Google is set to pay only £6.09 million in UK taxes despite raking in nearly £400m in revenue from its British operations.
The search giant, which employs 1,300 staff in the UK, angered MPs last year when it paid £935,000 tax on £2.39bn revenue, and is likely to face fresh criticism over this year’s contributions.
The figures were initially reported by the The Telegraph as profit in the billions of pounds, but Google has corrected those figures, saying it will pay £6.09m in taxes this year on £395m in revenue.
The figure contrasts with its end-of year filing to the SEC, which said Google earned $4bn in revenues in the UK “based on the billing addresses of our customers”. That differential isn’t new: last year, an Evening Standard report showed Google had made more than £6bn in the UK, but claimed revenue of £526m and was taxed £8.2m.
Google promised more details about this year’s taxes would follow in a filing due to be released “imminently”.
Google said: “We comply with all the tax rules in the UK. We make a big contribution to the UK economy by employing over a thousand people, helping hundreds of thousands of businesses to grow online and investing millions supporting new tech businesses in East London.”
I am all for the silicon roundabout, but it should not be a magic roundabout, in which going around it twice means not paying any tax or going round it three times, like Google, means turning a massive profit into a tax loss
Number crunching
A look at the company’s overseas income and tax payments, in its full-year results filed at the beginning of the year, show that in 2011 it made profits of $4.7bn in the US, with $7.6bn coming from overseas operations. The company made provisions for $1.7bn in US federal tax, $274m for state taxes in the US, and $248m for its foreign income tax.
In its declaration of revenues, it lists three revenue streams: the US at $17bn, the UK at $4bn and the rest of the world with $16bn.
However, the company’s two declared major tax jurisdictions are the US and Ireland, where the tax rate is a lowly 12.5% compared to 25% in the UK and 35% in the US. The company said “substantially all of the income from foreign operations was earned by an Irish subsidiary”.
Previous complaints
In a speech made at last year’s Edinburgh Television Festival, executive chairman Eric Schmidt blamed the low payments squarely on the UK tax system. “We could pay more tax but we would have to do so voluntarily. It’s called paying the legally minimum amount of tax required,” he said.
“There are lots of benefits to [being in Britain]. It’s very good for us, but to go back to shareholders and say ‘We looked at 200 countries but felt sorry for those British people so we want to [pay them more]’ – there is probably some law against doing that.”
Last year, Google faced criticism from MPs over the way it used Ireland as its main international hub, at least in part because the tax rates there are significantly lower.
“Google took about £2.15 billion in revenue from the UK in 2010, making an estimated £700 million profit, yet it did not pay any tax. In fact, it declared a loss of £22 million,” said Charlie Elphicke, MP for Dover, in a parliamentary statement after the budget. “I am all for the silicon roundabout, but it should not be a magic roundabout, in which going around it twice means not paying any tax or going round it three times, like Google, means turning a massive profit into a tax loss.”
This story was updated from the original figures after Google confirmed that The Telegraph posted incorrect numbers.
Disclaimer: Some pages on this site may include an affiliate link. This does not effect our editorial in any way.
