Is Google Stirring Up U.K. Tax Trouble?

What’s this? Is Google (NASDAQ:GOOG) in trouble in Europe again? U.K. officials are not happy with the company over what they seem to believe has been significant tax avoidance on the part of the search giant.

Google seems to have been having trouble staying out of trouble in Europe. Recently, it was under legal scrutiny in both the European Union and the United States over some illegal data gleaning that it had done when it had cars rolling around the streets of both areas to create Google Maps’ signature Street View. In Europe, Google was fined a whole 145,000 euros — about $186,000 — by German regulators for what it had done.

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However, at the time, there was concern that the fine would not be nearly enough to dissuade Google from ceasing its illegal actions. With a 2012 net profit of $10.7 billion, the fine amounted to only 0.002 percent of its profits. Johannes Caspar — the data protection supervisor in the Hamburg, Germany — said that fines as small as this were much too low to stop corporations as large as Google from illegally collecting data.

The tax situation in the U.K. might be a different story, but it rings with similar tones to the illegal data collection in Germany. According to Google’s Northern Europe boss, Matt Britin, employees in London were not in the business of selling product. This would make it so that Google didn’t have sales to be taxed, but it was later found that there had, in fact, been sales.

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In November, Brittin said, “Nobody is selling,” in relation to staff in the U.K. He has since denied misleading Parliament, but said that Google UK had more selling activity than he had previously let on. Thursday he said, “The U.K. team are selling, but they are not closing.” Google is already under scrutiny by the U.K. tax authority for how it handles traded services between Google UK Ltd and other Google companies.

The way things should have worked would have staff at Google Ireland making the actual sales to the U.K. and sending most of the turnover to Bermuda, allowing the sales to avoid taxation in the U.K. Between 2006 and 2011, Google paid taxes of $16 million to the U.K., but that was less than 0.1 percent of the $18 billion in revenue it had made during that time.

While the lawmakers are sure to be angry about this for a while, it’s not certain whether they will do anything significant about it. Given the tiny German fine that might not have convinced Google to change its ways, and a recent fine for Microsoft’s (NASDAQ:MSFT) breech of an antitrust agreement, it’s seeming like regulatory bodies can’t charge enough to deter this sort of activity from businesses.

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The Parliament’s Public Accounts Committee chairwoman Margaret Hodge said to Google, “You do do evil,” in regard to its tax avoidance in the U.K.

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