US technology giant Google has announced that it has agreed to pay £130m in extra tax and interest to HMRC, in a move to conclude an enquiry into its tax affairs dating back to 2005. George Osborne hailed this agreement as a ‘major success’, in the face of criticism over the deal. Shadow chancellor John McDonnell tabled an urgent parliamentary question on Monday, to which financial secretary to the Treasury David Gauke responded: ‘The statement made by Google [in which Google agreed to change the way it calculated its tax bill] at the end of last week is solid evidence that companies are changing their models and reviewing their structures because we have strengthened the rules.’
McDonnell said: ‘Independent experts have suggested that the effective tax rate faced by Google is now about 3%, despite estimated profits of £1bn in 2014 alone.’ He noted that Conservative MP and Mayor for London Boris Johnson had called the settlement ‘derisory’. Gauke replied that he was ‘not privy to information that is not in the public domain’.
Meg Hillier MP, chair of the PAC, said: ‘The news that Google is paying ten years’ back tax vindicates the Public Accounts Committee’s vigorous pursuit of international companies that were running rings around tax officials.
‘HMRC now needs to assure taxpayers that it will keep up the pressure to tackle whatever the next emerging issue is in real time, rather than years later. It is effectively admitting it pulled in too little tax from Google for nine out of ten years. This is not a great success rate and the PAC will be calling in HMRC and Google to explain.’
Professor Crawford Spence of Warwick Business School said: ‘The windfall tax on Google is being celebrated as a success by the UK government, but the money recouped represents a small proportion of what it realistically would have paid, had a strict “substance over form” approach been taken here. There is also a real lack of transparency so we do not know exactly what the figures are based on. Moreover, these sort of ad hoc, under the counter deals between the government and large companies tend to undermine wider initiatives that seek to harmonise tax practices at the global level.’
Writing in this week’s Tax Journal, however, tax expert Miles Dean said that: ‘The behaviour of Google is a natural consequence of the tax landscape, with the “abuse” existing only in the minds of those who don’t understand the law.’
US technology giant Google has announced that it has agreed to pay £130m in extra tax and interest to HMRC, in a move to conclude an enquiry into its tax affairs dating back to 2005. George Osborne hailed this agreement as a ‘major success’, in the face of criticism over the deal. Shadow chancellor John McDonnell tabled an urgent parliamentary question on Monday, to which financial secretary to the Treasury David Gauke responded: ‘The statement made by Google [in which Google agreed to change the way it calculated its tax bill] at the end of last week is solid evidence that companies are changing their models and reviewing their structures because we have strengthened the rules.’
McDonnell said: ‘Independent experts have suggested that the effective tax rate faced by Google is now about 3%, despite estimated profits of £1bn in 2014 alone.’ He noted that Conservative MP and Mayor for London Boris Johnson had called the settlement ‘derisory’. Gauke replied that he was ‘not privy to information that is not in the public domain’.
Meg Hillier MP, chair of the PAC, said: ‘The news that Google is paying ten years’ back tax vindicates the Public Accounts Committee’s vigorous pursuit of international companies that were running rings around tax officials.
‘HMRC now needs to assure taxpayers that it will keep up the pressure to tackle whatever the next emerging issue is in real time, rather than years later. It is effectively admitting it pulled in too little tax from Google for nine out of ten years. This is not a great success rate and the PAC will be calling in HMRC and Google to explain.’
Professor Crawford Spence of Warwick Business School said: ‘The windfall tax on Google is being celebrated as a success by the UK government, but the money recouped represents a small proportion of what it realistically would have paid, had a strict “substance over form” approach been taken here. There is also a real lack of transparency so we do not know exactly what the figures are based on. Moreover, these sort of ad hoc, under the counter deals between the government and large companies tend to undermine wider initiatives that seek to harmonise tax practices at the global level.’
Writing in this week’s Tax Journal, however, tax expert Miles Dean said that: ‘The behaviour of Google is a natural consequence of the tax landscape, with the “abuse” existing only in the minds of those who don’t understand the law.’
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