Here’s a bah humbug story to stoke some cynicism this Christmas. Google’s online services are free, apparently, so the country’s skint citizens shouldn’t complain too loudly about the fact it appears to pay a comically small sum of UK corporation tax.

Last year, Google reportedly earned £1.6 billion ($2.58 billion) in sales but paid the Inland Revenue only £141,519 in tax. That’s less than some top-flight footballers and they are infamous for employing accountants to hunt down every loophole going, so how does a mega-giant of search, video and Gmail get away with dodging what would otherwise be a £450 million bill on its sales?

The answer is it doesn’t have to because the money crosses the Irish Sea to its European HQ, which passes a considerably smaller sum to the government of that land. It’s all above board and legal, even if the company has also been accused of consolidating its expenses in the UK to cut the burden further.

Google will point out that it does contribute in that it employs several hundred people in the UK, all of whom pay tax, and it also buys services from other UK companies.  Lets not forget that it gives UK computer users access to services such as search, YouTube and Gmail free of charge, so be thankful that they want to be here at all.

Nonsense, Google simply extracts its pounds and dollars by indirect means, by pushing people through sponsored links for the long tail of search. Businesses that have paid for that ranking - and almost all significant ones do - pass the cost on as part of their business model. Remember that the next time you buy a DVD from Whether you used it or not to find the goods, Google’s search probably added to the cost.

Believing that Google is free is rather like the naive belief that TV adverts on channels somehow get made at huge expense without that fact affecting the cost of the goods and services they are promoting.

Behind its ‘free’ business model, Google costs us all, and fair enough you might say. Its model spreads the cost over all transactions, allowing everyone to benefit from it on the same basis. But whether it is paying tax in relatively large markets such as the UK or not, the economic benefit of companies such as Google is the degree to which their services stimulate the economy in ways that would not otherwise happen.

What is clear from its revenues relative to the tax it pays is this: Google needs more competition before we can say that the plus points outweight the minuses for the UK tax payer.