What Is the Google Tax?

On December 3, 2014, the U.K. Treasury Chief George Osborne introduced a new 25% tax on foreign companies’ profits derived from economic activity in the U.K. This new tax has been coined by the press as the Google tax, but is officially called the “diverted profits tax.” The announcement came as a part of George Osborne’s “Autumn Statement,” which is one of the two statements the Treasury makes each year to Parliament upon publication of the economic forecasts. The idea behind this tax proposal is that large multinational companies are able to do business in the U.K., often electronically, and get away with paying little to no tax there.

Mr. Osborne specifically singled out technology companies: “Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes. That’s not fair to other British firms. It’s not fair to British people either. Today we’re putting a stop to it. My message is consistent and clear: low taxes, but low taxes that will be paid.”

The tax is to be put into effect on April 1, 2015; however, no details were revealed along with the announcement on how they plan to implement this new tax, and what exactly will constitute economic activity that will give rise to this new tax.

NEED MORE INFORMATION?

If you have any questions about this World Business & Tax Update, please contact your WithumSmith+Brown professional, a member of WS+B’s International Services Group or email us at [email protected].

Kimberlee Phelan, CPA, MBA
Practice Leader, International Services Group
609.520.1188
[email protected]

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To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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