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Google's £130 million 'derisory' tax deal must be investigated says Labour

Published 23/01/2016

Google has agreed to pay back taxes of £130 million to the Government
Google has agreed to pay back taxes of £130 million to the Government

Google's £130 million deal with the taxman is "derisory" and must be investigated by the public spending watchdog, Labour has said.

The internet giant reached the agreement with HM Revenue and Customs over taxes it has owed since 2005 and will also start to pay tax "based on revenue from UK-based advertisers, which reflects the size and scope of our UK business".

But John McDonnell said the public would be "sceptical" about the settlement and called for the National Audit Office to launch an inquiry into the deal.

The shadow chancellor said he would be demanding details of the deal from Chancellor George Osborne in parliament on Monday and criticised the HMRC for agreeing to recoup a "relatively small amount".

"It looks to me from all the independent analysis that this is relatively trivial in comparison with what should have been paid," he told BBC Radio 4's Today programme.

The move comes after years of criticism of Google and other multinational firms over their tax arrangements in the UK and across Europe.

Google's sales were valued at £3.8 billion in Britain during 2013 but it paid just £20.4m in UK taxes that year.

Between 2006 and 2011 the company's revenue in the UK hit around £12.6 billion but its corporation tax payments for the period totalled £11.2 million.

Meg Hillier, who chairs the Common's Public Accounts Committee (PAC,) will call Google and HMRC figures before MPs to explain the deal, which she said showed the taxman "admitting it pulled in too little tax from Google for nine out of 10 years".

"The news that Google is paying 10 years' back tax vindicates the Public Accounts Committee's vigorous pursuit of international companies that were running rings around tax officials," the Labour MP said.

"We were shocked to learn of workarounds of the tax system that were considered normal behaviour by big corporations but which appalled the individual taxpayer.

"HMRC now needs to assure taxpayers that it will keep up the pressure to tackle whatever the next emerging issue is in real time, rather than years later. It is effectively admitting it pulled in too little tax from Google for nine out of 10 years."

The committee's previous chairwoman, Labour MP Margaret Hodge, was an outspoken critic of the firms' tax affairs and led tough questioning of companies.

During PAC hearings, firms have been accused of "siphoning" off profits made in the UK to countries where they pay less tax.

Mrs Hodge branded tax avoidance "immoral" and suggested that Google's tax activities were "evil".

In March's Budget the Chancellor announced the introduction in April of a so-called "Google tax" targeting firms that move their profits overseas.

The "diverted profits tax" is designed to discourage large companies from taking earnings out of the UK to avoid tax.

Mr Osborne described the payments as a "victory" for action on tax avoidance.

He said: "Good to see Google paying more tax on past profits. We want successful businesses in UK - but they should pay their taxes.

"Google tax bill is a victory for the action we've taken. I introduced diverted profits tax. We now expect to see other firms pay their share."

A Google spokeswoman said: "We have agreed with HMRC a new approach for our UK taxes and will pay £130 million, covering taxes since 2005.

"We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business.

"The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result. This settlement reflects that shift and is in line with recent OECD guidance."

An HMRC spokesman said: "The successful conclusion of HMRC inquiries has secured a substantial result, which means that Google will pay the full tax due in law on profits that belong in the UK. Multinational companies must pay the tax that is due and we do not accept less."

Treasury minister David Gauke said: "The Google tax bill dates back to the middle of the last Labour government, which did absolutely nothing about it. Yet again it is this government that is sorting out the mess.

"For Labour to complain now is at best selective amnesia and at worst shameless hypocrisy.

"Of course, the details of the payment HMRC has agreed can now be examined by the National Audit Office."

Wes Streeting, a Labour member of the Treasury select committee, said: "HMRC and Google should be hauled before the Commons Treasury committee to explain how they've managed to agree such a paltry sum at the end of a lengthy negotiation behind closed doors.

"Most people filing their tax returns this month will be appalled that a multinational giant like Google can get away with effectively determining how much tax they pay and at bargain basement prices."

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