Google, You Owe Us -- Signed, The UK

If you need just one reason to support the Chancellor's intention of bringing in a Digital Sales Tax next April, look no further than the reports surrounding Google's latest tax bill.

The giant that is one half of the duopoly has seen its tax liability go up from GBP49m to GBP67m. This is because, according to its UK accounts, it only made a profit of GBP246m in its last financial year. 

Now, you're probably wondering how on earth can Google -- which accounts for the majority of digital advertising expenditure in the UK, alongside Facebook -- have such a small profit? Does it run margins so tight that it is only left with a quarter of a billion pounds in profit to tax?

Those would need to be very tight margins indeed, considering that eMarketer is quoted in The Telegraph today as estimating Google earns revenues of GBP5.3bn in the UK each year.

A simple calculation would suggest it must cost Google GBP5bn to do business in the UK if it only has GBP246m of profit to tax at the end of a year of hard work.

The truth, The Telegraph makes clear, is a little more believable but much less palatable. The bulk of Google revenue, derived from digital ad sales in the UK, isn't accounted for in the UK. A Google statement makes it clear that the company offers the UK a lot. There is a huge investment in London offices, which will house 7,000 people.

When it comes to what the UK offers Google, however, I might humbly suggest I can think of the 5.3 billion-pound coins worth of business that it gets in return.

Let's reiterate -- this is not illegal and Google is right in saying it pays taxes that are due in the UK. Legally, there is no wrongdoing. Morally? I'm not so sure you can say the same.

On the basis of the Chancellor's current suggestion of 2% tax on revenue, not profit, the Digital Sales Tax would nearly double Google's liability overnight to around the GBP100m mark.

You can argue about the legality of a tax structure all you like. However, when a company dominates the UK market and then accounts for that revenue far away from the UK Treasury, there is something deeply wrong.

There may be some deep questions about where the Government it taking us on Brexit today, I think many would agree that to tax the tech giants at source and on revenue is a wise move.

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