6 ms·

Google agrees to pay £130m in back taxes after an audit by UK tax authorities

99 points by credo 11y ago

thebouv 11y ago
So pretty much nothing to them?
- IBM 11y ago
  And they'll be paying the appropriate UK taxes going forward.
  - bitmapbrother 11y ago
    Don't worry. So will every other company.
Isn0gud 11y ago
The term "agrees to" really bugs me...
- colechristensen 11y ago
  But it's likely very accurate. The article doesn't seem to say they were compelled to do anything by legal force instead they worked with the regulators and came to a mutual understanding rather than forcing it to go through a long, complex, and uncertain legal process. Lots of places are increasingly cracking down on the legal and ethical grey area of tax avoidance/minimization. The outcomes (like this one) are long coming but still positive. Lots of populist folks would like to see heads roll, but what's actually happening is probably better because it balances the interests of the people, the corporations, and the regulators. They're doing good things in a realistic way.
  - Isn0gud 11y ago
    Yeah, I understand your point, but I think something is really wrong when a company is agreeing to pay taxes. Of course you could throw out a sacrificial lamb but that wouldn't change a thing. The way taxes are charged really has to be change for these big companies.
Paul_S 11y ago
This usually works like this: company doesn't pay tax, HMRC has to spend lots of money to prosecute them, company settles to pay a fraction of the tax. Doesn't seem fair to me but HMRC already spent lots of money and to get them to pay it all up they would have to spend even more so in the end they would get less making them willing to compromise. Doesn't this crate an incentive for companies not to pay tax? Worst case scenario is you have to pay a fraction of that tax later.
- MLR 11y ago
  I think this is a change from that honestly, if I'm remembering correctly UK tax law was changed so that companies deemed to be going against the spirit of the law after an audit could be forced to pay the appropriate amount of tax - I imagine this is a consequence of that.
  - peteretep 11y ago
    > against the spirit of the law Those are dangerous words...
    - MLR 11y ago
      Well that was my memory of it, how they put it can be read here, section B2. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/399270/2__HMRC_GAAR_Guidance_Parts_A-C_with_effect_from_30_January_2015_AD_V6.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...
    - umanwizard 11y ago
      Why? That's a core part of the definition of what it means to have a common-law legal system
  - Malarkey73 11y ago
    This is an odd settlement though as it sort of ignores the law. Corporation tax is based on profits - which Google offshore to avoid UK tax (and many other places). Here they have said to them we see what you're doing - make nice. So they have drawn up a special formula (secret too) that pays a percentage of UK revenues - just for Google! And of course whilst secret it leaves Google open to manipulate their UK sales too - as whilst they clam some Billions in their UK accounts in their US accounts they claim many Billions more. With their now secret formula the UK public will never be able to pin them down when questioning what they are paying.
dingdingdang 11y ago
Why can a super successful company like Google not take open pride in doing a bit of civic duty? The fact that they have to be cajoled into doing what is pretty much standard fare to make society function does NOT enamour me as a customer towards their long term well being in any way whatsoever - quite the opposite: I would happily jump ship if a transparent civilly minded alternative emerged (mostly thinking gmail/google-search here).
- skybrian 11y ago
  What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? Probably you'd wonder why they have that job if they're not good at it. For this sort of professional, their customers come first.
  - gozur88 11y ago
    And, as a shareholder, what would you think of a CEO who didn't hire a tax accountant to make sure you paid as little tax as possible? It's not like shareholders don't have to pay taxes on capital gains and dividends.
  - enraged_camel 11y ago
    >>What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? It wouldn't be up to the tax accountant to make this type of decision. It would be the CEO going to them and saying, "hey guys, I know you have tried to minimize taxes in your past jobs, but we do things a bit differently here..." re: downvotes. You gotta understand that tax accountants' job is more than just to minimize taxes.
- flthrieu 11y ago
  That's cute. Why don't you set a good example for Google by sending the government double what you owe in income taxes this year? Just call it a gift, because you couldn't correctly call it a "civic duty." In fact, you're in a better position than Google to do so. Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes if they decided to start giving away extra money (shareholders' money) to the government. By the way, in 2010 Google paid $2.3 billion federal tax on income of $10.8 billion.
nickpp 11y ago
Not sure I got this right, but they're saying the rules changed under them and the new rules increased the taxes?!
- cpncrunch 11y ago
  I think that's what google is saying, but HMRC is saying that google was misinterpreting the rules and/or evading tax. From what I can see, it's down to the interpretation of the rules, and google's interpretation was, perhaps, somewhat creative. Either way, it makes sense for them to pay up. They could challenge HMRC, but even if they won the UK government could just change the law so they're going to have to pay the tax no matter what. This is a win for the working people in the UK who don't have the option of devising an elaborate tax shield. Now google is finally paying their fair share of taxes.
- madaxe_again 11y ago
  Yes, but when income tax goes up, just you try continuing to pay the old amount, using "ah but you changed the rules" as your reason to not pay the new amount.
bootload 11y ago
