Google has about 1,200 employees in England and made £395 million in revenue there last year (that’s just under $620 million). It did, however, only pay £6 million in taxes in England last year. Unsurprisingly, that’s not sitting well with a number of British politicians and according to The Independent, Google could face a more formal investigation into its tax schemes by next spring.
Google bases its international operations in Ireland, where corporations pay a tax rate of just 12.5%. Using a legal tax loophole called “Double Irish,” the company can move a large chunk of its UK profits to Ireland and then Bermuda. There, of course, the company pays even less tax.
According to the Independent, Google’s Irish subsidiary basically employes Google UK as an agent. Because of this, Google’s UK revenue goes straight to Ireland. The Irish headquarter then pays Google UK a 10% fee and, “once costs have been deducted,” that’s all Google UK pays taxes on.
It’s worth noting that the £6 million Google paid for 2011 is significantly more than it ever paid before. In the six previous years, Google only paid £8 million in total. The company has recently made a larger push into England and expanded its engineering team there by about 40% last year.
Here is Google’s statement regarding this matter:
We make a substantial contribution to the UK economy through local, payroll and corporate taxes. We also employ over a thousand people, help hundreds of thousands of businesses to grow online and invest millions supporting new tech businesses in East London. We comply with all the tax rules in the UK.