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Google tax deal 'disproportionately small' says Public Accounts Committee

Published 24/02/2016

Google's £130m tax settlement
Google's £130m tax settlement "seems disproportionately small", says the Public Accounts Committee

Google's £130 million tax settlement "seems disproportionately small", an influential Commons committee investigating the deal has said.

Public anger at the agreement with HM Revenue & Customs to cover taxes due over the past 10 years has been "palpable", MPs said.

The internet giant insisted that it pays a "fair" amount of tax and Chancellor George Osborne hailed the deal a "victory".

But the Public Accounts Committee said it "seems disproportionately small when compared with the size of Google's business in the UK, reinforcing our concerns that the rules governing where corporation tax is paid by multinational companies do not produce a fair outcome".

Meg Hillier, who chairs the PAC, said: "Public anger has been palpable ever since this settlement was announced and we still don't know the full details.

"Whether you call it secrecy or confidentiality, this lack of transparency does nothing to build confidence that big corporations are paying their fair share of tax.

"Google has been keen to parade its enthusiasm for simplicity in the tax system but the fact remains the company has chosen to set up a complicated tax strategy specifically designed to minimise its tax bill."

MPs said they were concerned that the taxman "appears to have settled for less" corporation tax from Google than other countries are willing to accept.

The committee pointed to French and Italian investigations into the company, which are expected to lead to larger payments.

It called for HMRC to reopen the deal if new evidence becomes available as a result of the probes by European authorities.

MPs said the lack of transparency over the details of the settlement and how it was reached meant they could not judge whether it is fair to taxpayers.

They criticised HMRC for taking six years to carry out "a very expensive and resource-intensive" investigation into the company's tax affairs before finalising the settlement.

The taxman " seems unable to collect a fair share" of corporation tax from global companies in the UK because international rules are not working, the PAC said.

Google did not pay a penalty as part of its settlement and complex rules make it easier for large businesses to avoid being fined than the average taxpayer, it added.

MPs called for reforms punishing businesses for failing to pay tax to be introduced swiftly.

Ms Hillier said: " HMRC itself has identified that the current penalty regime treats corporations differently from individual taxpayers.

"That is why we are calling on HMRC to take a lead in reforming international tax rules. The bigger prize after a costly six-year investigation would have been to develop a new approach to the activities of internet-based companies.

"We are not convinced HMRC has achieved this and it must work with overseas tax authorities if we are to see lasting and effective change in the international tax system."

Shadow Chancellor John McDonnell said the report showed it was "far too easy" for companies like Google to use loopholes to "pay the least amount of tax as possible".

"This is a damning report on a tax deal that George Osborne initially called a 'major success', when we all know that this deal really demonstrates the Chancellor's laid-back approach to tackling tax avoidance and evasion.

"The Public Accounts Committee is right to point out, as Labour have, that we urgently need to see transparency around the deal that was done as we still have no details so we cannot tell if this was fair for taxpayers. It also leaves serious questions about why the deal with HMRC took so long to agree.

"This report further shows that it's far too easy for big multinationals like Google to set up a merry-go-round of tax loopholes to deliberately pay the least amount of tax as possible.

"It is vital that George Osborne gets a grip as these companies have been getting away with paying very little for way too long."

An HMRC spokesman said: "HMRC does not settle for a penny less than is due under the law from multinationals. Last year we brought in an additional £7 billion by rigorously enforcing the tax rules that apply to large businesses.

"We completely understand that there is a real appetite for as much information and insight as possible into how we pursue the tax payable by multinationals.

"We are committed to being as open and transparent as we can within the constraints of our statutory duty of taxpayer confidentiality."

He added: "The penalty rules will change this year to better support those who play by the rules and the PAC has welcomed that."

A Downing Street spokesman said: "The key point is that HMRC are clear that the £130 million that they have got back from Google is the taxes that were owed and it was the correct amount of money to be paid."

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