MPs accuse Google of ‘devious’ tax behaviour

Its corporate motto may be “Don’t be evil” but Google was accused of being devious, calculating, and unethical as British MPs put pressure on its tax regime.

Eric Schmidt, Google’s CEO, has previously tried to divert attention away from the level of corporate tax that the company pays by highlighting its employment record.

“The people we employ in Britain are certainly paying British taxes, and more importantly, they’re British citizens and they’re driving a lot of GDP. I think the most important thing to say about our taxes is that we fully comply with the law, and well, obviously, should the law change, we’ll comply with that as well,” he said.

But in a stormy session of the Commons Public Accounts Committee (PAC), members reacted with incredulity to claims that the company — which paid just £6m (€7.1m) in corporation tax in 2011 — did not carry out advertising sales in the UK, despite generating more than £3bn a year in revenues.

Vice president Matt Brittin, Google’s head of operations in Northern Europe, insisted that he stood by evidence he gave last year that all Google’s European sales were routed through its operation in Ireland and so were not liable to UK taxes.

But he was told by the committee’s chairman Margaret Hodge: “You are a company that says you do no evil and I think that you do do evil in that you use smoke and mirrors to avoid paying tax.”

Earlier, Ms Hodge — who strongly criticised the performance of HM Revenue and Customs (HMRC) — said the committee was now considering recalling Amazon to give evidence following the disclosure that it paid just £2.4m last year in UK corporation tax, despite sales of £4.2bn.

There was further embarrassment for HMRC yesterday when a High Court judge ruled that a “sweetheart” deal with bankers Goldman Sachs had been procedurally flawed, even though it was not unlawful.

Listing a series of failings Mr Justice Nicol said the then head of HMRC, Dave Hartnett, had been wrong to take into account the “potential embarrassment” to George Osborne, the chancellor, if the settlement, worth up to £20m, didn’t go through.

Mr Brittin — who originally appeared before the PAC last November — was recalled after the committee were contacted by what Ms Hodge said had been a “stream” of whistleblowers challenging his evidence.

She said that one had provided documentation showing that when Google began operating in the UK in the early 2000s, the “entire trading process and sales process” took place in the UK. Customers included Amazon, eBay, and British Airways.

She said the committee had also been contacted by a senior UK salesman who was paid a “modest” salary, but who received three or four times that in commission for sales and for “closing deals”.

Mr Brittin acknowledged that Google staff in the UK were involved in encouraging clients to spend money, but insisted they did not handle the actual transactions.

“Any advertiser in the UK or Germany or France or any European country contracts with Google in Ireland because that is where they have the rights to sell Google advertising.

“The way we are established is Ireland owns the technology, owns the intellectual property for the purposes of selling across Europe,” he said.

“People in Google UK Ltd are promoting our properties and encouraging people to spend money with Google. Clients may well feel that they are selling — we hire people with sales skills and they are encouraging people to spend money. But what is very clear is that no one in the UK team can execute a transaction, no money changes hands.”

Ms Hodge accused Mr Brittin of “devious, calculated and, in my view, unethical behaviour in deliberately manipulating the reality of your business in order to avoid paying your fair share of tax to the common good”.

She said she believed Google in the UK was a sales firm “masquerading” as a marketing business.


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