Tag Archives: Google

Google’s Controversial UK Tax Arrangements Ruled Legal

Google LogoHM Revenue and Customs (HMRC) has reportedly ruled that the highly controversial and very complex tax arrangements are within the boundaries of UK law. The ruling will see the multinational firm only required to pay a fraction of the tax that would otherwise have been due.

The ruling, which followed an investigation over the course of six years and has not previously been published, means that the American search giant is not required to pay tax on proceeds from the sale of advertising in the UK. This decision clears up some of the confusion around the fact that Google is only paying an additional £130 million in tax for the past ten years, which represents a very small percentage of its actual UK-generated earnings.

While it has been decided that the company’s tax practices are legal, many critics still label them tax avoidance and the agreement reached between Google and HMRC has been heavily criticised. The arrangement means that Google pays an effective tax rate of only 3% on the millions of pounds of income it generates in the UK.

The main tactic used to minimise Google’s tax bill involves taking steps to register the bulk of its UK profits in Ireland. A separate company based in Ireland carries out all of Google UK’s operations. The company works exclusively for Google, but is legally a separate business. They carry out work on behalf of Google UK in return for a fee. As a result, from a legal viewpoint only this fee qualifies as profit generated in the UK, and is therefore kept as low as possible. All other profits, which amount to millions, are counted as profits generated in Ireland where the business is based.

A number of other multinational businesses use similar arrangements to register their UK profits as occurring overseas in jurisdictions with lower rates of tax. The ruling that Google is operating within the boundaries of the law could therefore have important implications when it comes to assessing the legality of other major companies engaging in alleged tax avoidance. Technology giant Apple and major online retailer Amazon are among the more prominent examples of companies employing similar tactics.

The decision that this practice is currently legal has also led to increased pressure on the government to take steps to close loopholes and prevent profits from multinational businesses being diverted abroad in order to avoid paying tax in the UK on income that has been generated here.

Progress and Limitations on “Right to be Forgotten”

Google Logo 2010Google has recently made some first steps in complying with the recent EU ruling that individuals may have some information about themselves¬†removed from search results as part of a “right to be forgotten.” However, while Google has done a lot in a very short time to comply with the ruling in spite of the company’s own disappointment with the controversial decision, there remain strict limitations in place. Some of these limitations are with the ruling itself, and show no signs of going away however closely Google complies with the law.

Google recently created a webform through which people are able to request the removal of content. Individuals completing the form will have to explain their reasons for considering the content “irrelevant, outdated or otherwise inappropriate.” Under the EU ruling, it is only this type of content that can be removed in order to prevent negative media coverage from a person’s past continuing to dominate any search engine query relating to that individual. Those submitting requests will also have to specify which European jurisdiction they reside in and provide digital copies of identification in order to prove their personal eligibility.

However, by Google’s own admission these efforts are in the early stages. The form is just an “initial effort” with significant changes and improvements to the company’s systems still expected in the months to come.

Furthermore, the EU ruling is disappointingly non-specific even for some of those who agree with the European Court of Justice’s decision. The type of content specified as eligible for removal is extremely broad, and at the same time vague enough to make it difficult to specify any one type of content. For their part, Google seem to have adopted a fairly narrow interpretation. Once a removal request has been received, they will weigh up whether the information’s availability is in the public interest, and if they feel that it is the request is likely to be rejected. When it comes to the public interest, Google seem to have matters such as financial fraud, misconduct and professional malpractice in mind.

There are also some limitations that will never be overcome by Google’s efforts alone. This fact will not be unwelcome to the many who have disagreed with the EU Court of Justice’s ruling, but will certainly disappoint those who are hoping to have negative media coverage buried. For a start, the ruling relates only to search engine results. It will still be accessible through links on other websites and searches within the news website itself. Secondly, it only applies to search engines focussed on markets within the EU. Through the nature of the internet, it is extremely easy for individuals within the EU to access search engines outside EU jurisdictions in which the results may still appear, and this could include Google’s own, main .com domain.