George Osborne announced plans on Wednesday to target tax-dodging multinational corporations such as Google, Starbucks and Amazon.
In this week’s autumn statement, Osborne made a pledge to“make sure that multinational corporations pay their fair share” by introducing a 25 per cent tax. The move comes in response to growing outrage against big corporates who managed to avoid most of the tax on their earnings in the UK by moving profits to low-tax havens.
The tax will be levied on profits “from economic activity here in the UK which they then artificially shift out of the country” in April 2015, Osborne said. More information will be released on December 10th.
The chancellor hopes that new Diverted Profits Tax will raise more than 1 billion pounds ($1.6 billion) over the next five years, a fairly modest sum compared to the profit that Google, for example, makes yearly. The company made of $5.6 billion in the UK in 2013, with a profit margin of 25 per cent, or $1.4 billion, according to a Reuters report. That year, a tax bill of 25 per cent would have asked for $350 million – or £223 million – but the company paid £20.4.
Many foreign governments are also interested in overhauling international tax treaties to stop such companies shifting revenues to low-tax areas. Tax experts believe that the ploy would be difficult to enforce unilaterally, the report added.