The British Chancellor is set to close a number of tax loopholes used by Google, Amazon and other multinationals who have headquarters in Ireland.
The Sunday Times reports that George Osborne will flesh out his plans to prevent big companies dodging the taxman by routing profits generated in Britain offshore.
Known as the ‘Google tax’ the new measures in next week’s UK budget will hit companies with a penal tax rate (25%) if they are judged to have shifted cash overseas with a view to sidestepping HM Revenue and Customs.
The ‘diverted profits’ tax, which is set to come into force next month, will be levied at 25%, compared with the standard 20% corporation tax rate.
The tax will be coupled with much stricter corporate reporting requirements. Among them, Mr Osborne is expected to force mulitnationals to dsiclose revenue and profit figures on a country by country basis.
This, in turn, would give tax authorities a clearer picture of just how much money a company earns in each market. Matching that up with other metrics like how many people are employed in each country in turn will help paint a clearer picture of a company’s operations in the country.
The Sunday Times describes it as, despite having thousands of employees and business operations in a country like the UK,
“…the tech giants are not deemed to have a ‘permanent establishment’ in Britain. Through this legal accounting ploy, Facebook and Google channel the overwhelming majority of their revenues to their international headquarters in Dublin. The Irish companies then send licensing fees to Caribbean havens, which do not charge corporation tax. Osborne’s diverted profits tax aims to rein in the use of these opaque arrangements.â€Â
