Google, the internet giant whose informal corporate motto is “don’t be evil”, did not pay any tax on its £1.6 billion advertising revenues in Britain last year.
The firm, which has a substantial presence in London, diverted all its advertising earnings from customers in Britain to its Irish subsidiary. The arrangement allowed Google legally to avoid paying more than £450m in corporation tax to HM Revenue & Customs in 2008, The Sunday Times has established. The disclosure prompted politicians to criticise Google, widely lauded as a pioneer of the internet age, for “ducking its social responsibility” and for “tax avoiding”.
Accounts filed with Companies House in the past week show Google’s 2008 UK corporation tax bill amounted to just £141,519 — and that was tax on the interest generated by its cash pile in UK bank deposits.
Vince Cable, the deputy leader of the Liberal Democrats, urged the search firm to “pay its fair share” of tax.
“Avoidance like this is hard to stomach at the best of times,” said Cable. “But when the country is in recession and everyone is feeling the pain, it really sticks in the throat — it means higher taxes for the rest of us.
“Google’s reputation will be severely damaged if it continues to behave in this way. It is ducking its social responsibility.”
Google says its structure complies fully with UK tax rules and that the company makes a “substantial” contribution to tax receipts wherever it operates. About 13% of Google’s global revenues now come from the UK, and 770 staff are based at its London offices.
Accountants said that if the firm’s £1.6 billion UK earnings were paid directly into Google UK Limited, the London operation, it would have been liable for UK corporation tax of between 28% and 30%. This could have raised about £450m for the public finances — enough tax to fund three NHS hospitals, buy at least eight Chinook helicopters or pay the annual salaries of about 15,000 policemen. Any British individual or company who places an advertisement with the search engine pays a fee to Google’s European headquarters in Ireland, where corporation tax is levied at between 10% and 25%.
The Dublin operation’s latest accounts show that only €7.5m (£6.7m) of Irish tax was paid in 2008, even though the bulk of Google’s €6.7 billion (£5.9 billion) European earnings flowed into Ireland. Austin Mitchell, the Labour MP for Great Grimsby, who campaigns against tax avoidance, said: “Google isn’t just sucking money out of local newspapers and other people who rely on advertising for a living — it’s also draining money out of the public finances.
“The search engine is a marvellous service, but the company is run by tax avoiders. If they are going to make so much money here they need to give more back to society.” As well as paying little tax, Google UK Limited’s latest accounts disclose that it made modest charitable donations of just £5,662 during the year.
The document also reveals that Google’s highest-paid UK director earned nearly £1.1m — an 80% rise on the previous year. The average British-based Google worker earned more than £90,000 last year, with the company paying National Insurance and other social security contributions of £10m.
Peter Barron, director of communications for Google in northern Europe, said: “Google makes a big investment in the UK, with over 800 employees, and we make a substantial contribution to local and national taxation. But the fact is that our European headquarters is in Dublin. We comply fully with the tax laws in all the countries in which we operate.”
Google has established strong ties with British politicians in recent years. Last February, David Cameron, the Tory leader, appointed Eric Schmidt, the company’s chairman, to the Conservatives’ economic recovery committee. A few months later, Cameron suggested that NHS patient records could in future be maintained by Google