HMRC must fully investigate Google over tax, say MPs


Margaret Hodge, chair of the PAC, says HMRC should be "much more assertive"

HM Revenue and Customs should "fully investigate" Google after information from whistleblowers "undermined" the firm's defence of its tax arrangements, a committee of MPs has said.

Google says that advertising sales take place in low-tax Ireland, not the UK.

But the Public Accounts Committee (PAC) said it had been told by ex-employees of the tech giant that UK-based staff are engaged in selling.

Google said it complied with all the tax rules in the UK.

The company generated $18bn (£11.5bn) in revenue from the UK between 2006 and 2011 and paid just $16m (£10m) in UK corporate taxes in the same period.

Companies pay corporation tax on their profits, not their sales. But the current debate revolves around the apparent ability of multinationals to move their profits from country to country with little obvious relationship to where the sales are generated.

The committee also said that confidence in HMRC had been weakened.

It said it was "extraordinary" that the tax authority did not challenge Google over "the complete mismatch between the company's supposed structure and the substance of its activities".

'Much wider problem'

Start Quote

It's clear from this report that the PAC wants to see international companies paying more tax where their customers are located, but that's not how the rules operate today”

End Quote Google spokesman

Google executive Matt Brittin has twice appeared before the PAC - first in November, alongside executives from Starbucks and Amazon - and then in May when he was called back after whistleblowers said Google had sold advertising within the UK and invoiced customers in the UK.

He insisted that no-one in the UK could execute transactions, despite the fact that he employed sales staff in the UK.

"Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful," said Margaret Hodge, chair of the PAC.

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

Google is one of several multinational companies that have been strongly criticised in recent months for organising their tax affairs in ways that minimise the amounts they pay in the UK.

The committee said it was not singling out Google, nor Starbucks or Amazon, but said the tax avoidance of these multinationals was "illustrative of a much wider problem".

It said the only way for Google to repair its damaged reputation was for it to pay "its fair share of tax in the country where it earns the profits from the business it conducts".

A Google spokesman said: "It's clear from this report that the Public Accounts Committee wants to see international companies paying more tax where their customers are located, but that's not how the rules operate today.

"We welcome the call to make the current system simpler and more transparent."

Tackling tax avoidance

MPs were also critical of HMRC for not sufficiently challenging multinationals over their tax arrangements.

HMRC head of business tax Jim Harra said: "Since 2010 we have collected over £23bn in extra tax through challenging large businesses' tax arrangements.

"Through tackling transfer pricing issues, we have collected £2bn since 2010 alone. We relentlessly pursue businesses who don't play by the rules, these results reflect this."

The committee called on the government to strengthen HMRC and to simplify the tax code so that there are fewer loopholes.

The UK is hosting next week's G8 summit in Northern Ireland, and has put tax and transparency at the heart of the agenda.

Prime Minister David Cameron wants the meeting to include country-by-country reporting of where companies pay their tax.

"This government is committed to creating the most competitive corporate tax system in the G20, but this goes hand-in-hand with our call for strong international standards to make sure that global companies, like anyone else, pay the taxes they owe," a Treasury spokesman said.


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  • rate this

    Comment number 474.

    I have always been PAYE and received a letter from HMRC who had gone back 6 years and sent me a bill for thousands of £s. I had no recourse and was humiliated by them. It took 3 years to pay back. Yet companies like Google can pay minimal tax and nothing can be done because of the 'system'.
    The person on the street always seems to be on the receiving end, never the corporates. Fair it is not!!

  • rate this

    Comment number 409.

    The real issue is our complicated tax system, simplify it and the VAT system radically, ie very low flat rate tax and VAT with no credits or reliefs allowed and do the same with the benefits system. Until this happen the hard working middle will get taken advantage of by both ends of the system

  • rate this

    Comment number 397.

    Directors of a company have a legal duty to maximise shareholder returns, the directors of Google would be failing in their duty if they did not take all legal steps to minimise their costs including their tax liability. If the government wan more tax they need to change the rules, they seem to be able to do this very easily when they raise the duty on alcohol or tobacco!

  • rate this

    Comment number 393.

    In the current climate especially, the law should be changed to ensure loopholes are closed. It would be more cost-effective if government spent it's time on correcting this rather than focusing on cutting benefits to individuals. In a society which seems so concerned with 'fairness', where is the fairness in this?

  • rate this

    Comment number 77.

    The law is broken not the companies attitude to it.. No one in there right mind is going to pay tax when the law itself shows a way not too..

    As usual though its more headline grabbing for politicians to talk about companies than actually tackle the main problem


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