Credit: William Warby/Flickr

Autumn Statement: Osborne plans 'Google Tax' on multinationals

Overseas companies will have to pay 25% on offshored profits.

by Jack Torrance
Last Updated: 17 Jun 2015

At this year's Conservative Party conference George Osborne made it clear he wasn't happy with international tech companies like Google, Facebook and Amazon not paying their 'fair share' of taxes for profit generated in the UK. Though he said such companies should be 'welcomed with open arms,' he warned, 'while we offer some of the lowest business taxes in the world, we expect those taxes to be paid.'

In today's Autumn Statement the chancellor added some meat to the bones of just how he plans to make that happen. From next April multinational businesses will be hit with a 25% tax on the profits they divert offshore. Osborne said he expects this 'Diverted Profits Tax' to raise £1bn over the next five years.

The treasury's statement on the matter makes it sound so simple: 'The ‘diverted profits tax’ will apply to a company’s profits that have been diverted from the UK through complex arrangements... and will apply to both UK and foreign multinational companies.

'So if a company conducts a lot of activity in the UK – sales, for example - but can avoid paying corporation tax by moving profits generated in the UK to other countries through the manipulation of the international tax rules, the UK will now be able to tax those profits at a rate of 25%.'

If only things were that straightforward though. Unlike sales it's a lot harder to define where exactly a profit is actually made. That's why massive companies are in a position to reasonably claim they don't make a profit in the UK.

The announcement fed into a greater narrative in Osborne's speech about making sure everybody pays their fair share. Banks will now be made to pay a greater share of corporation tax, and those who buy the top 2% most expensive homes will be hit by a change in stamp duty reforms.  

It's a great pre-election soundbite but it remains very unclear how this new 'Google Tax' will be enforced so MT expects this debate to rumble on for quite some time.

Other key business measures from the Autumn Statement:

Funding: Expanding the British Business Bank and Funding for Lending

Business rates: A full review of the structure of the rates system, continuing to double the small business rates relief, increasing small retailer rates relief by 50%.

Other tax: Extension of theatre tax break to orchestras, increasing the R&D tax credit for small and medium companies to 230% and the credit for large firms to 11%, childrens' television tax credit.

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