Google in UK tax avoidance row

Just days after calls that Google should be more closely monitored, a critical eye has been cast over the company's public accounts by a corporate tax avoidance expert.



Richard Murphy, of Tax Research UK, found that Google avoided paying £100m in taxes by channelling its UK revenues through Ireland, where corporation tax is lower.



As a result, Google only paid Revenue & Customs £600,000 in UK corporation tax in 2007, despite its revenues exceeding £1.25bn, shows the probe for the Sunday Times.



If Google's tax structure remains, more than 90% of its UK revenues from this year will go to Ireland, where corporation tax is 12.5%, compared with 28% in Britain.



While legal, Google's avoidance of tax is open to challenge if HMRC says "Google is operating a branch in the UK" and decides to "tax it on its UK turnover here."



"If tax paid is a measure of corporate social responsibility to the communities from which it generates its income," Mr Murphy added, pointing to Google.



"-…then it [the company] is not acting in a responsible fashion in this country where its activities are…having significant social consequence."



He found that Google avoided a further €135m in tax from Ireland during 2007, the subsidiary of which is owned by one of two companies Google set up in Bermuda.



Seeming to explain the set up, Google Inc has said it reduces its tax bill by a further $705m by having foreign profits taxed at rates lower than in the US.



Murphy wrote. "This can only be explained, in my opinion, if the Irish Google subsidiary makes substantial payments to a low or no tax jurisdiction whose activities are undertaken intra-group and are not disclosed in the group accounts as a result."



He also claimed several sets of Google's UK accounts, which show 15% of total company revenues, were filed late, with one set outstanding by more than five months.



Vince Cable, deputy leader of the Liberal Democrats, reportedly said that Google is another in the "long line of companies who seems to think that paying British taxes is optional ."



Issuing his wish for Wednesday's Budget, Mr Cable said: "The government must crack down hard on the personal and corporate tax dodgers - including the banks - who are being supported by the public but who have managed to route their income or profits through some tropical tax haven."



The criticism of Google's tax planning follows a black mark it was given in 2007 by a Privacy International test of its privacy policies for users, which Google said lacked credibility.