Despite the fuss surrounding the way high-profile individuals legitimately avoid tax, the exchequer misses out on much larger sums when tech companies utilise tax avoidance schemes.
For instance, Google is the UK's biggest tax avoider, according to an article in the New Statesman. Google disputes the claim - I suspect with some justification. The New Statesman article also claims that Philip Green's Topshop pays 140 times as much tax in the UK as does Google, and compares the criticism levied against public figures such as the comedian Jimmy Carr and the entrepeneur Philip Green with the behaviour of big business. The author points out that whilst Green's personal tax affairs are 'open to criticism', Green's retail business Arcadia is "one of the most highly taxed and responsible companies in the UK". See also: Google lets slip next version of Android Jelly Bean will be 4.1
A Google spokesman told PC Advisor that in its view there is no evidence to uphold the claim that Google is the biggest tax avoider in the UK or anywhere else. And, well, we can't argue with that - no league table of tax avoidance exists. But with regard to its tax-paying status a Google statement reads: "We have an obligation to our shareholders to set up a tax efficient structure, and our present structure is compliant with the tax rules in all the countries where we operate." Which is interesting because it is not a denial of avoidance of tax - if anythign it is more of a boast about successfully and legally doing so. (See all Internet news.)
According to the New Statesman article, Topshop's parent company has paid £290m in corporation tax since 2006 and is scheduled to pay £80m this year. Google's tax affairs look somewhat different, however. The article claims that the UK is Google's second biggest market, representing 28 percent of the company's total earnings (the US is the biggest market, naturally). It says that in 2009 Google generated £1.25bn of UK income but paid only £600,000 in tax. Taken as a percentage of total earnings, that's just 3.2 percent tax. We've got no way of proving those figures, but it really doesn't matter: the point is that Google isn't denying that it pays as little tax as possible. Indeed, it says it is behoven to in order to satisfy its shareholders.
Google achieves this low figure, the New Statesman claims, by utilising the tax minimisation ploy know as 'the double Irish', in which profits are siphoned between Ireland and The Netherlands. This is despite Google's European arm having a huge base in London, thousands of UK employees and that £1.25bn UK business. But it would be unfair to single out Google.
According to a story published by The Telegraph in April this year, Apple and Amazon are other tech companies with huge UK profits and tiny tax bills. The Telegraph report said that Apple paid only £10.3m in corporation tax in the year to September 25, 2010, despite profits of around £6.3bn. The Telegraph says "The US giant avoids paying higher taxes by using foreign subsidiaries, such as in Ireland and the British Virgin Islands."
The same report alleges that Amazon had ammassed £8bn of sales in Britain over the previous three years without paying any corporation tax.
How you feel about this depends on your view of tax liabilities. Perhaps more stringent enforcement of the tax code would scare away tech giants from the UK. Personally, I doubt it: these businesses make huge profits in the UK, which is one of the world's most tech savvy and affluent societies. And in a time of austerity, we could certainly use more cash in the tax man's coffers.
So, before you wade in to criticise tax-avoiding individuals, consider the tech giants who make a fortune, and pay back much less.