The Public Accounts Committee – a group of MPs – says HM Revenue and Customs should fully investigate the web search giant Google, following information from ex-employees.
Whilst Google has in the past come under criticism for the amount of tax it pays in the UK, its defence was that sales to UK clients come from staff in Ireland.
The Committee (PAC) says it’s been told that UK staff are in fact still selling. It has also called for all multinationals to come under greater scrutiny, and for there to be action to reduce the loopholes they can use.
Margaret Hodge MP said in a statement today:
“Google generates enormous profits in the UK. But despite an $18 billion turnover between 2006 and 2011 it paid the equivalent of just $16 million in taxes to the UK government.
“Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. It claimed that its advertising sales take place in Ireland, not in the UK.
“This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK based staff are engaged in selling. The staff in Ireland simply process the bills. Google also conceded at this second hearing that its engineers in the UK are contributing to product development.
“The company’s highly contrived tax arrangement has no purpose other than to enable the company to avoid UK corporation tax.
“Google’s reputation has been damaged by these revelations of aggressive tax avoidance. That damage will not be repaired until the company arranges to pay its fair share of tax in the country where it earns the profits from the business it conducts.
“Confidence in HMRC has also been weakened. It is extraordinary that the department did not challenge Google over the complete mismatch between the company’s supposed structure and the substance of its activities.
“This is not specially to single out Google or indeed Starbucks and Amazon who had previously given evidence to us. The tax avoidance activities of these multinational companies are illustrative of a much wider problem.
“The Government clearly needs to act to strengthen HMRC and to simplify the tax code so that there are fewer loopholes. The Government should also consider greater transparency so that the public knows whether companies are paying a fair share. It should toughen up its proposals on public procurement to deny contracts to aggressive tax avoiders.
“The Government has declared that it will use its presidency of the G8 to promote the tackling of aggressive tax avoidance. This is a welcome recognition of the need for multilateral action to thwart the tax dodgers.
“This committee has vigorously condemned the activities of the big UK accountancy firms in helping their clients find loopholes in legislation and establish highly artificial tax structures. These firms must recognize that the public mood on tax avoidance has changed and that the time has come for them to advise their clients responsibly.”