Bid to close 'Google tax' loophole will raise £5bn
George Osborne set his sights on technology giants and banks in the Autumn Statement in a tax avoidance clampdown set to raise £5bn over the next five years.
From April, the Treasury will introduce a 25% tax on profits generated by multinationals from economic activity in the UK which they then artificially shift out of the country.
The tax avoidance loophole has been nicknamed the ''Google tax'' because the arrangement - involving payments between different parts of a company to shift profits from higher-tax countries to those with lower taxes - is widely used by technology firms.
The Chancellor also announced a crackdown on the way banks are able to offset all their losses from the financial crisis against tax on profits for years to come, meaning that some banks might not be paying tax for 15 or 20 years.
This move is expected to contribute almost £4bn more in tax over the next five years.
Mr Osborne said it was not fair to other firms or the British people that technology firms were able to exploit the tax rules of different countries in order to avoid paying tax.
He added: "We will make sure that big multinational businesses pay their fair share. 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."
Mr Osborne said the diverted profits tax will raise over £1bn over the next five years.
Toby Ryland, partner at HW Fisher & Company, said the new measures were unlikely to cause multinationals much concern.
He added: "The Chancellor said this will raise a billion over five years, but ultimately this is a tiny proportion of the profits the multinationals he has in mind are generating. The Chancellor has made the right noises, but most multinationals will be able to side-step these new rules without breaking into a sweat."