A couple of years ago, a furore arose across the European Union and Great Britain in particular. The leaders of these countries, you see, had found out that some of the world’s biggest tech companies — including Amazon, Google, and Apple — were paying tiny amounts of tax on incredibly large sums of revenue.
In the UK, for instance, it emerged that it had paid just £6-million on £2.5-billion worth of sales in the country. That in turn led to a hearing in which a UK parliamentarian called Google “devious”, “unethical” and “evil”. A former Google UK executive meanwhile alleged that the company misrepresented sales to avoid paying tax. Later, British Prime Minister David Cameron spoke out against the complex web of loopholes these tech companies used to avoid paying tax, calling it “aggressive” and “corrosive to the public trust”.
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And then things went quiet. But now, it seems, countries have been working in the background to make the likes of Google and Amazon pay their fair share of taxes.
This week it emerged that Google was preparing to pay €150-million in back-taxes to the Italian government, an amount which equates to 15% of its €1 billion revenues in the country.
Read more: The ticking tax-bomb: is Google good for your country?
The deal followed a probe into Google’s operations in the country, where it employs more than 130 people. It also follows a €315-million tax deal the Italian treasury cut with Apple, another company found to have used loopholes to avoid paying taxes. Italy is also set to introduce a “web tax” aimed at preventing big tech companies from engaging in such behaviour.
In France meanwhile, authorities are reportedly chasing Google for nearly €496-million in unpaid taxes. If it succeeds, it would represent a substantial proportion of the internet giant’s revenues in the country.
Interestingly, both countries’ efforts make the £130-million of tax dating back to 2005 that the UK managed to bring in seem paltry by comparison. As the BBC notes, the amount represent just three percent of Google’s total revenues during that period.
Despite Cameron’s earlier bluster, he was prepared to take the deal as a victory, pointing out that the money should have been collected under the previous Labour government.
“We’re talking about tax that should have been collected under a Labour government, raised by a Conservative government,” he said as he was questioned on the matter by members of parliament.
Read more: Eric Schmidt on Google’s UK tax practices: ‘What we’re doing is legal’
The deal hasn’t won any favours in Europe either.
French MEP Eva Joly, vice-chairwoman of the Special European Parliamentary Committee on Tax Rulings said it made it seem that the UK look was preparing “to become a kind of tax haven to attract multinationals” and that allowing companies to pay token amounts served only as a PR exercise.
While the deals certainly give governments hope that they can actually generate revenues from big tech giants such as Google, they fail to address the real elephant in the room. As long as there are ways for companies to avoid paying taxes through tax havens scattered around the globe, they will continue to do so. Their interest is in keeping investors happy, which largely boils down to increasing profits and cutting costs. And until that changes, it’s unlikely that they’ll suddenly become model tax-paying corporate citizens.
