GOOGLE’S CORPORATE TAX payments over a six-year period are to be investigated by the British tax authorities – in an investigation which will likely see the relationship between the British and Irish companies come under close scrutiny.
A report published by the House of Commons’ Public Accounts Committee reveals that the UK’s Revenue and Customs service (HMRC) was undertaking “a review of the tax returns filed by Google UK for 2005-11 inclusive”.
Google said the review was standard practice and that it would co-operate fully with the review.
Google’s British company, Google UK, recorded revenues of £396 million in 2011 but paid corporation tax of only £6 million because of arrangements which see Google’s international companies pay hefty licencing fees to a sister company in Bermuda, which owns its most valuable intellectual property.
The company’s Irish operations could also come under the spotlight because of the close relationship between the British company and the Irish one, Google Ireland Ltd, which oversees the company’s operations across Europe.
Irish company pays British staff
Google employs 1,300 staff in the UK – but told the Public Accounts Committee in public hearings that the employees were paid by Google Ireland Ltd, rather than its British sister company.
Though the company said profits should be taxed in the jurisdictions in which they are generated, it defended its moves by saying its business was built on the search engine product generated by the US company based in Palo Alto, California.
MPs found that Google had undermined its own argument by having its intellectual property held by the Bermuda company rather than the US one which developed it – which could mean that the US was also being denied its own share of legitimate corporate tax.
Google Ireland’s tax situation is more exaggerated than its British counterpart: accounts for 2011 show the company registered an overall income of almost €12.5 billion, and turned a profit of €9.075 billion – thanks largely to the collection of advertising revenue from across Europe, the Middle East and Africa.
However, Google Ireland paid only just over €8 million to the Revenue Commissioners in corporation tax, because its pre-tax profits were just €24.4 million – thanks to the nearly €9 billion in royalties that Google Ireland paid to the Bermuda operation.