The Public Accounts Committee (PAC) has confirmed that it will take evidence from senior officials at Google and HMRC at a hearing on corporate tax deals, scheduled for Thursday 11 February 2016 at 10am. The hearing follows news reports on 22 January that Google has agreed to pay £130m in UK back taxes, following a HMRC investigation into the technology giant’s taxes dating from 2005.
Witnesses will include: Matt Brittin, head of Google (Europe); Dame Lin Homer, HMRC chief executive and permanent secretary; Jim Harra, HMRC director of general business tax; and Edward Troup, HMRC tax assurance commissioner.
With HMRC apparently conceding that Google need not pay tax on UK advertising profits – and the subsequent press controversy over the corporation tax position of social media network Facebook – it has been widely reported that EU commissioner Margrethe Vestager has indicated that she would be willing to consider an investigation into the tax deal between HMRC and Google if called upon to do so. The National Audit Office is also preparing to begin an inquiry.
Andrew Watters, tax director at Thomas Eggar, commented: ‘It will be interesting to see whether the involvement of the European Commission in the Google case helps towards legal clarity as to what the “right” amount of tax is. Going forward, there will be far greater sharing of tax information both amongst states and by the large corporate groups.
‘While access to more information must be helpful in assisting tax authorities to ensure the right amount of tax is paid, the Google problem is that HMRC seems to have conceded that Google does not have a taxable presence in this country and consequently that the tax settlement is the right amount of tax under the law. Whether it is morally the right amount of tax is a question which HMRC does not have the authority to answer. For HMRC, the core legal issue is whether there is an entity in the UK that it can tax. That entity could be a company or a “permanent establishment”. That there is no company is a simple fact. That there is no permanent establishment seems to be a complicated fact that HMRC accepts on the basis of the available evidence.
‘The EU, working with national governments, can of course change the rules. This raises political as well as tax issues: the more power a supra-national body such as the EU has relative to individual states, the more difficult it will be for international groups to play one set of rules against another.’
Meanwhile, the Institute for Fiscal Studies (IFS) has defended HMRC over the criticism it received over Google, telling the FT that HMRC ‘is not busy cutting special deals’ with multinationals but attempting ‘to apply the tax rules in a consistent manner’. The IFS also called for a major overhaul of the international corporate tax system, arguing that reform would be more useful than ‘complaining that companies are behaving badly’.
The Public Accounts Committee (PAC) has confirmed that it will take evidence from senior officials at Google and HMRC at a hearing on corporate tax deals, scheduled for Thursday 11 February 2016 at 10am. The hearing follows news reports on 22 January that Google has agreed to pay £130m in UK back taxes, following a HMRC investigation into the technology giant’s taxes dating from 2005.
Witnesses will include: Matt Brittin, head of Google (Europe); Dame Lin Homer, HMRC chief executive and permanent secretary; Jim Harra, HMRC director of general business tax; and Edward Troup, HMRC tax assurance commissioner.
With HMRC apparently conceding that Google need not pay tax on UK advertising profits – and the subsequent press controversy over the corporation tax position of social media network Facebook – it has been widely reported that EU commissioner Margrethe Vestager has indicated that she would be willing to consider an investigation into the tax deal between HMRC and Google if called upon to do so. The National Audit Office is also preparing to begin an inquiry.
Andrew Watters, tax director at Thomas Eggar, commented: ‘It will be interesting to see whether the involvement of the European Commission in the Google case helps towards legal clarity as to what the “right” amount of tax is. Going forward, there will be far greater sharing of tax information both amongst states and by the large corporate groups.
‘While access to more information must be helpful in assisting tax authorities to ensure the right amount of tax is paid, the Google problem is that HMRC seems to have conceded that Google does not have a taxable presence in this country and consequently that the tax settlement is the right amount of tax under the law. Whether it is morally the right amount of tax is a question which HMRC does not have the authority to answer. For HMRC, the core legal issue is whether there is an entity in the UK that it can tax. That entity could be a company or a “permanent establishment”. That there is no company is a simple fact. That there is no permanent establishment seems to be a complicated fact that HMRC accepts on the basis of the available evidence.
‘The EU, working with national governments, can of course change the rules. This raises political as well as tax issues: the more power a supra-national body such as the EU has relative to individual states, the more difficult it will be for international groups to play one set of rules against another.’
Meanwhile, the Institute for Fiscal Studies (IFS) has defended HMRC over the criticism it received over Google, telling the FT that HMRC ‘is not busy cutting special deals’ with multinationals but attempting ‘to apply the tax rules in a consistent manner’. The IFS also called for a major overhaul of the international corporate tax system, arguing that reform would be more useful than ‘complaining that companies are behaving badly’.
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