Multi-national companies continue to draw the attention of the UK press over allegations that they contrive to export profits made in the UK to lower tax jurisdictions. In this way economic activity in the UK escapes UK tax. This in contrast to numerous small and medium sized businesses who are reported to be paying their fair share of income tax and corporation tax.
Google have responded by pointing out that their tax planning strategies are allowed in law and that if the UK tax authorities are at odds with Google’s tax contribution they should change the law.
The UK is one of the most productive markets for both Google and Amazon and in both cases UK sales grew by more than 20% last year, British customers generating about 10% of global sales.
In Google’s case evidence has emerged that UK staff are negotiating and closing deals – Google has always insisted, and continues to insist, that sales are negotiated in the UK and closed in Ireland. This issue is just one of the aspects that justifies their tax strategy. Pressure on these multi-national groups is likely to increase. Politicians will struggle to defend their austerity programme to UK voters if large businesses are being accused of not making a fair contribution to UK taxes.
George Osborne is making this off-shore shift of profits a priority for Britain’s chair of the G8.