Tomahawk, WI 10/16/2013 (BasicsMedia) – Google Inc (NASDAQ:GOOG) may have diversified into other products. One thing that is not in doubt is that the company continues to make waves where searches are concerned. It still earns a lot of revenue from its core business, that is, from its search engine. Its pay per click adverts still attracts a lot of revenue for the company. It has announced that the search trends are quite healthy for the third quarter. Recently, it emerged that the UK government is rumored to have initiated investigations to look into some of GOOG’s activities in the nation.

Did GOOG Break UK Tax Laws?

UK tax evasion laws are quite strict. Unfortunately, this is what GOOG and other Internet giants are accused of doing. The other companies that are currently being investigated by UK authorities with regard to having evaded paying tax include Facebook Inc, eBay Inc, Apple Inc, and Inc. The UK taxman accuses these five Internet giants of failing to pay more than $35 billion in tax. The tax body in the UK accuses these five tech giants of making faulty underpayments, dodging tax illegally, and restraint design. These are serious allegations.

These five companies are reported to have made more than £12 billion in Britain alone in 2010. The large part of the revenue was from advertisers and consumers in Britain. The tax body in UK says that based on these figures, the combined profits for all the five companies in the country would be around £2.5 billion. The money the five companies, including GOOG owe the exchequer amounts to £35 billion, which is an increase from that of £32 billion reported between 2009 and 2010 financial year. I wait to see how the UK tax body will recover the money.

How Much Should GOOG Have Paid as Corporation Tax?

If the corporation tax was to apply for GOOG and the other four companies, they should have paid £685 million. This is what they should have paid as corporation tax in 2010. What I gleaned from the records indicate that GOOG and the others paid only £19 million as corporation tax during 2010. Therefore, the UK tax body has every right to go after GOOG and the other four companies. As can be expected, the five companies have said that they broke no law since their actions were precisely what EU requires of them, that is, to treat it as a single market.

There are a lot of accusations and counter accusations flying all over. The five companies are not facing the easiest of times since they have to provide proof that they are not gui9lty of breaking any UK law regarding tax evasion or dodging. On the other hand, the UK tax body has to prove that GOOG and the other companies broke the law as it claims. This is interesting since if GOOG is found guilty, other countries within the EU may be forced to look at its tax activities within their jurisdictions afresh. These investigations have serious ramifications for everyone.

However, I do not expect these investigations to harm GOOG’s stock or financials in the short term, not unless they are guilty.

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