"Despite the UK being one of Google's biggest markets, it paid £20.4m in taxes in 2013." Squeeze the SOBs. This was the response from Google Australia boss, Maile Carnegie about tax: "called before the Senate tax inquiry to answer accusations that the company was dodging tax here after revelations its Australian arm paid $7.1 million in tax in 2013 on a profit of $46.5 million and revenue of $357.7 million." [0] and then: "criticism of the company’s tax bill was understandable, but failed to recognise the level of investment the company made in the local economy. She pointed to the presence of 450 Google engineers in Australia, who she said conducted work that could easily be done more cheaply elsewhere." [1] [0] "Google Australia boss Maile Carnegie: People, get ready" ~ http://www.theaustralian.com.au/life/weekend-australian-magazine/google-australia-boss-maile-carnegie-people-get-ready/news-story/c7f432b8ad242da640d9d7b37cd982f3 http://www.theaustralian.com.au/life/weekend-australian-maga... [1] "Google boss calls for simpler, transparent global tax system" ~ http://www.afr.com/technology/technology-companies/google/google-boss-calls-for-simpler-transparent-global-tax-system-20140611-ix2rk http://www.afr.com/technology/technology-companies/google/go...
- outside1234 11y ago
  They paid taxes but they were in Ireland likely. This is something you agreed to as legal when the UK signed one of the EU treaties. If you disagree with that (and I totally understand why you would), that is the root cause, and that is the treaty (aka law) that needs to be revoked. Alternatively, the UK could choose to have a lower tax rate than Ireland, in which case all of the EU tax bills would flow there instead of Ireland for multinationals. That said, you can see how that would end up being a race for the bottom. Its not completely that simple but it's pretty much that simple.
  - olau 11y ago
    What are you talking about? These treaties exist to give a fair treatment to companies and individuals that do not cheat on the scale.
  - yarper 11y ago
    That's why Europe needs to commit to either "the ever greater union" (at least in a fiscal sense) or kind of bin it off altogether and engage in the race to the bottom like you say
revelation 11y ago
So from £30m to >£130m? How do you do that without tax evasion? Seems like the company officials need to be prosecuted.
- Guyag 11y ago
  Creative accounting which follows the law to the letter. They're not doing anything illegal (you'd imagine at least - I doubt it would be an easy task to decipher exactly what they're doing to determine legality) but certainly immoral.
  - SEMW 11y ago
    > They're not doing anything illegal (you'd imagine at least - I doubt it would be an easy task to decipher exactly what they're doing to determine legality) Fortunately (if a bit paradoxically), in the UK, for taxes, following the letter but not the spirit of the law is against the law. http://www.legislation.gov.uk/ukpga/2013/29/part/5/enacted http://www.legislation.gov.uk/ukpga/2013/29/part/5/enacted
    - JoshTriplett 11y ago
      > Fortunately (if a bit paradoxically), in the UK, for taxes, following the letter but not the spirit of the law is against the law. Or, in other words, you can't actually follow what the law says, you have to anticipate what the government would prefer to be paid and pay that, or you might get prosecuted. That doesn't seem "fortunate" to me at all. How can anyone reasonably follow the law if the government can't even manage to write it down? Personally, I'd favor the idea of a tax code that fits on a single page of normal-sized text, but everyone wants the myriad exceptions they've bought and paid for. And now it's not even sufficient to understand and follow the tax code as written? If people take advantage of "loopholes" written into the law, and the government doesn't like that, then they should fix their tax code to say what they mean.
      - MAGZine 11y ago
        Law: You must not do A. You may do b-zB-Z. You: I'm doing a. Law doesn't say I can't. Just a, not A. I don't see an issue with a fine. "Creative accounting" is a nice title for "finding loopholes." Loopholes, by their very nature, are UNINTENTIONAL gaps in the law. Politicans draft the law. Tax firms merely collect on it. So you're asking politicians to foresee all possible loopholes. You might as well as a programmer to write bug-free software, except the programmer doesn't have any say or get to ask any questions about the implementation.
warrenmiller 11y ago
Genuine question: what would happen if my small UK company didn't pay its corporation tax?
- pbowyer 11y ago
  You'd be fined, sat on with a ton of bricks and spend thousands on accountants' fees as they decided to 'investigate' you.
- simonswords82 11y ago
  HMRC would launch an investigation in to your business. They would devote enough resources to make sure that you and your accountant were sufficiently overwhelmed. Most business owners can't afford the time and £'s it takes to defend such an attack, and will most likely pony up the cash. Ninja edit: Most accountants in the UK offer up an insurance that covers your accountants fees if you are investigated by HMRC. It's about £120 per year for the insurance and in my opinion a very sensible form of protection. HMRC don't always need a reason to investigate, some "high risk" businesses are selected randomly.
  - peteretep 11y ago
    I was about to reply after your first comment that this is why small business accountants are always pushing their insurance on you, but your ninja edit got there first.
  - seanwilson 11y ago
    > They would devote enough resources to make sure that you and your accountant were sufficiently overwhelmed. Is this strategy not extortion? For freelance earnings, I've been offered similar accountancy insurance as well. I was told that if I was investigated (not because I'd done anything wrong, just from random selection) it could cost several thousand to pay an accountant to do the work an audit would require. This always struck me as a broken system.
- peteretep 11y ago
  Didn't pay, or ran its affairs so as not to perhaps not be liable? Big difference there...
Neil44 11y ago
It should be pointed out that this £130M is intended to cover the last ten years.
- simonswords82 11y ago
  Really? I'm not saying I don't believe you but I'd love to see a source for that. I thought 130M for one financial year was a drop in the ocean but 10 years is fucking outrageous.
  - drothlis 11y ago
    Second paragraph of the bbc article.
yarper 11y ago
The absolute worst thing about this is that large corporations get a solid tax advantage in the UK compared to small businesses without the money or swing with HMRC to compete.
lukasm 11y ago
I'd love to see an experiment with 1% revenue tax.

