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Economics

Study Notes

The Diverted Profits (Google) Tax

Level:
AS, A Level
Board:
AQA, Edexcel, OCR, IB

The UK government is introducing a new tax designed to reduce the amount of (legal) tax avoidance done by multinational businesses such as Starbucks, Amazon and Google which reduces the yield from corporation tax for the UK Treasury.

The Diverted Profits tax is also known as the Google Tax and it comes into force in April 2015. It is designed to counter the practice of large multinational companies diverting profits abroad through complicated business structures in order to avoid paying taxes. The new 25% rate tax will apply to a company's profits that have been diverted from the UK through complex arrangements.

This short piece from BBC business news looks at the practice of diverting profits overseas to countries such as Ireland that have substantially lower rates of corporation tax.

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