Author: Gordon Platt


Britain likely will succeed in taxing multinational companies at a 25% rate on their UK operations beginning in April, without violating international tax treaties, analysts say, but tensions are rising between countries on suspicions that MNCs are engaging in global tax evasion.

The UK’s so-called Google tax is aimed at large companies, technology firms in particular, that artificially shift profits outside of the country. It will be up to the UK Treasury to decide which profits belong to a company’s domestic operations, if the tax is approved by Parliament in its proposed form.

“We are still at a very early stage, but the expectation is that the proposed Google tax is not contrary to tax treaties,” says Andrew Packman, partner at PwC in London. “The tax is not likely to fall at that hurdle.” The key question is how companies will react to the new tax and reform their operations, Packman says.

Meanwhile, Australia’s government is considering a similar policy to that of the UK, whereas the US could move to protect the tax benefits of US multinationals, with Republicans now controlling both chambers of Congress.

Google News announced in December that it would shortly shut down in Spain as the result of a new tax law that would require every Spanish publication to charge it for the right to publish links and excerpts from news stories. Germany and Belgium imposed similar taxes earlier, but backed down after Google pulled links to their publications and traffic to their sites fell.                     


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