The House of Commons Public Accounts Committee (PAC) released the report of its investigation of the tax affairs of internet firm Google.
The report says that ‘to avoid corporation tax, Google relies 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 place in the UK’, recommends that Google be ‘fully investigated’ by HMRC and called for a ‘push for an international commitment to improve tax transparency’.
Google responded in a statement: ‘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.’
Heather Self, partner at international law firm Pinsent Masons, said: ‘The Public Accounts Committee may feel that the conclusion they have reached over corporate taxation is obvious, but the reality is not as simple as their report paints it. Tax is very complex and politicians who largely escape criticism in the report must accept that continual changes to the rules have left us in a situation where few understand the key principles of the system they have enacted.’
Andrew Watters, director at law firm Thomas Eggar, commented: ‘The debate about tax avoidance and Google has moved from the esoteric to the practical. The previous focus was on technically complex cross-border structuring. The accusation now is that the Google operation did not do what it said on the tin. Google says it did not “sell” in the UK. Some ex-employees have suggested that they did sell in the UK. So the question is simply what constitutes “selling”?
‘This simple question is unlikely to get a simple answer. Do various operations which help generate sales constitute selling? How important is customer perception that selling is taking place? Is the place where transactions are “executed” crucial? What does “executed” mean? Was there mission creep where an initially limited UK operation expanded its scope? Tax as morality tale is moving on to tax as whodunit.’
The House of Commons Public Accounts Committee (PAC) released the report of its investigation of the tax affairs of internet firm Google.
The report says that ‘to avoid corporation tax, Google relies 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 place in the UK’, recommends that Google be ‘fully investigated’ by HMRC and called for a ‘push for an international commitment to improve tax transparency’.
Google responded in a statement: ‘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.’
Heather Self, partner at international law firm Pinsent Masons, said: ‘The Public Accounts Committee may feel that the conclusion they have reached over corporate taxation is obvious, but the reality is not as simple as their report paints it. Tax is very complex and politicians who largely escape criticism in the report must accept that continual changes to the rules have left us in a situation where few understand the key principles of the system they have enacted.’
Andrew Watters, director at law firm Thomas Eggar, commented: ‘The debate about tax avoidance and Google has moved from the esoteric to the practical. The previous focus was on technically complex cross-border structuring. The accusation now is that the Google operation did not do what it said on the tin. Google says it did not “sell” in the UK. Some ex-employees have suggested that they did sell in the UK. So the question is simply what constitutes “selling”?
‘This simple question is unlikely to get a simple answer. Do various operations which help generate sales constitute selling? How important is customer perception that selling is taking place? Is the place where transactions are “executed” crucial? What does “executed” mean? Was there mission creep where an initially limited UK operation expanded its scope? Tax as morality tale is moving on to tax as whodunit.’
