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UK enacts new tax to cope with companies like Apple, Google diverting profits overseas

A new tax in the U.K. directly targets companies such as Apple, Amazon, and Google, which have been accused of shifting profits overseas to avoid paying taxes in countries where they nevertheless do business.




The Diverted Profits Tax —sometimes nicknamed the "Google Tax" —will see multinationals owe 25 percent on offshored profits, Sky News reported on Wednesday. That's above the level of the U.K.'s Corporation Tax, which is today being reduced from 21 percent to 20 percent.

Google paid £11.6 million ($17.2 million) in local taxes during 2013, while Apple paid £11 million ($16.3 million), despite the U.K. being one of the world's most lucrative markets. One of the worst offenders is thought to be Facebook, which paid out just £3,169 ($4,696), below what many households might owe.

Starbucks however paid no Corporation Tax at all between the years of 2009 and 2012, claiming that it had suffered a loss. The coffee vendor managed £400 million ($592.8 million) in 2011 sales alone.

One of the most common tax havens is Ireland, which until recently had a loophole known as the "Double Irish." Apple specifically has funneled much of its non-US revenue through the country, and in 2014 paid only $1.1 billion in taxes on $30.5 billion in foreign earnings, or roughly 4 percent. That loophole should be closed by 2020, which will force companies like Apple and Google to either accept a higher tax obligation or find other havens.

Late last month, Italian prosecutors accused Apple of failing to pay over 879 million euros ($964 million) in corporate taxes, citing the company's Irish tax scheme. The case could go to trial. Apple has denied any wrongdoing, claiming that allegations against some of its Italian and Irish staff are "without merit."