George Osborne has announced a new 'diverted profit tax' that will levied against multinational companies that use convoluted schemes to avoid paying tax in the UK
Chancellor George Osborne has announced a new 'Google tax' designed
to clamp down on multinational companies that use convoluted
tax-avoidance schemes.
The new 'diverted profit tax' - announced in the Autumn Statement - will affect any large company that generates significant profits from economic activity in the UK but then 'artificially shifts' the money out of the country.
There 25% rate will be levied on profits generated by multinationals from economic activity in the UK and then shifted in this way.
"Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes," said Osborne.
"That’s not fair to other British firms. It’s not fair to the British people either. Today we’re putting a stop to it."
The tax will be applied from 1 April 2015, but is only expected to generate an additional £25 million in the next financial year, and £270 million the following year. The three subsequent years will generate around £350 million each.
The measures have been dubbed 'Google tax' because a number of large tech companies - including Apple and Facebook, as well as other multinationals like Starbucks - use sophisticated tax planning to allow them to pay very little tax in the UK.
Google, for example, has 1,500 staff in the UK, but most of the company's transactions funnel through Ireland where it has a favourable tax regime. Google argues that the staff in the UK aren't really selling the advertising, but just facilitating the sale which actually takes place in Dublin.
This sort of semantic wrangling is used by a number of major tech companies, but the new tax will penalise those that continue to use these techniques.
"Some technology companies go to extraordinary lengths to pay little or no tax here," Osborne said at the Conservative Party conference this year.
"My message to those companies is clear: we will put a stop to it."
Despite the strong words, there is sure to be a way to circumvent the new tax - and Google, Apple, Starbucks and Facebook's accountants will be handsomely rewarded for finding it.
The precise details of the Autumn Statement 2014 have yet to be published, but we'll update this story as we get more details.
You can follow all of the announcements coming from the Autumn Statement here.
The new 'diverted profit tax' - announced in the Autumn Statement - will affect any large company that generates significant profits from economic activity in the UK but then 'artificially shifts' the money out of the country.
There 25% rate will be levied on profits generated by multinationals from economic activity in the UK and then shifted in this way.
"Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes," said Osborne.
"That’s not fair to other British firms. It’s not fair to the British people either. Today we’re putting a stop to it."
The tax will be applied from 1 April 2015, but is only expected to generate an additional £25 million in the next financial year, and £270 million the following year. The three subsequent years will generate around £350 million each.
The measures have been dubbed 'Google tax' because a number of large tech companies - including Apple and Facebook, as well as other multinationals like Starbucks - use sophisticated tax planning to allow them to pay very little tax in the UK.
Google, for example, has 1,500 staff in the UK, but most of the company's transactions funnel through Ireland where it has a favourable tax regime. Google argues that the staff in the UK aren't really selling the advertising, but just facilitating the sale which actually takes place in Dublin.
This sort of semantic wrangling is used by a number of major tech companies, but the new tax will penalise those that continue to use these techniques.
"Some technology companies go to extraordinary lengths to pay little or no tax here," Osborne said at the Conservative Party conference this year.
"My message to those companies is clear: we will put a stop to it."
Despite the strong words, there is sure to be a way to circumvent the new tax - and Google, Apple, Starbucks and Facebook's accountants will be handsomely rewarded for finding it.
The precise details of the Autumn Statement 2014 have yet to be published, but we'll update this story as we get more details.
You can follow all of the announcements coming from the Autumn Statement here.
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