OUTRAGE OVER GOOGLE TAX AVOIDANCE IN THE UK – For those of you who are unfamiliar with taxation law let me start by saying that ‘Tax Avoidance’ by any company, foreign or domestic whom operates within the United Kingdom is perfectly legal. However, engage in any type of ‘Tax Evasion’ and your company will pay the penalty.
So what’s all the fuss about? Google is legally avoiding its tax liability to HM Customs and Revenue and some feel that considering the profits it makes from its UK operations loopholes should be firmly closed in order to extract the correct taxes.
That would appear to be the solution and yet the tax legislation is full of holes and any company with the legal and accountancy resources will do everything in its power to avoid tax so that it can utilize the cash for internal development and provide a healthy return for its stockholders.
This, any company will tell you, is just good business practice and one that is demanded of them by their shareholders.
I’ve just read an article by Luke Johnson who is the founder of Risk Capital Partners and was the chairman of Channel 4 from 2004 to 2010 who accuses Google of being a ‘gigantic parasite’ rather than a company who reports of taking the ‘moral high-ground’ and to having the ‘highest standards of business conduct’.
Luke thinks all of Google’s company statements and glossy brochures that present the company as a cool, hip and happening company who promotes enlightenment is nothing more that pious rhetoric which is supported by the revelation Google paid a paltry £6 million on profits of £2.6 million.
Last week as the news broke Google’s executive chairman, Eric Schmidt, was forced into an interview with the BBC in order to defend Google’s tax position and fiscal conduct.
Right or wrong, moral or immoral, all large corporations are going to take full advantage of any tax loopholes. The simple truth is that if they didn’t their shareholders wouldn’t be happy and the bottom line is ‘the bottom line’ but Luke does have a few points that are justifiable and if I have read Luke’s points correctly this appears to be more about an ‘openness issue’ rather than a tax avoidance issue.
During the BBC interview Schmidt attempted to justify its use of the tax loopholes by suggesting that the savings the company makes allows Google to further develop its offerings to the British public. He also went on to say that Google supports a huge amount of internet start-ups by allowing them to earn much needed revenue through its own network.
This statement really did stick in my caw as Google’s multi-billion dollar annual profits, from its advertising network, would not be possible if not for those who included Google Ads on its sites. While Google may be a vast corporation it is solely dependent on users and advertisers but more importantly those millions of websites and blogs around the world that display Google Ads – that this away and Google would suffer a catastrophic meltdown. I will admit, as a start-up that runs Google Ads I was both astonished and appalled by statement that appear to be nothing less other than Google was doing us a favour and for the pittance we earn we should be grateful.
Most small to medium websites earn very little from their Google Ads but collectively we produce billions of dollars a year in revenue for Google.
How much is small? Just to give you an idea… I started Meebal.com in November 2012 with no money for marketing. I have now built up a daily readership of around 400 a day. This month I have earned less than £7.00 (that’s seven pounds sterling) so it’s not the sort of earnings that will allow me to live the high-life and I am not alone – there are millions of small to medium sized blogs all struggling along but they, like I, simply love doing what they do.
Another issue that Luke has with Google, and I fully support is its empty rhetoric of how it is helping the UK economy thought employment. Google employs around 2,000 people, a lot less than some would think and doesn’t have that many offices dotted around the UK. However it doesn’t need offices or that many people, it just needs warehouses full of servers to support its services.
Luke also pointed out some interesting information I wasn’t aware of and that is the fact that the UK is the second largest market for Google next to its U.S operations and generates 11% of its annual global income.
According to Luke and his research Google had revenues, in 2012, of £3.3 billion and with current tax rates should have had a tax liability of approximately £200 million, however a mere fraction of this was actually paid over to the taxman.
So how does Google get away with paying so little? Luke makes it clear that Google’s tax structure is highly complex as it has established a number of international businesses with which profits are filtered through. Primarily Google’s British revenues to an Irish company which in turn is then linked to other ‘holding’ companies based in the Netherlands which are owned by other companies in the tax haven of Bermuda.
Again it must be pointed out that the process of tax avoidance is perfectly legal and Google has broken no laws in its bid to severely reduce its tax liability to the British Government.
Taking the shareholders out of the equation for the moment it could be argued that what Google does is good business practice that allows it to utilize greater profits for future development of its services, both existing and new, which in turn creates great opportunities – well that’s what Google would have you believe but nothing future could be from the truth.
Ask yourself why Western Governments have laws preventing monopolies – it’s because no company should be able to completely dominate a market nor should it become so powerful that it can exploit its wealth on the political arena. This is of course a little naïve as the U.S has a system of ‘lobbying’ where powerful corporation, including Google, wield influence over government policy to a huge extent.
