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Google tax defence is "deeply unconvincing"

Google bosses’ defence of the firm’s UK tax affairs have been “deeply unconvincing,” MPs have said.

The Public Accounts Committee (PAC) said it was surprising that HMRC had not challenged Google more thoroughly and called on the organisation to fully investigate immediately.

A report from PAC follows the questioning of Google boss Matt Brittin and Ernst & Young’s John Dixon, and suggests the Google’s huge UK profit is “out of reach” of the tax system.

The body of MPs also reiterated their concerns over dated tax frameworks that govern international e-commerce, which rely on automated processes.

Chair of the Committee, Margaret Hodge MP, said: “Google generates enormous profits in the UK. But despite an $18 billion turnover between 2006 and 2011 it paid the equivalent of just $16 million in taxes to the UK government.

“Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. It claimed that its advertising sales take place in Ireland, not in the UK.

“This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK based staff are engaged in selling. The staff in Ireland simply process the bills. Google also conceded at this second hearing that its engineers in the UK are contributing to product development.

“The company’s highly contrived tax arrangement has no purpose other than to enable the company to avoid UK corporation tax.

“Google’s reputation has been damaged by these revelations of aggressive tax avoidance. That damage will not be repaired until the company arranges to pay its fair share of tax in the country where it earns the profits from the business it conducts.

“Confidence in HMRC has also been weakened. It is extraordinary that the department did not challenge Google over the complete mismatch between the company’s supposed structure and the substance of its activities.”

In recommendations set out by the report, PAC also noted the role of big accountancy firms in the process of “artificial” tax arrangements, and called for such firms to have a role in promoting transparency in their clients’ taxes.

HMRC’s Jim Harra, director general for Business Tax said: “Since 2010 we have collected over £23 billion in extra tax through challenging large businesses’ tax arrangements. Through tackling transfer pricing issues alone we have collected £2 billion since 2010. We relentlessly pursue businesses that don’t play by the rules; these results reflect this.”

This was posted in Bdaily's Members' News section by Tom Keighley .