CandleFocus Glossary Editor
Google Tax, also known as the Diverted Profits Tax (DPT), is a concept created by the UK Government to tackle profit shifting by multinational companies, including tech giants like Google and Amazon. Google Tax is a form of anti-avoidance tax, meaning it is imposed on companies that attempt to avoid paying taxes in a particular jurisdiction.
The UK Government introduced Google Tax as part of their efforts to close the 'tax gap' and raise £4 billion in extra revenue for the government. The UK government has estimated that global corporation tax evasion is costing the global economy in excess of £5 trillion a year. The Diverted Profit Tax (DPT) is an attempt to crack down on companies that shift profits to other countries to pay lower tax rates, by taxing them at a higher rate of 25% on their taxable profits in the UK.
Google Tax applies to companies with multi-national operations and revenues over £10 million. Such companies have to prove that their economic activity is substantially linked to their UK-based operations, i.e., more than 50% of their profits are generated by their non-UK related activities. Companies that fail to meet this criteria will be subject to the Diverted Profits Tax.
The impact of Google Tax has been significant, with many of the world's top multinationals seen to move profits to their home countries, like the US, Singapore or Ireland, in an effort to reduce tax liabilities and remain competitive. Companies like Google and Amazon have also been seen to shift profits to tax havens, such as Bermuda, in order to avoid taxes.
Google Tax and other initiatives by the UK government, such as Country-by-Country reporting, have significantly changed the game for multi-nationals by making it more difficult to shift profits in order to reduce tax liabilities and taxes. Furthermore, it is possible that other countries and government agencies around the world will follow suit and introduce new taxes to increase their revenues from corporations and clamp down on global tax evasion.
Google Tax is an important step towards raising the hundreds of billions of pounds in crucial national revenue that governments would otherwise be missing out on. Since the introduction of the Diverted Profit Tax, governments have made significant progress in their efforts to close tax loopholes and pay closer attention to how firms move profits around the world. While it is still far from a perfect system and will have to be continually shaped and refined, it is a sign that multinational companies can no longer ignore their tax obligations.
The UK Government introduced Google Tax as part of their efforts to close the 'tax gap' and raise £4 billion in extra revenue for the government. The UK government has estimated that global corporation tax evasion is costing the global economy in excess of £5 trillion a year. The Diverted Profit Tax (DPT) is an attempt to crack down on companies that shift profits to other countries to pay lower tax rates, by taxing them at a higher rate of 25% on their taxable profits in the UK.
Google Tax applies to companies with multi-national operations and revenues over £10 million. Such companies have to prove that their economic activity is substantially linked to their UK-based operations, i.e., more than 50% of their profits are generated by their non-UK related activities. Companies that fail to meet this criteria will be subject to the Diverted Profits Tax.
The impact of Google Tax has been significant, with many of the world's top multinationals seen to move profits to their home countries, like the US, Singapore or Ireland, in an effort to reduce tax liabilities and remain competitive. Companies like Google and Amazon have also been seen to shift profits to tax havens, such as Bermuda, in order to avoid taxes.
Google Tax and other initiatives by the UK government, such as Country-by-Country reporting, have significantly changed the game for multi-nationals by making it more difficult to shift profits in order to reduce tax liabilities and taxes. Furthermore, it is possible that other countries and government agencies around the world will follow suit and introduce new taxes to increase their revenues from corporations and clamp down on global tax evasion.
Google Tax is an important step towards raising the hundreds of billions of pounds in crucial national revenue that governments would otherwise be missing out on. Since the introduction of the Diverted Profit Tax, governments have made significant progress in their efforts to close tax loopholes and pay closer attention to how firms move profits around the world. While it is still far from a perfect system and will have to be continually shaped and refined, it is a sign that multinational companies can no longer ignore their tax obligations.