Google Tax Avoidance Scheme in UK Exposed by Insider

Yes, you read that right, there are such things as a Google tax avoidance scheme and the scheme is allegedly practiced by Google in the United Kingdom in the last 10 years or so.

This accusation was made by a former executive of Google, Barney Jones, 34 years old. He worked for Google Inc between 2002 and 2006 and to support his allegations he has 100 000 emails and internal documents. He said he is ready to present all these to HMS Revenue & Customs (HMRC), in order to prove his allegations.

Everyone knows about the fact that are 2 certain things in this life, death and taxes. This works if you’re the average John Q, a law abiding citizen, working hard to earn your daily living and of course, you pay your taxes, else you get pinched.

Things are not the same if you are one giant greedy corporation and you have an army of lawyers, taking care of your finances.

According to Barney Jones, Google cheated the British taxpayers with hundreds of millions of pounds over the last ten years. In an interview, he described Google’s crooked model of business, the money laundering operations taking place via Ireland and through Bermuda tax haven.

The tax avoidance scheme is quite simple, as Google’s employees in London prepare and negotiate the deals, they sign them with their British clients, money are paid into UK bank accounts but the deal itself is booked via Google’s Dublin headquarter, in order to minimize the liabilities here.

Jones already testified regarding this tax avoidance scheme in front of the Commons public accounts committee (PAC). Because of its testimony, Matt Britin, the vice president of Google for Northern Europe, had to answer some uncomfortable questions last week.

In Jones own words, let me quote him:

“The real victims are ordinary taxpayers in Britain who are being cheated by Google. They don’t have the means to hire accountants to pretend they make their money in Ireland, Bermuda or the British Virgin Islands. What Google is doing is immoral.”

After Jones testimony, Margaret Hodge, chairwoman of PAC described Google‘s practices using terms like evil, devious and unethical, describing the tech giant shady accounting practices.

The tax avoidance scheme is built around Google’s offices in Dublin, Ireland, where the taxes are much lower than in Britain. In the five years between 2005 and 2011 Google recorded revenues of £11.9bn in Britain, according to American stock market records. Through the tax avoidance scheme, Google paid to HRMC only £10 million in corporate tax.

Jones accused Google’s vice president Brittin of misleading the UK’s parliament, as he told PAC last year that Google’s UK office never sold advertising on its website.

But last week, when he was asked to prove his statement, he said that ““a lot of the aspects of selling” actually happened in London, but the actual deals were closed in Dublin.

This little oversight is essential, because if the deals would be closed in London, the profits made would be taxed according to Britain’s tax laws, not the more lax Irish ones. As Jones describes it:

“It uses a concocted scheme to avoid tax. It’s a smoke-screen to distort where the substance of its economic activity is really taking place,”

Tax Avoidance Scheme-Facts

Jones has in his possession contracts and invoices, even correspondence, between Google and its clients in Britain, which clearly show in the heading “Google’s London HQ” and deals sold to British customers from the Google staff in London, the clients paid the fees in British bank accounts etc.

Google reportedly had in Britain £266m in revenue in 2004, £579m in 2005, according to its US accounts, yet it declared only £11.1m and £27.1m respectively to the HRMC. As Jones puts it: “We were making tons of money,”

In 2011, Google paid a mere £6 million in corporation tax, yet the US accounts show a UK turnover of £2.7 billion. The profit margin for 2011 reported by Google itself was 26%, and if you apply this figure to their real revenues in Britain, Google should have paid £180 million in taxes for a profit of £676 million. Thanks to their clever tax avoidance scheme, they managed to get away with only 6 million…

There are other big corporations like Apple and Facebook, which operate in the UK, and they also established their HQ in Dublin Ireland, because of the low taxes there. But Google ferreted its way out of paying taxes  by using the Bermuda tax haven in which it’s paying royalty fees via its offshore subsidiaries. Not to mention the hypocrisy of using a motto like “Don’t be evil” while you’re avoiding taxes via elaborate schemes…

When questioned about the tax avoidance scheme, Google’s director of External Relations, Peter Barron stated:

“As we said in front of the public accounts committee, it is difficult to respond fully to documents we have not seen. These questions relate to Google’s business in the UK going back a decade or more. None of the allegations put to us change the fact that Google pays the corporate tax due on its UK activities and complies fully with UK law.”