Google's tax troubles

22-04-2009

by Ralph Averbuch

Google may be avoiding big tax bills but is the damage to reputation worth it?

As part of the new world order, or 'new reality', both US President Barack Obama and UK Prime Minister Gordon Brown have made it clear that they intend to put pressure on tax havens such as Switzerland, Monaco, etcetera. Broadly speaking, this seems fair, especially where it involves private individuals trying to evade legitimate taxation in their home country. But all this noise about tax havens has given the media a new bête noire . In the case of the UK press, papers such as the Guardian and Times have campaigns to expose companies that seek to avoid paying local taxes. Most recently that attention has fallen upon Google. According to UK media reports, the company earned STG1.25 billion for which the tax bill would have been roughly STG100 million. Instead Google paid just STG600 thousand by channeling its UK revenues through Ireland. Of course, in the final analysis it can be argued that Google is simply looking out for shareholder value by seeking every legitimate way to minimise its total global tax burden... and if the rules allow it then the rules are ultimately at fault. Meantime, Google will still need to deal with the practical realities of being exposed for such practices. Whether legal or not, appearances and reputations matter. Even if Google's tax avoidance is above board, the mere fact that it made so much revenue in the UK yet paid so little in tax, sullies a hard-won reputation. Meantime the Revenue Commissioners will be having sleepless nights worrying that the wheels are about to come off one of the best revenue generating wheezes they ever thought up! Next stop, harmonised taxation.

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