99 points by credo 11y ago

thebouv 11y ago

So pretty much nothing to them?

IBM 11y ago
And they'll be paying the appropriate UK taxes going forward.
- bitmapbrother 11y ago
  Don't worry. So will every other company.

Isn0gud 11y ago

The term "agrees to" really bugs me...

colechristensen 11y ago
But it's likely very accurate. The article doesn't seem to say they were compelled to do anything by legal force instead they worked with the regulators and came to a mutual understanding rather than forcing it to go through a long, complex, and uncertain legal process. Lots of places are increasingly cracking down on the legal and ethical grey area of tax avoidance/minimization. The outcomes (like this one) are long coming but still positive. Lots of populist folks would like to see heads roll, but what's actually happening is probably better because it balances the interests of the people, the corporations, and the regulators. They're doing good things in a realistic way.
- Isn0gud 11y ago
  Yeah, I understand your point, but I think something is really wrong when a company is agreeing to pay taxes. Of course you could throw out a sacrificial lamb but that wouldn't change a thing. The way taxes are charged really has to be change for these big companies.

Paul_S 11y ago

This usually works like this: company doesn't pay tax, HMRC has to spend lots of money to prosecute them, company settles to pay a fraction of the tax. Doesn't seem fair to me but HMRC already spent lots of money and to get them to pay it all up they would have to spend even more so in the end they would get less making them willing to compromise. Doesn't this crate an incentive for companies not to pay tax? Worst case scenario is you have to pay a fraction of that tax later.

MLR 11y ago
I think this is a change from that honestly, if I'm remembering correctly UK tax law was changed so that companies deemed to be going against the spirit of the law after an audit could be forced to pay the appropriate amount of tax - I imagine this is a consequence of that.
- peteretep 11y ago
  > against the spirit of the law Those are dangerous words...
  - MLR 11y ago
    Well that was my memory of it, how they put it can be read here, section B2. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/399270/2__HMRC_GAAR_Guidance_Parts_A-C_with_effect_from_30_January_2015_AD_V6.pdf https://www.gov.uk/government/uploads/system/uploads/attachm...
  - umanwizard 11y ago
    Why? That's a core part of the definition of what it means to have a common-law legal system
- Malarkey73 11y ago
  This is an odd settlement though as it sort of ignores the law. Corporation tax is based on profits - which Google offshore to avoid UK tax (and many other places). Here they have said to them we see what you're doing - make nice. So they have drawn up a special formula (secret too) that pays a percentage of UK revenues - just for Google! And of course whilst secret it leaves Google open to manipulate their UK sales too - as whilst they clam some Billions in their UK accounts in their US accounts they claim many Billions more. With their now secret formula the UK public will never be able to pin them down when questioning what they are paying.

