Google and the £6billion Bermuda tax shelter: Web giant's haven revealed as Cameron urges global crackdown

• Google funneled £6billion to Bermuda, avoiding £1billion tax bill
• David Cameron wrote to G8 leaders calling for a stop to 'unfair' practice

Google funnelled an astonishing £6billion through the tax haven of Bermuda in a year – while paying just 0.1 per cent of that amount in British corporation tax.
Official documents reveal that by exploiting the tiny tax haven the internet giant halved its global tax bill in 2011 – leaving governments, including the UK, out of pocket by more than £1billion.
In the same year the firm legally arranged its accounts to surrender just £6million in corporation tax in the UK. The startling revelations came yesterday as David Cameron called on world leaders to launch a global crackdown on tax avoidance by multinationals.

Googleplexed: By funneling the money through Bermuda, Google HQ, pictured, only paid 0.1 per cent in British corporation tax avoiding paying over £1billion in taxes to various governments

In a letter to Barack Obama, Angela Merkel, Vladimir Putin and other G8 chiefs, the Prime Minister said co-ordinated action is needed to make major corporations and wealthy individuals pay their fair share of tax.
Mr Cameron said: ‘I do believe  we all have a common interest in being able to tell our taxpayers who work hard and pay their fair share of taxes that we will make sure others do the same.’

His intervention follows a year in which the tax affairs of multinationals and wealthy individuals have come under intense scrutiny and criticism in the UK.

Bold steps: David Cameron urged fellow G8 leaders to crack down on tax dodging by international companies

Major firms such as Google, Amazon and Starbucks were described as ‘immoral’ by MPs on the Public Accounts Committee following revelations about the legal loopholes they exploit to reduce their corporation tax liabilities in this country to almost nothing.
Last month Starbucks was shamed into offering to pay £20million to the Treasury over two years following a public backlash and consumer boycott.
But campaigners say a systematic drive is now needed to close down tax loopholes across the world.
Official documents revealed that the amount Google is diverting offshore has almost doubled over the past three years.
They also show the extraordinary lengths taken by the firm to avoid tax.
Google’s UK boss Matt Brittin admitted to MPs last year that the company uses Bermuda, a renowned tax shelter where firms are not forced to pay a penny on their profits, to hide some of its money.
Google lowered its UK tax bill for 2011 by more than £200million by pushing £2.6billion of British revenues offshore. Company chairman Eric Schmidt said he is ‘very proud’ of the elaborate structure which enabled it to pay so little.
Now official documents have emerged showing the full extent of the labyrinthine payments.
Google lists its employees and operations based in the UK as a ‘service arm’ – which reports considerably smaller revenues.
The firm uses an Irish subsidiary to collect advertising revenues from Britain and other nations.
The Irish group then pays royalties to another Irish company, and these payments are then transferred to a holding company in the Netherlands, which has its tax base in Bermuda. Last year the payments to this Dutch group, which has no registered employees, were £6.1billion, according to official documents filed by the company.
This is an increase of 81 per cent on the £3.4billion sheltered in the company in 2008.
By using this complex structure to push revenues offshore, Google cuts its global tax bill in half – as the amount sheltered is equal to around 80 per cent of its pre-tax profits from last year.

Dodgers' heaven: Google's haven of choice, Bermuda, is a renowned for their tax laws which do not force companies to pay tax on their profits

The same official documents show that Google’s tax rate outside of the US was just 3.2 per cent last year, even though the vast majority of its operations are in European countries where tax rates vary between 26 and 34 per cent.

The findings are ‘a deep embarrassment to governments across Europe’, said tax accountant Richard Murphy. ‘The only people who benefit from this policy are Google’s management.
‘As well as short-changing taxpayers, the company’s shareholders are short-changed because the money is locked away in Bermuda.
‘Management is denying shareholders any prospects of the dividends they deserve for investing in the company.’
The Chancellor has announced he will this year bring in a general anti-abuse rule to clamp down on tax avoidance – which is legal but viewed as morally questionable.
The UK yesterday took over the 12-month revolving presidency of the G8 group of leading industrialised countries. In his letter to fellow leaders Mr Cameron urged them to start work now on preparing ‘bold steps’ to take when they meet in Northern Ireland in June for the G8’s annual summit.
He warned he would not allow a summit where rich nations ‘simply whip out a chequebook at the 11th hour, pledge some money and call it a success’.

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