In common with most multinational companies, Google arranges its affairs such that it pays as little corporation tax as possible.
According to US stock market filings Google made $18bn sales in the UK between 2006 and 2011, but paid only around $15m corporation tax (tax on company profits) in that period.
How does Google manage that?
Google has an unusual way of doing business.
The company employs staff in the UK who negotiate sales with companies operating in the UK.
These companies pay cash into a UK bank account.
But the deals are technically booked through an office across the Irish Sea in Dublin, Ireland.
Google pays 12.5% corporation tax in Dublin as opposed to 23% in the UK, and further reduces that liability by making very large royalty payments to a company based in Bermuda (where taxes are even lower).
The UK also does not collect the 20% VAT (Sales tax)on sales diverted to Dublin.
Google says that it does pay the corporation tax which is due, and that it pays local taxes such as National Insurance for employees.
A government committee has been looking into this and the Chairman Margaret Hodge called the company evil, devious and unethical.
Today an ex-employee, Barney Jones, said that Google operates an “immoral tax avoidance scheme”. He claims that his job was find advertisers, to close the deals and to get clients to sign a document to say that they were committed to spending money on advertising on Google in the UK. He says that is “operating in the UK” and that taxes should have been paid on this income, irrespective of where the invoices were prepared.
What do you think?
Do you think Margaret Hodge and Barney Jones are right? Is what Google is doing immoral?
Or do you think Google is behaving responsibly by maximising profits for its shareholders?