite employing thousands of staffers in London alone. However Google will now evade the DPT as part of the backroom deal.
Even the French got more [3 times more] out of Google than we did!
Google’s UK “business” is in Ireland, and the company pays the UK Exchequer only on profits from UK transactions. While our taxmen have failed to challenge the legality of this arrangement, the French have not and look set to extract far more from the search giant, the Times reports. The paper also says France will get three times as much as HMRC, even though its UK revenue and profits are greater. The French are pushing for €500m, while a concession that Google’s French operation is really French could be worth even more.
MPs have launched an inquiry into the UK’s tax system after the government was accused of allowing Google to pay too little in a £130m deal. The House of Commons Treasury committee announced that it would examine whether a radical shake up of corporation tax was needed, amid concern that Google has been allowed to get away with an effective rate of 3%. The inquiry is not directed at Google, but will investigate the UK’s shrinking corporate tax base more widely and whether HMRC is doing enough to tackle avoidance.
Cosy meetings do not do it justice, the government have got this wrong.