Photograph by Carlos Luna
Whistleblowers have “undermined” Google’s defence of their tax arrangements, and HMRC should “fully investigate” the US technology giant, a committee of MPs has said.
Google claims that its advertising sales take place in low-corporation-tax Ireland, and not in the UK. However the Public Accounts Committee (PAC) has said that whistleblowers within the company’s UK-based staff have told them that they are actively engaged in selling.
Google generated £11.5 billion in revenue from the UK between 2006 and 2011, but paid just £10 million in UK corporation tax.
Google claims it complies with UK tax law.
There is an ongoing worldwide debate about how multinational companies manage to move their profits from country to country to legally avoid paying taxes in the countries where their sales are generated, and instead claim the business is located in low tax countries such as Ireland and Luxembourg.
Current debate focuses on technology companies such as Google, Apple, and Facebook, although such legal tax avoidance schemes are used by a wide variety of multinational corporations. The public perception of these legal tax avoidance schemes is that huge corporations are not paying their fair share, something considered increasingly problematic when public services are being cut due to austerity measures due to lack of public funds.
The consumer-backlash against Starbucks for using a similar scheme to legally avoid UK tax, made the company voluntarily pay more tax to the UK, but to campaigners this was illustrative of the problem as tax to multinationals appears optional.
Google has strongly defended its tax arrangements, and stated that if countries want to prevent these legal forms of tax avoidance then they need to change the law. A spokesman said:
“It’s clear from this report that the Public Accounts Committee wants to see international companies paying more tax where their customers are located, but that’s not how the rules operate today.
We welcome the call to make the current system simpler and more transparent.”
For all the accusations of companies “not paying their fair share”, politicians both in the UK and abroad have consistently failed to close the tax loopholes which enable multinationals to avoid tax by moving their profits to lower tax or zero tax locations. The PAC have called on the government to simplify the tax code and address the loopholes.
Tax an transparency are central to the agenda of the G8 summit in Northern Ireland next week. Prime Minister David Cameron has said he wants to see country-by-country reporting of where companies pay their tax.
