UK spending watchdog criticises Google tax scheme
THE BRITISH parliament's powerful spending watchdog has formally castigated the internet giant Google for a "brazen" and "unconvincing" attempt to avoid paying its fair share of UK tax.
In a damning report, the Public Accounts Committee (PAC) called on HM Revenue & Customs (HMRC) to "fully investigate" the company, after concluding it had used "highly contrived" tax arrangements with the sole purpose of avoiding corporation tax on its multibillion-pound UK revenues.
Google, however, was unrepentant, accusing the committee of failing to understand how tax laws operate, and insisting again that it operated within existing rules.
The PAC said that while the UK was a key market for Google, generating $18bn (€13.5bn) revenue between 2006 and 2011, it had paid just $16m (€12m) in corporation taxes over the same period.
The committee said that while Google defended its tax position by claiming that its sales of advertising space to UK clients took place in Ireland, the explanation was "deeply unconvincing on the basis of evidence". It pointed to the testimony of whistleblowers, including ex-employees, which demonstrated that Google's UK staff carried out the substance of work leading to contracts with major UK clients. It described the arrangement as an "elaborate corporate construct" that had undermined confidence in the effectiveness of HMRC in collecting tax due.
It added that any "common sense reading of HMRC's own guidance and tests" would suggest that HMRC should have "vigorously questioned" Google's claim that it is acting lawfully.
The cross-party committee also warned that the UK's big accountancy firms had damaged their reputations by helping clients avoid tax.
Margaret Hodge, the committee's chair, said: "Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful. (But they have) no purpose other than to enable the company to avoid UK corporation tax."
A Google spokesman said: "Google complies with all the tax rules in the UK, and it is the politicians who make those rules."