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'Google Tax' In Force To Tackle Avoidance

Multinational companies that shift their profits offshore to avoid tax now face being slapped with a levy.

The diverted profits tax (DPT), which has now come into force, aims to crack down on the controversial practice which has sparked criticism of companies like Google (Xetra: A0B7FY - news) , Starbucks (Hanover: SRB.HA - news) , Amazon and Apple (NasdaqGS: AAPL - news) .

Only last month, a financial watchdog highlighted its continuing concerns that multinational companies trading in the UK were not paying the right amount of tax.

Members of the Commons Public Accounts Committee said evidence given by Google, Starbucks, Amazon and large accountancy firms showed the use of tax avoidance measures was "widespread".

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In 2013, Facebook (NasdaqGS: FB - news) paid just £3,169 in tax, while Amazon paid £10m, Apple (Swiss: AAPL.SW - news) £11m and Google £11.6m.

At the same time, the total revenues of the four companies in the UK was more than £17bn.

Meanwhile, it was revealed Starbucks paid no corporation tax between 2009 and 2012.

Despite sales of £400m in 2011, the coffee giant claimed it had made a loss in those years and so paid no tax.

There has been mounting pressure to tackle tax avoidance in the face of the austerity-driven spending squeeze.

The so-called "Google Tax" will see firms charged 25% on profits artificially siphoned offshore.

It is expected to make £25m for the Treasury this financial year, rising to £360m by 2020.

Other changes being introduced from April 1 include reducing the rate of Corporation Tax paid by companies from 21% to 20%.

These were highlighted by Chancellor George Osborne as 100 leading business figures gave their backing to the Conservatives and said Labour would damage Britain's economic recovery.

He said: "Their message is positive: under David Cameron's leadership, we have an economic plan that is working and creating jobs.

"Today that plan sees corporation tax cut again to 20%, and a new diverted profits tax so those low taxes are paid."

Labour's shadow business secretary Chuka Umunna has hit back at the open letter, saying: "No one will be surprised that some business people are calling for low taxes for big businesses."