Big tech companies like Google make billions of dollars every year but much of that money doesn’t get taxed nearly as much as it should thanks to clever accounting. The United Kingdom may be taking steps to combat this in the near future with a “Google Tax” that would place a 25% tax on profits earned in the United Kingdom but have been diverted to other countries to avoid British taxes.
In the lead up to the UK’s national election in May, big tech companies are finding themselves in the crossfire. An article in the Sunday Times (paywalled) lays out more details around UK Chancellor George Osborne’s proposal for a “Google Tax” — a 25% tax on big tech companies’ profits from UK operations that, through creative accounting, have been diverted offshore, saving these businesses millions in tax bills. The tax will be included in the UK Budget, due to be published later this month. It’s unclear how many millions of pounds would be at stake here, or if there will be any attempt to collect taxes retroactively. When Osborne first alluded in December 2014 to his plans for a “Google Tax”, it was estimated that the UK could claw back as much as £1 billion ($1.5 billion) over five years. The “Google Tax” of 25% will be higher than the usual 20% corporate tax levied in the UK, and it is expected to be applied only to companies whose annual revenues are more than £250 million ($376 million).