The Budgetary measure has been introduced today and companies that move their profits overseas to avoid tax will be subject to a “diverted profits tax”, also known as the Google Tax.
The tax follows criticism of multi-national companies such as Google, Starbucks, Amazon and Apple. Some of those companies are subsequently being investigated by the European Commission for their failure to pay tax in the countries where they operate. The tax will be charged at 25% of profits, and is expected to make £25m for the Treasury this financial year, rising to £355m by 2020.
In imposing the tax, George Osborne is responding to significant public anger over how little tax is paid in the UK by the new breed of mainly US and mainly tech-based multinationals, of which Google is unlucky enough to have become the poster child. The new tax measure is designed to discourage large companies diverting profits out of the UK to avoid tax. In his final Budget before the election, George Osborne said firms that aid tax evasion will also face new penalties and criminal prosecutions.