The PAC has scrutinised Google executives, with chair Meg Hillier saying they were “taxing (her) patience” as they explained Google’s tax settlement following a six year HMRC audit, which encountered a backlash from critics.
Google’s vice-president Tom Hutchinson was adamant in front of the PAC that the £130m tax settlement was “fair” and later said that HMRC “determined that we interpreted the rules in a reasonable way”.
The PAC’s contention surrounded the amount Google paid in retrospective taxes compared to the other countries seeking; for example, French officials are allegedly negotiating for a £378m settlement. While Lin Homer refused to comment on other tax authorities, Jim Harra did say that “if facts came to light that were not disclosed to us, that were relevant, we could re-open the case”.
President of Google UK, Matt Brittin, rejected the “sweetheart deal” accusation, and that Google was paying 3% tax, claiming they were paying 20%.
Hutchinson revealed that £18m from the £130m Google paid was the interest over the 10-year period. When asked by MP Caroline Flint, Hutchinson confirmed that zero of the £112m included any penalties.
Google allegedly used tax schemes in Bermuda and Ireland which came under scrutiny. However, Brittin reasoned that it was the Dublin workers’ multi-linguistic skills that attracted Google into setting up their European operations in Ireland, not the lower tax rates, triggering laughter from the committee.
The PAC condemned Google’s tax settlement as a public relations disaster. Jim Harra, HMRC’s director general of business tax, touched on this when asked whether Google was an “aggressive habitual tax planner”. Harra said HMRC’s aim was to “impress upon” large businesses that “reputationally it is in their interest to take on a conservation low risk approach to their tax planning” and that this would also prevent HMRC from conducting expensive investigations on them.
In the next session, HMRC defended its role in its six year audit into Google’s UK tax affairs. Harra revealed at any one time more than 10 but less than 30 HMRC officials were working on the investigation.
Lin Homer told the committee that in the huge number of meetings Google has had with the government over the last five years, in which Brittin conceded in the first session that tax might have been discussed, there was no HMRC representative present.
HMRC couldn’t escape being the butt of the joke. When Homer defended Harra’s inability to answer how much Google paid in tax globally, saying that they are not the global tax administration, MP Richard Bacon quipped: “Given your customer service performance here at the moment whether we want to inflict you on the rest of the planet is itself moot.”
Homer assured that HMRC applies the same approach to small businesses as they do large business like Google.
George Bull, senior tax partner at RSM, said: “It today emerged that many micro-businesses have been removed from the online VAT MOSS service because they do not make enough regular sales. This appears at odds with HMRC’s assertions and could result in those businesses being forced into using sales platforms owned by the multinationals who themselves are at the centre of tax avoidance claims.’
While many of the headlines coming out of the session will focus on Brittin repeatedly dodging Hillier’s interrogation over how much he earns (he claimed he “didn’t have the figure”), Bull criticised some of the committee member’s Paxman-like delivery and lack of knowledge about the practical application of tax.
He said: “The grandstanding and bear-baiting stood in the way of getting clear answers to some very legitimate questions. A number of the MPs present claimed to have been representing their constituents, but many of those same constituents may well feel let down.”
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.