Britain proposes 25% tax on corporate profits shifted out of country

The British government is proposing a so-called “Google tax,” a 25 per cent levy on profits that are artificially shifted out of the country.

Efforts to boost tax paid by multinationals and banks included in fall economic update

Britain's Chancellor of the Exchequer George Osborne, left, with his deputy Danny Alexander head to the House of Commons to deliver the autumn statement on Wednesday. Osborne announced a 25 per cent tax on multinational profits shifted out of the country. (Alastair Grant/Associated Press)

The British government is proposing a so-called “Google tax,” a 25 per cent levy on profits that are artificially shifted out of the country.

U.K. chancellor George Osborne proposed the tax in his autumn statement on government budget finances released Wednesday,

The U.K. is under pressure to crack down on tax planning, especially efforts by technology firms, that allows them to avoid paying taxes by processing their sales in a low tax jurisdiction.

Last year the House of Commons Public Accounts Committee  probed Google’s structure, which it described as an “elaborate corporate construct” used to avoid tax by shifting their profits through Ireland.

Google has come under fire throughout Europe for its tax-shifting schemes and is in a fight with France over its tax structure. France has asked for $1 billion in corporate taxes, calling Google’s assertion that it does its business out of Ireland an elaborate facade.

Its dominance of search functions on the internet is also a sore point.

British banks to pay more tax

Last week the European Parliament voted in favour of considering “proposals aimed at unbundling search engines from other commercial services.”

In Wednesday’s statement, Osborne also launched a crackdown on Britain’s banks, who are contributing less to government coffers since the financial crisis.

He said he would introduce a new measure limiting bank profits which can be offset by losses for tax purposes to 50 per cent.

It was “unsustainable that some banks will not be making corporation tax payments for another 15 to 20 years,” Osborne said.

The new policy on banks is estimated to raise 3.5 billion pounds (about $6.2 billion Canadian) over the next five years.

Osborne’s growth forecast for Britain for next year have been revised higher to 3 per cent but 2016 GDP was forecast at 2.2 per cent, lower than previous predictions.

The opposition accused Osborne of floating the idea of a crackdown on multinationals to deflect criticism for failing to meet his budget targets.

The U.K.'s public finances have not improved as much as Osborne anticipated when he laid out the Conservative-led government's deficit-reduction strategy in June 2010.

While the budget deficit is falling, the shortfall will be £91.3 billion ($163 billion) in 2014-15 or 2.7 per cent of GDP.

With files from the Associated Press


To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.