Financial News

  • 17 May 2013, 12:10

Google Faces Fresh Grilling Over Low Tax Bills

Google has denied trying to "disguise" the way its business operates in order to minimise its tax bill in the UK.

The internet giant's vice president Matt Brittin was questioned by the Commons' public accounts committee (PAC) for a second time about the firm's practices.

His appearance came as newly-published accounts revealed's main UK unit only paid 2.4m in tax in 2012 on sales of 4.2bn.

Committee chair Margaret Hodge branded Google "devious, calculated and unethical" and accused the company of "deliberately manipulating the reality of their business".

She added: "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."

But Mr Brittin replied: "We comply fully with the laws that are set down by politicians. Tax is not a matter of choice, tax is a matter of following the law."

Mrs Hodge warned the Google executive that it was a "very serious offence" to mislead Parliament as she raised conflicting evidence about the firm's sales.

She claimed documents seen by MPs and evidence from a "stream of whistleblowers" who said sales were happening in the UK contradicted Mr Brittin's comments last November.

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

Mr Brittin refused to budge, saying: "I stand by what I said. I described very clearly how we operate."

MPs were told that Google's largest operation in Europe was based in Dublin and that any advertiser in Europe contracts with Google in Ireland.

"We set that up because we wanted to be able to contract with customers across the whole of Europe, not just the UK," Mr Brittin said.

Mrs Hodge said she had seen a Google invoice from a London address and a presentation about how to sell involving UK-based staff.

A senior salesman has also contacted the committee, claiming he was paid commission for sales and "closing deals", she continued.

"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."

Mr Brittin admitted sales staff in the UK promoted Google and encouraged people to spend money but said the transactions all took place in Ireland.

But Mrs Hodge said: "We all accept the billing is in Ireland. If sales activity is taking place in the UK, you are misleading both Parliament and the taxpayers in suggesting that is not happening."

Amyas Morse, head of the National Audit Office and Comptroller & Auditor General, told Mr Brittin the issue was not "going away" because people remained sceptical.

"There are a ton of people who are listening and saying we think they are selling in the UK," he said.

Mrs Hodge also sharply criticised HM Revenue and Customs chief executive Lin Homer over the way her staff interpreted the law in relation to companies like Google.

"It is an issue of judgement," she said. "I think your judgement belies common sense. We don't trust your judgement. I think your staff are being bamboozled."

Ms Homer, appearing after Mr Brittin, 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," she said.

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

The hearing came after it was revealed Google had described its London offices on its website as a base for sales teams and advertised dozens of London-based sales vacancies.

Amazon could also now be dragged back to face further questions about its own finances after the new tax figures which emerged on Thursday.

It is believed the company was able to report the relatively small corporate income tax bill because its sales to British customers are routed through a Luxembourg affiliate, Amazon EU Sarl.

The 2.4m paid in corporation tax in the UK is less than the amount it receives in UK Government grants which stands at 2.5m.

A report last December by the PAC accused Google and Amazon, along with Starbucks, of "immorally" minimising their UK tax bills.

The firms were criticised for the "unconvincing and, in some cases, evasive" evidence they gave on why their corporation tax payments are so low.

A Google spokesman said: "As we have always said, we fully comply with all of the tax rules in the UK.

"We stand behind Matt Brittin's testimony over the course of two sessions in front of Parliament, and we disagree with the committee's view of our tax structure."