In a scathing report, the House of Commons public accounts committee (Pac) dismissed as “deeply unconvincing” Google’s claims that its UK sales activities take place in low-tax Ireland and found that the company’s account of its operations made “absolutely no sense”.
Committee chairwoman Margaret Hodge branded the company’s arguments “brazen” and said the only way for Google to repair its damaged reputation was to pay a fair share of tax in the countries where it earns its massive profits.
But the report was also highly critical of tax authorities, finding it was “extraordinary” that HMRC did not challenge Google over its arrangements.
The cross-party committee also warned that the UK’s big accountancy firms had damaged their reputations by helping big business clients avoid tax, calling on them to recognise that “the public mood on tax avoidance has changed”.
The committee urged the government to take a lead internationally on modernising “out-of-date” tax frameworks covering internet-based commerce, and commended Prime Minister David Cameron for putting tax avoidance at the heart of his agenda for next week’s G8 summit in Northern Ireland.
Google generated £11.5 billion in revenue from the UK between 2006 and 2011, but paid just £10m in corporation tax, found the Pac report. During this period, the main rate of corporation tax was between 30 per cent and 26 per cent.
In an appearance before the committee last November, the company’s vice president Matt Brittin insisted Google complied with UK law and paid all taxes required. Anyone purchasing advertising from Google in Europe – including the UK – was buying it from Google Ireland, where all of the company’s sales outside the US were billed, he said.
But Mr Brittin was hauled back in front of the committee in May to face a second grilling over evidence from whistleblowers which showed “clear discrepancies” with his claim that none of Google’s 1,300 UK staff were working in sales.
Ms Hodge said: “Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. It claimed that its advertising sales take place in Ireland, not in the UK.
“This argument is deeply unconvincing and has been undermined by information from whistleblowers, including ex-employees of Google, who told us that UK-based staff are engaged in selling. The staff in Ireland simply process the bills. Google also conceded at this second hearing that its engineers in the UK are contributing to product development.”
Ms Hodge said the committee was not singling out Google but believed that its tax avoidance activities were “illustrative of a much wider problem” among multinationals in the globalised business environment.
A Google spokesman said: “As we’ve always said, Google complies with all the tax rules in the UK, and it is the politicians who make those rules.
“We welcome the call to make the current system simpler and more transparent.”