Historically, corporations have always gone to great lengths to avoid paying taxes, and Google, with its ‘double Irish’ arrangement, is no different. In fact, not only is Google fiscally resident in Ireland, a country with a very low corporation tax rate of 12.5 per cent, but due to this special arrangement, its Irish taxes are further decreased. Its subsidiary pays intellectual property royalties to an entity in Bermuda, where corporation tax is a flat zero percent. 

Internet companies have the advantage of being able, thanks to their tangled networks of subsidiaries, to channel their revenue in whatever way is most fiscally advantageous. Check out your bank statement. When you sit in your college room and buy something from Amazon, you are not paying a company based in the UK, but one of Amazon’s subsidiaries – in this case, Amazon EU SARL, conveniently located in Luxembourg. 

Therefore, when Google agreed to make a £130 million back-tax payment to the UK it seemed like a victory for the HMRC. Since 2005, Google has paid only £70 million in tax for all its profit produced in the UK, which is a steady 2.77 per cent. Corporation tax in the UK is 20 per cent, and it has fallen by 10 per cent from its 2005 level. This means that, over a decade, on an overall estimated £7.2 billion profit, with an average tax rate of 25 per cent, that’s £1.8 billion of tax. If one subtracts the £200 million already paid by Google, that is still £1.6 billion unpaid, which is a lot of foregone expenditure on nurses, doctors and students. 

This is of course an oversimplification. I am assuming that the yearly profit was constant and that the tax rate fell by 10 per cent in 2010, but it gives a rough idea of the sheer magnitude of unpaid taxes by just one of many corporations in one of many countries. These figures are produced by tax avoidance expert Prem Sikka, professor of accounting at the University of Essex, who also directly attacked Chancellor George Osborne, stating, “Osborne will probably chicken out of explaining and say that the Treasury does not discuss individual tax payments but they have instigated this by talking about it, so that is out of the window.”

Leaving aside political criticism and the usual empty accusations, this deal once again brought a widespread phenomenon to public attention which, in light of recent government cuts, cannot be ignored anymore. Amazon is adept at these practices: in 2014, British customers paid £5.3 billion to amazon. co.uk which, according t o Companies House fi lings, was a 14 per cent increase. The profit, r e p o r t e d by its Luxembourg subsidiary, however, was a meagre and some w h a t conspicuous £34.4 million. From this, it is clear that they paid only £11.9 million to the UK in tax. 

In 2014, Facebook paid £4,327 in corporation tax. Let me say it again: Facebook paid four thousand three hundred and twenty-seven pounds in corporate tax to the UK. This is due to an accounting loss of £28.5 million in the UK – that is, after paying out £35 million to its UK team in bonuses. Facebook effectively operated at a loss, which allowed it to pay less corporation tax than the average employee. Its UK revenue, on the other hand, was £105 million, and it is also opening a new 227,324 square foot office space by Tottenham Court Road in London. Corporate tax avoidance through subsidiaries is legal, common and less frowned upon than one would imagine. The so-called “battle” Osborne embarked against with his ‘Google Tax’ plan is just one example of many actions that countries are taking on in their attempts to reduce it. 

Google’s £130 million deal with HMRC sets a bad precedent: tax expert Richard Murphy stated that this deal is “undermining the new international tax consensus” because “what was agreed is far removed from what is required for sustainable corporation tax in future”. 

There is a delicate balance between the needs of a country and those of a corporation. Corporations are often categorically portrayed as the enemy, and sometimes this is well deserved. But it is in the interest of corporations to pay as little tax as possible, largely because wealth is reinvested and redistributed within the company – and this is followed by some benefits to the state. 

Matt Brittin, head of Google Europe, put it explicitly, saying, “What companies should be doing is hiring people and providing services that help other people” and stressed the “£11 billion of value that companies in the UK get from using [Google] to help export and growth… that’s value that wouldn’t be there were it not for [their] product.” Whether that’s a persuasive enough argument not to make their “do no evil” motto sound anything less than hypocritical is for you to decide.