dingdingdang 11y ago

Why can a super successful company like Google not take open pride in doing a bit of civic duty? The fact that they have to be cajoled into doing what is pretty much standard fare to make society function does NOT enamour me as a customer towards their long term well being in any way whatsoever - quite the opposite: I would happily jump ship if a transparent civilly minded alternative emerged (mostly thinking gmail/google-search here).

skybrian 11y ago
What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? Probably you'd wonder why they have that job if they're not good at it. For this sort of professional, their customers come first.
- gozur88 11y ago
  And, as a shareholder, what would you think of a CEO who didn't hire a tax accountant to make sure you paid as little tax as possible? It's not like shareholders don't have to pay taxes on capital gains and dividends.
- enraged_camel 11y ago
  >>What would you think of a tax accountant who didn't try to save you money on your taxes (legally)? It wouldn't be up to the tax accountant to make this type of decision. It would be the CEO going to them and saying, "hey guys, I know you have tried to minimize taxes in your past jobs, but we do things a bit differently here..." re: downvotes. You gotta understand that tax accountants' job is more than just to minimize taxes.
flthrieu 11y ago
That's cute. Why don't you set a good example for Google by sending the government double what you owe in income taxes this year? Just call it a gift, because you couldn't correctly call it a "civic duty." In fact, you're in a better position than Google to do so. Any publicly-traded company like Google would be immediately sued for dereliction of duty to shareholders to minimizing taxes if they decided to start giving away extra money (shareholders' money) to the government. By the way, in 2010 Google paid $2.3 billion federal tax on income of $10.8 billion.

nickpp 11y ago

Not sure I got this right, but they're saying the rules changed under them and the new rules increased the taxes?!

cpncrunch 11y ago
I think that's what google is saying, but HMRC is saying that google was misinterpreting the rules and/or evading tax. From what I can see, it's down to the interpretation of the rules, and google's interpretation was, perhaps, somewhat creative. Either way, it makes sense for them to pay up. They could challenge HMRC, but even if they won the UK government could just change the law so they're going to have to pay the tax no matter what. This is a win for the working people in the UK who don't have the option of devising an elaborate tax shield. Now google is finally paying their fair share of taxes.
madaxe_again 11y ago
Yes, but when income tax goes up, just you try continuing to pay the old amount, using "ah but you changed the rules" as your reason to not pay the new amount.

bootload 11y ago

"Despite the UK being one of Google's biggest markets, it paid £20.4m in taxes in 2013." Squeeze the SOBs. This was the response from Google Australia boss, Maile Carnegie about tax: "called before the Senate tax inquiry to answer accusations that the company was dodging tax here after revelations its Australian arm paid $7.1 million in tax in 2013 on a profit of $46.5 million and revenue of $357.7 million." [0] and then: "criticism of the company’s tax bill was understandable, but failed to recognise the level of investment the company made in the local economy. She pointed to the presence of 450 Google engineers in Australia, who she said conducted work that could easily be done more cheaply elsewhere." [1] [0] "Google Australia boss Maile Carnegie: People, get ready" ~ http://www.theaustralian.com.au/life/weekend-australian-magazine/google-australia-boss-maile-carnegie-people-get-ready/news-story/c7f432b8ad242da640d9d7b37cd982f3 http://www.theaustralian.com.au/life/weekend-australian-maga... [1] "Google boss calls for simpler, transparent global tax system" ~ http://www.afr.com/technology/technology-companies/google/google-boss-calls-for-simpler-transparent-global-tax-system-20140611-ix2rk http://www.afr.com/technology/technology-companies/google/go...

outside1234 11y ago
They paid taxes but they were in Ireland likely. This is something you agreed to as legal when the UK signed one of the EU treaties. If you disagree with that (and I totally understand why you would), that is the root cause, and that is the treaty (aka law) that needs to be revoked. Alternatively, the UK could choose to have a lower tax rate than Ireland, in which case all of the EU tax bills would flow there instead of Ireland for multinationals. That said, you can see how that would end up being a race for the bottom. Its not completely that simple but it's pretty much that simple.
- olau 11y ago
  What are you talking about? These treaties exist to give a fair treatment to companies and individuals that do not cheat on the scale.
- yarper 11y ago
  That's why Europe needs to commit to either "the ever greater union" (at least in a fiscal sense) or kind of bin it off altogether and engage in the race to the bottom like you say

revelation 11y ago

So from £30m to >£130m? How do you do that without tax evasion? Seems like the company officials need to be prosecuted.

