The Emergence of Google Tax

Yesterday, George Osbourne, British Chancellor, announced that a new tax, entitled “Google Tax”, will come into effect on the 1^st April 2015. This tax is set to cost large multinational companies 25% of their profits and is expected to raise £3.1 billion in 5 years. This means that MNCs who have avoided paying their taxes up until now, will be in for a major shock!

The tax applies to companies whose annual revenue is equal to or greater than £250 million, assuming they are found guilty of artificially diverting profits to a low-tax destination.

Because of tax avoidance, companies such as Apple, Amazon, Google, and Facebook, will be paying a whopping 5% more than the Corporate Tax of 20% levied in the UK.

This new tax will mean that MNCs based in Ireland will now be paying the Google Tax on profits made from their UK sales.

Now for the big question – What does this mean for Ireland?
Enda Kenny is adamant that Ireland’s 12.5% company tax “won’t and can’t be changed”. But if countries like France & Germany hop on the Google Tax bandwagon, then it’s possible that, while not entirely abolishing the Irish 12.5% tax rate, they may be able to render it completely irrelevant.

Analysts estimate that almost €3.2 billion comes from multinationals. So if the tax inflow from these MNCs was to cease, then the government would have to raise this money another way, which would most likely be by increasing the USC charge to a figure looming around 10%.

I know for sure if this came to be, then myself, and all others would be outraged by almost 10% of their earnings being taken just like that, and spending would certainly decline, dealing yet another blow to the already decrepit Irish economy.

Ireland clearly needs to wake up & get in the game, because unless we do, we’re going to lose.

Find more on the topic here and here