European leaders have been concerned about international companies who have managed to pay almost no tax while making large revenues. Their latest debate involves Google who, despite generating more than £3bn a year in revenues, only paid £6m in corporation tax.
So why does the internet giant feel exempt to the rules? It has no sales presence. Therefore, they cannot be considered resident for tax purposes. At a time where the British citizins’ purse strings are tightened, Google’s methods of minimising British tax don’t go unnoticed – far from it.
Taking the opportunity to boost his popularity before the G8 Summit, Ed Miliband addressed the audience of a Google event in London. He brandished a letter written by the Google’s founders in 2004, highlighting that short-term interests were often ignored for long-term ones.
In response to the passage, Miliband said: “When Google does great things for the world, I applaud them. But when (Google Chairman) Eric Schmidt says its current approach to tax is just ‘capitalism’, I disagree. When Google goes to extraordinary lengths to avoid paying its taxes, I say it’s wrong.”
He pledged that a future Labour government would change laws to stop “transfer pricing”.
Schmidt was quick to defend the company’s honour. He explained that governments, not firms, are to blame for our “irrational” tax policy. According to Schmidt, we all operate in a long-standing tax regime which was set up for various reasons that don’t necessarily make sense to anyone. He does, however, support the prime minister’s pursuit of inter-governmental talks to overhaul the global tax system.
Prime minister David Cameron hailed a meeting of the European Council, which proved successful. The member states have resolved that information on who really owns and controls every company should automatically be exchanged between tax authorities. He believes it is important to not only tackle tax evasion, but tax aggression as well.
Cameron’s message is clear: “The best solution is to establish tough global rules and standards where all multinationals make a full and fair contribution.”
Image sourceBy Shané Schutte
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