Tax codes are probably some of the most arcane pieces of law that anyone has ever run across. And that’s exactly why multinational companies like Google, Apple and others often take advantage of loopholes and special deals to avoid getting taxed for their profits. But now both the UK and the EU and OECD are looking to cut down on tax avoidance and to that end Google will be paying the British government $180 million in back taxes.
The move was announced over the weekend when the American-based company reached a deal with the UK regulators to pay some extra taxes. This preempts an upcoming rate hike the government will soon impose, on profits it deems to have been taken out of the country for tax avoidance purposes.
Despite this many critics, especially those in the opposition in the UK view this as a very worrying precedent. The deal between Google and the UK tax authority is seen as almost a surrender by national authorities who have agreed to a figure that’s much lower than what Google actually owes. According to The Guardian’s report, over the past ten years Google has paid an effective tax rate of 2.77%, almost ten times lower than the standard 20% that British corporations are supposed to pay.
Not only that, but the deal is being criticized for undermining upcoming legislation both from the UK and the EU that supposed to clamp down on companies that avoid paying their fair share.
Up until now Google, and its now parent company Alphabet, have denied any wrongdoing both in front of the US congress and in front of other national bodies in the EU, claiming the companies have always paid taxes in concordance with the local laws.
However, critics argue that Google, Apple and Microsoft, as well as hundreds of other multinational companies like Starbucks and McDonalds, have abused local tax systems and have moved around hundreds of billions of dollars that should’ve been taxed.
This Thursday the EU Commission is expected to introduce measures aimed at closing tax loopholes and taking aggressive action against tax avoidance.