Google is now the latest multi national to hit the world’s media regarding doing business in the UK. It is perfectly legal for a company to organise its tax affairs so that it pays the least amount in the country it does business in – in this case, Google – doing business in the UK.
It may also be seen to be amoral.
However other large US companies adopt similar practices, generating profits in low tax havens – and keeping them there.
In the US such profits are taxable in the US only when repatriated – that is brought back into the US.
To avoid the tax effect (of paying normal US taxes like domestic corporations) Apple has had to resort to borrowing $48 billion to pay back capital to shareholders (rather than using its own cash it daren’t bring back to the US currently) – using its cash held offshore as security.
Oh for a simple rule that they be asked to pay tax on all their worldwide profits, whether repatriated or not.
That might have 2 effects:
A windfall to the US treasury of the tax on that dead money held overseas, by providing a boost to the US economy as the tax generated flows into the US and state coffers (or brings down government borrowings)
More consideration to US companies paying taxes offshore, when such taxes can be offset against US taxes. This might enable them to pay tax fairly(?) in those counties they are doing business in (akin to a sales tax by country?) knowing that such taxes would have to be paid anyway once they become liable to tax in the US on worldwide profits.
We work with overseas companies doing business in the UK from a company formation perspective through to VAT registration and monthly accounting services as well as payroll processing. For further information on doing business in the UK – please get in touch.