Market

Osborne’s ‘Google tax’ on overseas profits now raises zero revenue, Treasury reveals | Tax and spending


A “Google tax” introduced by the coalition government to crack down on multinationals shifting profits overseas has been criticised as a “total failure”, as new documents show it is predicted to raise no money over the next six years.

The diverted profits tax, introduced in 2015, was hailed as a pioneering effort to tackle multinationals who were reducing their UK corporation tax by shifting profits overseas.

It was predicted by officials that the tax would raise up to £400m a year, but new figures published with the budget last week show revenues slumping to zero.

Labour’s James Murray, the shadow financial secretary to the Treasury, said: “Rishi Sunak tried to bury it but the diverted profit tax is a total failure. The government’s own documents admit it will bring in absolutely nothing. Big multinationals are benefiting time and again from the chancellor’s tax breaks – while British businesses are stifled with debt and unfair business rates.”

The tax was introduced by the then chancellor, George Osborne, to stop large-scale tax avoidance. Osborne said the tax was “designed to deal with the very real anger that people feel when they see large businesses not paying tax.”

It was described as a “world-leading” anti-avoidance measure. It later emerged that Google would not be paying the tax, after negotiations with HM Revenue and Customs (HMRC), but other companies were forced to.

The measure was brought in after a series of tax rows involving major corporations. It emerged in 2012 that Starbucks had made no profit, and paid no corporation tax, on sales of £1.2bn in the UK over three years. Amazon, Google and Microsoft also faced mounting scrutiny over the amount of tax they paid in Britain.

HMRC
HMRC said last year it was conducting about 100 investigations into multinationals with arrangements to divert profits. Photograph: Kirsty O’Connor/PA

It was revealed in 2018 that Amazon UK Services paid just £1.7m in tax the previous year, despite the online giant achieving total UK sales of £11bn.

Google has used tax structures known as the “Double Irish” and the “Dutch Sandwich” to channel profits through Ireland and tax havens to avoid tax. It said last year it would no longer exploit the loopholes.

Microsoft was revealed to be avoiding up to £100m a year in UK corporation tax by booking billions of pounds of sales in Ireland under a confidential deal with British tax authorities.

Officials said last year HMRC was conducting about 100 investigations into multinationals with arrangements to divert profits. The total amount of tax under consideration was £5.3bn at the end of March 2020.

HMRC has encouraged companies to disclose any profit-shifting arrangements by signing up to its “compliance facility”. It says firms can update their tax affairs via the facility “without investigation by HMRC if a full and accurate disclosure is made”.

There has been a concerted international effort to prevent multinational firms from creating elaborate corporate structures to avoid tax.

Boris Johnson and other world leaders were set to endorse a new agreement at the G20 summit onSaturday to ensure multinationals pay a fair share of tax around the world. The plan puts in place a minimum global corporate tax rate of 15%. One White House official was quoted as describing the deal as “a reshaping of the rules of the global economy”. It has been estimated it will raise more than £100bn a year globally.

George Turner, director of the UK charity TaxWatch, said the diverted profits tax had not stopped firms shifting profits overseas. He said: “Companies will continue to move their profits around the world to exploit the lowest possible rate of corporation tax. The new agreement at G20 and a new minimum tax rate of 15% will not put an end to that.”

A HM Treasury spokesperson said: “The diverted profits tax is an important tool in countering artificial profit shifting. Since its introduction it has raised significant revenue as well as successfully encouraging groups to change their behaviour so that they pay more corporation tax in the UK.”



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *