PAC slams “small” Google tax deal

24 Feb 16

The government’s controversial £130m tax deal with Google seems “disproportionately small” when compared with the size of the firm’s UK business, an examination by the Public Accounts Committee has found.

Today’s report found that it is not possible to judge whether the settlement agreed between Google and Revenue & Customs was fair to taxpayers.

MPs also concluded that “HMRC appears to have settled for less corporation tax from Google than other countries are willing to accept”.

The deal reinforced the committee’s concerns that rules governing where corporation tax is paid by multinational companies do not produce a fair outcome, chair Meg Hillier said.

“Public anger has been palpable ever since this settlement was announced and we still don’t know the full details. Whether you call it secrecy or confidentiality, this lack of transparency does nothing to build confidence that big corporations are paying their fair share of tax,” she stated.

“That is why we are calling on HMRC to take a lead in reforming international tax rules. The bigger prize after a costly six-year investigation would have been to develop a new approach to the activities of internet-based companies.

“We are not convinced HMRC has achieved this and it must work with overseas tax authorities if we are to see lasting and effective change in the international tax system.”

According to the report, the tax deal is related to the application of transfer pricing rules, and MPs highlighted that HMRC did not apply a penalty to Google. It found that to avoid UK corporation tax Google relied on “the deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes places in the UK”.

The committee called for greater transparency, as it was currently impossible to judge whether it is fair to taxpayers.

“We are concerned that HMRC appears to have settled for less corporation tax from Google than other countries are willing to accept. We expect HMRC to monitor the outcome of other tax authorities’ investigations into Google, and re-open its settlement with Google if relevant new evidence becomes available,” it stated.

“HMRC should also examine the approach adopted by other tax authorities to see what lessons it can learn, should they succeed in securing larger tax settlements from Google.”

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