Multinationals including Facebook and Google face 25% levy on UK profits , Britain imposes 'Google tax' to make tech titans pay dues:

From April, multinationals including Google and Facebook will face a 25 per cent tax on profits,.

Technology giants that avoid paying into Treasury coffers will be hit with a new ‘Google tax’, George Osborne said yesterday.

From April, multinationals including Google and Facebook will face a 25 per cent tax on profits generated from their economic activity in the UK.

The crackdown will focus on the form of tax dodging widely used by technology firms in which ‘elaborate structures’ are used to shift profits from higher-tax countries to those with lower levies.

However, firms may simply avoid the higher new charge by paying more corporation tax at 21 per cent.

And the Chancellor said the levy will raise just £1.3billion over the next five years – a figure dwarfed by the £4billion the two firms will make from advertising next year alone.

Just hours after his announcement it emerged that Google and Facebook are likely to hoover up more than half of Britain’s £8billion digital advertising market for the first time in 2015.

They are forecast to make a combined £4.1billion on ads on websites, smartphones, online video and social media, a report by eMarketer reveals. With Facebook’s UK ad revenues expected to grow to £743million and Google’s to £3.35billion, the figure puts the Chancellor’s projected £300million a year from the tax into perspective.

Experts also questioned whether it will be possible to raise much from the new levy at all, given how hard it is to know whether money is being artificially diverted.

The independent Office of Budget Responsibility gave the new tax a ‘medium-high’ uncertainty rating because it is based on ‘assumptions that cannot be readily checked’.

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‘Some of the largest companies in the world, including those in the tech sector, use elaborate structures to avoid paying taxes. My message is consistent and clear. Low taxes; but taxes that will be paid.’

MPs have accused overseas giants like Amazon and Google of using complex cross-border accounting measures to transfer profits to low-tax jurisdictions like Ireland.

This allows the companies to declare losses or tiny profits in Britain and pay minimal corporation taxes. Google paid £20.4million to the Treasury last year, but pulled in UK revenues of £3.3billion.

Bosses at Google also enjoy regular access to senior ministers, and there are also close links between present and former Google employees and the Tories.

Starbucks has also faced criticism for shifting revenues and the new boss of its UK arm this week suggested the coffee chain would not start paying into Treasury coffers for another three years.

Heather Self, of law firm Pinsent Masons, warned the tax could encourage retaliation against UK businesses trading overseas.

And Chris Morgan, head of tax policy at KPMG, said the levy is unlikely to be paid as companies restructure to ensure profits are not artificially diverted.

‘They will then be taxed at the standard rate of corporation tax in the normal way,’ he said.

Stephen Herring, of the Institute of Directors, said: ‘It is never easy to determine whether profits have been artificially diverted rather than being authentically allocated to a particular jurisdiction.’

Toby Ryland, of accountants HW Fisher & Company, said of the Chancellor: ‘He has made the right noises, but most multinationals will be able to side-step these new rules without breaking into a sweat.’

Via Dailymail