U.K. Issues 14 ‘Google Tax’ Charges to Multinational Companies

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By Ben Stupples

The U.K. has sent more than a dozen “Google tax” charging notices to multinational companies since introducing the controversial penalty, according to official data.

“In 2016/17 HMRC issued 16 DPT preliminary notices and 14 DPT charging notices,” Her Majesty’s Revenue and Customs, the U.K. tax agency, said on the diverted profits tax in statistics published Sept. 13. “During 2015/16 HMRC did not issue any DPT preliminary or charging notices,” it added.

The most detailed information yet from HMRC on the diverted profits tax, the data comes as the tax authority reported an 89.6 percent increase in additional receipts collected from multinational companies by challenging their transfer pricing arrangements.

According to the Sept. 13 data, HMRC secured 1.6 billion pounds ($2.1 billion) from this activity in the financial year to April 2017, dwarfing the 853 million pounds for the previous 12 months. The latest figure includes the extra 281 million pounds in receipts collected that year through the DPT.

“With 14 charging notices issued by 31 March 2017 we would expect significantly more next year,” Heather Self, a U.K. tax partner at London-based law firm Pinsent Masons LLP, said in a Sept. 13 emailed statement. As “many companies have 31 December year ends and the deadline for notices for the period ended 31 December 2015 is 31 December 2017, so we think a lot of notices will be issued in the second half of this year.”

LSE, Diageo, Glencore

The data from HMRC also follows multinational companies’ disclosures on DPT, nicknamed the “Google tax.” London Stock Exchange Group Plc, U.K.-based drinks company Diageo Plc, and Switzerland-based conglomerate Glencore Plc are all grappling with HMRC over DPT charges.

Last month, at the same time, Bloomberg BNA revealed San Jose, Calif.-based Netgear Inc., a maker of WiFi-connected products, as the first U.S. multinational company to face the DPT.

Under the U.K.’s DPT laws, companies have to notify HMRC if they have any arrangements that may fall in scope of the tax. If the tax authority believes that a company may owe DPT, it first issues a preliminary notice. A charging notice then sets out HMRC’s demands for DPT, giving companies 30 days to pay.

While it didn’t issue any charging notices, HMRC received 48 notifications from companies for the DPT in the 2015-16 financial year, according to the Sept. 13 data. The following year, it received a total of 145. Based on that data, only around 10 percent of multinationals’ notifications to HMRC about the DPT result in actual charging notices, according to data compiled by Bloomberg BNA.

Targeting Behaviors

The U.K. introduced the diverted profits tax in 2015 amid concern that Google parent Alphabet Inc. and other global tech companies were engaging in tax planning to shift their profits to offshore havens. The measure sets a 25 percent levy—higher than the country’s current corporate tax rate of 19 percent—on any profits HMRC deems to have been moved improperly out of the U.K.

The U.K.’s decision sparked controversy at the time, as the country took action individually amid the Organization for Economic Cooperation and Development’s efforts to rewrite global tax policy for multinationals. Since then, Australia has enforced a similar measure, with higher penalties.

The DPT “is not targeted specifically at any particular sectors or companies, but rather at particular behaviours and arrangements,” HMRC said in the Sept. 13 statistics. “It was expected that HMRC might not issue DPT notices during 2015/16,” the tax authority added.

To contact the reporter on this story: Benjamin Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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