Does Google Pay All the Taxes It Should? (Hint: Not Really)

The controversy of tax avoidance has followed Google around for some years and, as they say, there’s no smoke without fire. In this article, we delve into the question ‘does Google pay its taxes’ to unearth the truth behind the digital giant’s taxation history.

How much tax did Google pay in 2019?

In terms of paying tax in the United Kingdom, Google paid just £44 million in corporation tax last year. That may sound like a lot, but remember that their total gross profit in 2019 was $89.96 billion and their reported UK profit was £225 million.

At the time of writing, UK corporation tax is 19% of company profits. So yes, Google has paid the required corporation tax in the UK, but nothing more. Despite their astonishing profits and being a multinational company, Google pays no more corporation tax in the UK than a small business.

Plus, although Google UK reported £1.6bn in revenue last year, it is thought that this doesn’t actually reflect how much it makes in total advertising revenues in the UK, as some are reported in other jurisdictions. In fact, the research company eMarketer estimates that, in reality, Google made about £5.7bn in ad revenue in the UK last year.

As part of a movement to request more taxes from multinational corporations, from April 2020, the UK government has introduced a new Digital Services Tax — this is a 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. This means that Google will have to pay more tax for the 2020–2021 tax year (but only slightly more).

Does Google have a history of tax avoidance?

In the past, Google has used a notorious ‘Double Irish, Dutch sandwich’ tax loophole, which is technically legal but has been heavily criticised. Under the Double Irish, Dutch sandwich scheme, companies move their taxable income from an operating company in Ireland to another Irish-registered firm in an offshore tax haven.

They do this through a ‘filling’ of a Netherlands-based company, because Dutch tax law allows untaxed profits to be moved to a tax haven without incurring a withholding tax.

The ‘Double Irish, Dutch sandwich’ technique allowed Google to delay paying US taxes on international earnings, as well as paying a lower rate of tax overseas. In 2017, Google moved €19.9bn ($22.7bn) to Bermuda through a Dutch shell company. The following year, they moved €21.8bn ($24.5bn).

Back in 2012, Google were extremely defiant about their tax-avoiding strategies. Chairman Eric Schmidt said the following: “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate”. He later followed it up with another statement: “It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”

Google has now come out and said that they will no longer use this loophole and the termination of this strategy should take place in 2020. However, their troubling history of tax avoidance remains and they have likely racked up a huge bill over the years.

In fact, the organisation Fair Tax Mark calculated that six of the digital giants are responsible for a $100 billion ‘tax gap’ between 2010 and 2019, with Google being the worst offender after Amazon and Facebook.

Do I have to continue supporting a company with a history of tax avoidance?

When you hear the numbers associated with Google’s past tax avoidance strategies, it really brings home the enormity of this company and how they could be doing far more work for the greater good with their money.

While Google is undoubtedly the dominant search engine on the market, there are more ethical alternatives. Charity search engines, for example, donate a large portion of their profits to charitable causes in order to make the world a better place, rather than focusing on strategies which help them avoid tax and hold onto their money.

SearchScene is one such option — our charitable search engine which focuses on supporting charities that help fight climate change and alleviate the suffering caused by climate change. We donate 95% of our profits, which are primarily made through advertising just like Google, to charities selected by you.

This article first appeared on Medium.