The bottom line here is that with Google’s continuous growth it is able to squeeze out existing and potential competitors. This was clearly demonstrated recently when the European Trade Commission found Google guilty of manipulating its own services to stifle its rivals; a similar action with the U.S Federal Justice Department last year which cleared Google of any such practice. The U.S Federal Justice Departments findings have now been called into question considering the EUTC investigation leading some to suspect Google many have influenced the FJD in some way.
“Essentially, Google is a gigantic parasite that makes a fortune from exploiting the creativity and entrepreneurship of others. Its search engines do not actually make anything; they just take advantage of the achievements of others.” Luke Johnson
From the perspective of a small start-up, that Google denied entry into its Google News Service, on the grounds that Meebal.com didn’t really produce much in the way of news, I have to say this restrictive practice places Google in prime position and one that meebal.com will find almost impossible to overcome.
Google reports, in its Webmaster Guidelines, that it only wants to index ‘quality’ and ‘unique’ content, both of which I feel meebal.com fully complies with. I try my best to give my readers what they want and that is open and honest news written with a personal perspective – only my visitors should judge the quality and as far as uniqueness goes it doesn’t get any more unique when written from a person perspective.
Google, for all its rhetoric of helping new online business to reach stardom through its search engine is simply that, rhetoric and hollow with it. Almost all small websites I know of comply fully with Google’s guidelines and terms and yet our position within the search engine ranking is so insignificant it might as well not be there in the first place.
I have heard rumbles of webmaster discontent for many years and I feel there will come a time where sites across the globe will start blocking Google from indexing their sites in protest for the ever growing power Google exerts over the web. If this were to occur then Google’s search engine would quickly become defunct with no content to display search results.
One of Google’s main guidelines is that of ‘unique content’ as I mentioned above and yet Google itself, while it ranks high in the search engine results has almost no unique content to boast of. Google has, over the years, been in and out of court for copyright infringement ranging from movies, images and text – most of these directed at YouTube which Google acquired in late 2006.
If you think this synopsis is a little far-fetched go and do a Google search for anything you like and see how many times YouTube appears in the top rankings. YouTube effectively breaks every rule in the book as the content it displays is duplicated throughout the web and most pages fail to carry the required minimum of 300 words – something that Google will penalize other websites for.
How much influence do you think Google has within the halls of the British Government? I was a little skeptical about this until I read Luke Johnsons article in which he details a web of interconnected political connections that can spell only one thing ‘influence’.
Here’s what Luke Johnson had to say:
“Google’s current head of public policy in the UK is Sarah Hunter, a former adviser to Tony Blair, while the company’s global head of communications is Rachel Whetstone, who used to work for ex-Tory leader Michael Howard and is married to David Cameron’s former policy chief Steve Hilton.
Another British Google staffer, Naomi Gummer, is the daughter of Cameron’s close friend and Tory peer Lord Chadlington.
In 2010, Ms Gummer was controversially named a special adviser to Jeremy Hunt when he was in charge of the Department of Culture, Media and Sport.
Moving in the opposite direction, Amy Fisher used to be a communications officer for Google and now works as special adviser to the Justice Secretary Chris Grayling.” Luke Johnson
If there was any doubt about how Google influences UK Government policies in any way this would strongly suggest that the matter can be laid to rest; it would be foolish and naïve to think or suggest that these appointments are not politically motivated.
It does get a little more suspicious when you look back to last year in East London when the Chancellor, George Osborne was called in to open the new Google Campus which he announced in a speech; “The new Google Campus will help create and develop the next generation of British Technologies.”
Some Google opponents remarked that the speech would have been more truthful if it had read; “The new Google Campus will help Google exploit new talent and then steal innovative ideas from under its creators without any financial compensation.”
In the last part of Luke Johnson’s article was probably the most damning and for me disturbing. With Google’s growth it has acquired vast wealth and wealth it has used to manipulate the web for its own gain. It continuously breaks copyright laws and infringes on the public’s privacy and all with the blessing of the UK Government.
We are all aware that Google got itself into hot water over its Google Streetmap service as it was caught snooping in on Wi Fi Networks and stealing personal data. On top of this no one, as Luke rightfully points out, ever was asked for their permission to photograph their house and yet Google has been able to pry, monitor our online habits and even looking at our email, all without any real penalties imposed upon it.
“If you have something you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” Eric Schmidt and his response over Google spying on the public
If you think things are bad now then wait a few more years as Google will continue to grow and spread its influence through Governments that will allow it to rule the internet and spy on our every move without the slightest fear of reprisals from the law as it will have them firmly tied up in their web of interconnected connects that will make them untouchable.
If you would like to read Luke’s article it is available on the Daily Mail – Click to Read
Would really like your take on the article so feel free to leave your comments below.