UK Treasury Secretary David Gauke today defended an HM Revenue and Customs settlement with Google relating to back taxes, telling Members of Parliament that no special favors were granted to the company and that claims that the deal allowed Google to pay tax at a 3 percent effective rate were inaccurate.
The parliamentary debate, arranged by Labor finance spokesman John McDonnell, concerned the announcement last Friday that Google would pay £130 million (USD 185 million) to settle ten years of UK tax liability. Chancellor of the Exchequer George Osborne in a tweet called the deal a “victory for the action we’ve taken.”
According to opposition party and tax campaigner critics, though, the government settled for way too little, granting Google a “sweetheart deal” available only to large and powerful multinationals.
Labor MP Caroline Flint (Don Valley) noted that Google earned revenue of £24 billion (USD 34 billion) over the ten year period at issue and that tax experts have pegged Google’s tax liability for the period at about £2 billion (USD 2.8 billion).
How can the current government claim it no longer tolerates corporate tax avoidance yet accept such a low settlement? she asked. Flint added that she believed both HMRC and Google should be called to testify before the Public Accounts Committee about the deal, and said her colleagues on the committee will likely agree.
McDonnell asked Gauke to confirm that the settlement allowed Google to pay only a 3 percent effective tax rate during the ten year period, as suggested by some tax experts. He noted that the company’s UK profits totaled £1 billion (USD 1.4 billion) in 2014 alone.
Gauke denied that Google’s effective rate was as low as 3 percent under the deal, but, when pressed, refused to state what the actual rate was on grounds of taxpayer confidentiality.
Gauke said that the 3 percent figure was probably arrived at by computing taxes based on profits from Google’s UK sales. This is not correct; taxes are computed on the basis of economic activity and assets located in the UK, he said.
“If we accept that principle, that does rather discredit the claims of a 3 percent tax rate,” he said.
Stewart Hosie MP (Dundee East, Scottish National Party) also said that the settlement was too generous. “Should this deal not be put to [Competition Commissioner Margrethe] Vestager to ensure it complies with state aid rules?” he asked. Gauke responded that HMRC does not give any special deals to taxpayers.
Gauke added that the National Audit Office examines HMRC settlements and may review this case.
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