Google defends UK tax arrangements

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Media captionGoogle UK boss Matt Brittin could not tell MPs how much he earned

Google's UK chief has defended the search giant's tax arrangements in a hearing before MPs on the Commons Public Accounts Committee.

Matt Brittin said he understood public anger about the amount of tax it paid.

However, he said Google was paying 20% tax on its UK profits, not the 3% figure cited in some reports.

The £130m in UK tax it paid for the 10 years from 2005 was reached following a "six-year rigorous, independent tax audit" by HMRC, Mr Brittin said.

Tom Hutchinson, Google's global tax chief, told MPs that the company did not negotiate its tax settlement with HMRC.

He told the committee that the tax authorities did not "throw out a number - it's not a negotiation", adding: "There was no top-line figure; that's not how the process works."

The £130m payment included £18m in interest, Mr Hutchinson told MPs, but no penalties or payments under the government's diverted profits tax - also known as the "Google tax".

Analysis: Kamal Ahmed, economics editor

Today's Public Accounts Committee hearing was interesting less for Google's explanation of its tax arrangements - we've heard much of that detail before - and more for HMRC's defence of the settlement.

There Dame Lin Homer, the head of HMRC, made two significant points.

First, she said that under the law HMRC could not have demanded more from Google, pointing out that the £130m settlement was the largest the technology giant had signed outside the US.

Dame Lin said it would not have helped if HMRC had gone to court.

Certainly, proving that the company had acted "unreasonably" is difficult.

Second, Dame Lin said that HMRC applied the same tax laws to Google as it did to any business and that at any one time up to two-thirds of large businesses are under-going some form of tax audit process.

HMRC says it is constrained by the complicated tax laws. If they are to change, it is politicians who need to act.

MPs also questioned HMRC officials about their settlement with Google.

Jim Harra, its head of business taxation, said the company was not fined, despite underpaying tax, because proving "insufficient care" was "very difficult".

Dame Lin Homer, HMRC chief executive, admitted that the six-year investigation into Google's tax affairs took a long time to complete, but said that similar inquiries into far smaller firms could be just as lengthy.

Image caption HMRC chief Dame Lin Horner

Mr Brittin said there had been no co-ordination with the Treasury about the timing of Google's announcement about the tax settlement late last month. The Chancellor, George Osborne, described it as a victory for the government.

The timing was determined by the fact that the figure was due to be made public when the company's UK accounts were filed, Mr Brittin said.

Dame Lin told MPs that HMRC informed the relevant minister that a big company was to make a tax announcement the following day, but did not name the firm.

"What we don't, and never, do is share taxpayer information with ministers and Treasury colleagues," she said.

Tax reform call

In a statement released after the hearing, Google said that it had 2,329 staff in the UK last year compared with 156 in 2005.

In an article for the Telegraph published on Thursday, Mr Brittin said Google wanted the international tax system to be reformed.

He said the company paid $3.3bn in corporation tax last year, mostly in the US, where most of Google's products were designed and created.

Image copyright Getty Images

"We have long been in favour of simpler, clearer rules, because it is important not only to pay the right amount of tax, but to be seen to be paying the right amount," Mr Brittin wrote.

"But changes to the tax system are not Google's call. Reform must come from governments, not from the companies who are subject to their rules."

He was asked four times by Meg Hillier, chair of the Public Accounts Committee, how much he was paid. Mr Brittin said: "I don't have the figure, but I will happily provide it."

"You don't know what you get paid?" responded Ms Hillier.

"Out there, taxpayers, our constituents, are very angry, they live in a different world clearly to the world you live in, if you can't even tell us what you are paid."

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