16 May 2013 03:28pm

Google withstands second PAC grilling

Search giant Google stood firm today over accusations it misled the government about its UK tax payments

Called in front of the Public Accounts Committee (PAC) for the second time Matt Brittin, vice president of Google’s northern European operations, faced accusations from chair Margaret Hodge, that the company is "devious, calculated and unethical" and "deliberately manipulating the reality of their business".

Google, whose sales team is based in Dublin, was originally called in front of the PAC in November last year, where it told the Committee that no deals were closed in the UK. However, the firm was recalled following suggestions it had not been comprehensive in its evidence to the PAC first time round.

"You are a company that says you do no evil and I think that you do do evil in that you use smoke and mirrors to avoid paying tax," Hodge accused Brittin.

In an occasionally heated exchange, MPs claimed that evidence from a “stream of whistle blowers”, coupled with a Reuters investigation, contradicted Brittin’s previous assertion that sales are not made by Google in the UK.

Hodge offered Brittin on numerous occasions to “reconsider his previous evidence” as it is a “very serious offence” to mislead Parliament and would risk contempt of court.

She said that whistleblowers had come forward with supporting documents which included pay-slips showing UK-based staff being paid substantial bonuses depending on their 'sales', evidence of big clients being dealt with almost exclusively in the UK and an invoice in Sterling paid to Citibank in London.

"It was quite clear from all that documentation that the entire trading process and sales processes took place in the UK," she told him.

Brittin repeated, "I stand by what I said. I described very clearly how we operate. I think the body of what I said, if you look at every quote I said, I described exactly what we do.”

He conceded that Google staff in the UK carry out “several sales processes” such as, promoting products, cultivating clients and advising on prospective business plans, but do not have the authority to complete a transaction. This means that the tax paid is within the remit of the law.

“We do hire people with sales skills but nobody in the UK team can execute a transaction - no money changes hands,” he said. “The rights to what's sold are owned by Google Ireland. Nobody here can agree a price or a volume discount, they can only encourage that to happen.”

Responding to questions on UK commission for employees that can not make sales, he replied, “Many companies incentivise staff in this country to grow the business. They grow the business by encouraging people to spend money on Google products. Customers have to buy from Ireland because that's where the intellectual property sits.”

He revealed that 60-70% of advertising revenues from UK customers comes from a minority of larger clients that have contact with UK based staff.

“Why don’t you call a spade a spade for once?” asked Tory MP Richard Bacon.

Increasingly exacerbated by Brittin’s answers and discussion on what constitutes a ‘sale’, Hodge said, “We all accept the billing is in Ireland.

“This is a UK sale and should be subject to UK tax. I would ask you to reconsider what you are telling us, because it doesn't make sense to your own staff, it doesn't make sense to the committee, it doesn't make sense to any of your clients.

"The only people it seems to make sense to are Google - you are the last man standing on this,” she added.

Brittin finished by saying, "Tax is a matter of following the laws that are there, internationally, and that's what we do."

Alongside Brittin was John Dixon, head of tax at Google’s auditors Ernst & Young, who answered questions in abstract rather than on Google specifically due to client confidentiality.

He argued “some of the questions asked here today are not relevant to the issues on whether a company based in Ireland is paying the correct amount of corporation tax.

It was important to for an auditor to know what is “actually going on” on the ground floor, so there is no “tripping over the grey line between point of sale.”

HMRC boss Lin Homer, up after Brittin, strongly rebutted claims by the MPs that the Revenue favoured multinationals over the individual or small business.

Hodge said that after having seen whistleblower evidence, she thought HMRC had “lousy judgement” and that those taking decisions on these matters were “not fit for purpose.”

Homer added “she fully understood the emotional reaction”, but insisted that HMRC was better qualified than MPs to determine what taxes were due.

"That is a matter for the application of expert tax knowledge. I'm afraid that that is something I think we do rather better than a select committee.

“Unless and until you change the law, we cannot collect the tax people would like us to collect."

Raymond Doherty


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