Google tax row highlights need for new business levy, says Lawson
THE Google tax row shows that corporation tax has “had its day” and should be replaced with a levy on corporate sales, Lord Lawson, the former Conservative chancellor, has said.
The peer, who has acted as an informal adviser to George Osborne, said the fact that multinational companies can move profits around the globe meant that corporation tax was out of date.
As the row over Google’s “sweetheart” deal to pay a £130 million bill to cover tax owed between 2006 and 2011 continued, a senior executive at the company agreed to give the first public defence of its actions. Peter Barron will appear on The Andrew Marr Show on BBC1 tomorrow morning.
Lord Lawson, chancellor under Baroness Thatcher from 1983 to 1989, said: “It is profoundly unsatisfactory that corporation tax has to be collected from large multinational corporations by a series of ad hoc compromise deals, as we have once again seen with the Google affair.
“It is also grossly unfair on smaller businesses, who are unable to shift profits between tax jurisdictions and have to pay the full amount due.
“I have long argued that in the modern world corporation tax has had its day as a major source of tax revenue. It needs to be a much lesser tax, bolstered by a tax on corporate sales. While mul- tinationals can artificially shift profits to whatever tax jurisdictions they choose, sales are where they are, and can’t be shifted.”
Meanwhile, Downing Street confirmed that Google had not had to make payments under the new diverted profits tax, introduced by the Chancellor last year to target companies that artificially shift revenues overseas to avoid paying tax in the UK.
The measure was nicknamed the “Google tax” after Mr Osborne said it was designed to put a stop to technology companies going to “extraordinary lengths to pay little or no tax here”.
Critics have accused the internet search giant of shifting billions of pounds worth of profit generated in the UK to low-tax Ireland.
But a No10 spokesman said that diverted profits tax was being applied only to those companies that fail to pay corporation tax at the appropriate level. He added that HM Revenue and Customs has already said that Google has paid the taxes due.
The new tax came into effect last April at a rate of 25 per cent, with the aim of creating a deterrent to companies seeking to avoid corporation tax at the lower rate of 20 per cent.
A Google spokesman said: “After a six-year audit by the tax authority we are paying the amount of tax that HMRC agrees we should pay. Governments make tax law, the tax authorities enforce the law and Google complies with the law.”