11 Feb 2016 05:46pm

Google defends "disaster" tax deal

The Public Accounts Committee (PAC) grilled Google executives and HMRC over their controversial tax deal

Tom Hutchinson, Google’s vice president and Matt Brittin, president of Google Europe, Middle East and Africa (EMEA), told MPs the tax deal reached with HMRC was a result of a six-year long “fully transparent process”.

Pushed by the MPs on why he thought the deal was such a "PR disaster”, Britton said, “I understand the anger and understand that people when they see reported that we are paying 3% tax would be angry. But we’re not. We’re paying 20% tax.”

PAC members accused Google of making their own choice to avoid tax, by setting up structures in low tax jurisdictions.

“It was not us who decided to move profits to Dublin. You say you want transparency, but you have used Double Irish, Dutch Sandwich and Bermuda to avoid taxes,” the committee of cross party MPs said.

The executives said multiple times during the hearing their Bermuda operations have no impact on the taxes they pay in the UK.

Google’s representatives also said the company decided to set up its base in Ireland not just because of the low corporate taxes, but also because of high speed broadband and the multi-linguistic team available in Dublin, which drew incredulity from Meg Hillier, chair of the PAC.

They admitted they have no employees in Bermuda or Cayman Islands.

Both Google and HMRC said the deal did not have any political influence from government ministers. Brittin admitted, however, that the subject might have come up during the 20 meetings the company held with the British government.

“I would be surprised if tax hadn’t come up time to time,” he said.

Brittin confirmed the £130m tax deal included £18m in interest, but this amount did not include any penalties or payments under the diverted profits tax, the so-called “Google tax”.

Jim Harra, HMRC head of business taxation, said later in the second session that the company was not fined because proving insufficient care was “very difficult".

PAC members asked HMRC if a corner shop owner would get a similar deal if they underpaid taxes for 10 years. Lin Homer, HMRC’s chief executive, said she hoped the British public knew the Revenue makes sure it applies the same rules for everyone.

The inter giant’s bosses said 10% of their total sales come from the UK, the highest amount in any territory outside the US.

MPs asked Brittin if he was not embarrassed for getting tax wrong for 10 years, but he blamed the “complicated” tax system.

The committee challenged Brittin asking why Google does not “get ahead of the game” and subscribe to the OECD framework designed to simplify taxes.

The company bosses were also asked what role the accountancy firm EY, as its external auditors, had in the process. Brittin said Google took advice from a number of external sources, but would follow up with the committee on specifics of who advised them.

Brittin was asked by Hiller how much he gets paid. He replied he did not have the figure but was happy to provide it privately if necessary.

Hiller said, “Taxpayers 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.”

In the second session, PAC questioned Homer, Harra and Edward Troup, HMRC’s tax assurance commissioner.

The committee asked them why the audit took six years to conclude. Harra said it took longer than usual because the Revenue faced a changing scale of business model at Google where it had to look at each year individually to define the tax the company had to pay.

MP Richard Bacon noted the audit took the same time as World War Two. “Either HMRC are very thick or Google are very bad at explaining,” he said at one point.

HMRC said it had more than 10 and less than 30 staff working on the audit, and admitted it was “very expensive”, without giving specific numbers.

The committee criticised the letter it received the night before the hearing with confidential information about the case, saying their aim is to get answers publically and confidentiality does not help improving the public trust.

Homer said she is seeing a shift in big companies mentalities and welcomed the fact that large businesses are paying more corporate tax. She would also like to see some recognition for the fact HMRC is making big firms pay more tax.

Google refused to comment on recent claims it is on the verge of striking deals with Italy and France for a larger amount, despite making less profits in those countries.

George Bull, senior tax partner at RSM, said of today’s hearing, “Unless the fundamental structure of corporation taxes worldwide is to be changed, debates such as this present the spectacle of individual countries scrambling for larger slices of the same cake.”

Jessica Fino


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