Guyag 11y ago
Creative accounting which follows the law to the letter. They're not doing anything illegal (you'd imagine at least - I doubt it would be an easy task to decipher exactly what they're doing to determine legality) but certainly immoral.
- SEMW 11y ago
  > They're not doing anything illegal (you'd imagine at least - I doubt it would be an easy task to decipher exactly what they're doing to determine legality) Fortunately (if a bit paradoxically), in the UK, for taxes, following the letter but not the spirit of the law is against the law. http://www.legislation.gov.uk/ukpga/2013/29/part/5/enacted http://www.legislation.gov.uk/ukpga/2013/29/part/5/enacted
  - JoshTriplett 11y ago
    > Fortunately (if a bit paradoxically), in the UK, for taxes, following the letter but not the spirit of the law is against the law. Or, in other words, you can't actually follow what the law says, you have to anticipate what the government would prefer to be paid and pay that, or you might get prosecuted. That doesn't seem "fortunate" to me at all. How can anyone reasonably follow the law if the government can't even manage to write it down? Personally, I'd favor the idea of a tax code that fits on a single page of normal-sized text, but everyone wants the myriad exceptions they've bought and paid for. And now it's not even sufficient to understand and follow the tax code as written? If people take advantage of "loopholes" written into the law, and the government doesn't like that, then they should fix their tax code to say what they mean.
    - MAGZine 11y ago
      Law: You must not do A. You may do b-zB-Z. You: I'm doing a. Law doesn't say I can't. Just a, not A. I don't see an issue with a fine. "Creative accounting" is a nice title for "finding loopholes." Loopholes, by their very nature, are UNINTENTIONAL gaps in the law. Politicans draft the law. Tax firms merely collect on it. So you're asking politicians to foresee all possible loopholes. You might as well as a programmer to write bug-free software, except the programmer doesn't have any say or get to ask any questions about the implementation.

warrenmiller 11y ago

Genuine question: what would happen if my small UK company didn't pay its corporation tax?

pbowyer 11y ago
You'd be fined, sat on with a ton of bricks and spend thousands on accountants' fees as they decided to 'investigate' you.
simonswords82 11y ago
HMRC would launch an investigation in to your business. They would devote enough resources to make sure that you and your accountant were sufficiently overwhelmed. Most business owners can't afford the time and £'s it takes to defend such an attack, and will most likely pony up the cash. Ninja edit: Most accountants in the UK offer up an insurance that covers your accountants fees if you are investigated by HMRC. It's about £120 per year for the insurance and in my opinion a very sensible form of protection. HMRC don't always need a reason to investigate, some "high risk" businesses are selected randomly.
- peteretep 11y ago
  I was about to reply after your first comment that this is why small business accountants are always pushing their insurance on you, but your ninja edit got there first.
- seanwilson 11y ago
  > They would devote enough resources to make sure that you and your accountant were sufficiently overwhelmed. Is this strategy not extortion? For freelance earnings, I've been offered similar accountancy insurance as well. I was told that if I was investigated (not because I'd done anything wrong, just from random selection) it could cost several thousand to pay an accountant to do the work an audit would require. This always struck me as a broken system.
peteretep 11y ago
Didn't pay, or ran its affairs so as not to perhaps not be liable? Big difference there...

Neil44 11y ago

It should be pointed out that this £130M is intended to cover the last ten years.

simonswords82 11y ago
Really? I'm not saying I don't believe you but I'd love to see a source for that. I thought 130M for one financial year was a drop in the ocean but 10 years is fucking outrageous.
- drothlis 11y ago
  Second paragraph of the bbc article.

yarper 11y ago

The absolute worst thing about this is that large corporations get a solid tax advantage in the UK compared to small businesses without the money or swing with HMRC to compete.

lukasm 11y ago

I'd love to see an experiment with 1% revenue tax.