by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Regardless of its liberal vibe, Google is no more excited than anyone else about paying an overly large tax bill. Jesse Drucker offers details in the latest issue of Bloomberg Businessweek.
Close to four years ago, Europe began to notice that some of the world’s biggest technology companies were paying minimal tax on the billions of dollars they earned across the continent. Among those the U.K. and other governments criticized was Google. Despite the years of debate since, analysis of the search giant’s newly available securities filings shows that over the past three years, the effective tax rate on its non-U.S. profits has remained in the single digits—about 7 percent.
In a Feb. 11 hearing with Parliament’s public accounts committee, Google tax chief Tom Hutchinson and Matt Brittin, head of European operations, argued that Google shouldn’t be coughing up more than the $185 million in back taxes it agreed to pay following a six-year government audit. Hutchinson said his company pays close to the 20 percent corporate income tax Britain requires, which is true if you look only at the tiny sliver of profits recorded in the U.K. “We are paying the right amount,” he said. He got laughs. …
… Governments in the U.K., France, Germany, and Italy have been trying to varying degrees to prevent companies like Google, Apple, and Amazon.com from lowering their tax bills by keeping profits in lower-tax addresses. Since 2014 the European Union has declared that tax breaks offered by Ireland, the Netherlands, and Luxembourg have constituted illegal state aid. The Organisation for Economic Co-Operation and Development (OECD) is crafting highly technical ways to clamp down on the most extreme uses of Bermuda and Grand Cayman mailboxes. Individual countries, including the U.K., have passed laws to tax so-called diverted profits.
So far, the effects appear slight. Tech giants are still reporting effective tax rates well below the lowest corporate rates, thanks to their armies of accountants and lawyers, says Jolyon Maugham, a U.K. tax lawyer and blogger. “Nobody pulls the plug on such machines without a fight,” he says.