Google’s Matt Brittin grilled over tech firm’s £130m tax deal

The head of Google’s European operation was accused of living “in a different world” as British MPs questioned him about the tech company’s controversial £130 million tax settlement.

Meg Hillier, chair of an influential cross-party committee, asked Matt Brittin repeatedly how much he was paid and reacted with incredulity when he declined to answer.

She said: “Out there taxpayers are very angry. They live in a different world, clearly, if you can’t even tell us what you’re actually paid.”

Mr Brittin told the UK public accounts committee: “I don’t have the figure but I’ll provide the figure privately, if it’s relevant to the committee to understand my salary.”

Ms Hillier asked him whether he understood the “anger and frustration” over the £130 million settlement. The disclosure last month provoked public uproar, with politicians of all parties describing the payment as a derisory sum.

But Mr Brittin, who is president of Google Europe, Middle East and Africa insisted that Google was paying the right amount of tax and said the settlement was reached following a "six-year rigorous, independent tax audit" by HM Revenue & Customs.

He said: “I understand the anger and understand that people when they see reported that we are paying 3 per cent tax would be angry. But we’re not. We’re paying 20 per cent tax.”

Tom Hutchinson, vice-president of Google’s parent company, told MPs the £130 million deal was “fair” and said it was the biggest settlement they had agreed outside the United States.

He said Google had given permission to UK Revenue & Customs to talk about the deal, adding that he had never seen a taxpayer share so much information about an audit settlement.

Mr Hutchinson said the company did not negotiate its tax settlement with HMRC. He told the committee that the tax authorities did not “throw out a number – it’s not a negotiation”, adding: “There was no top-line figure; that’s not how the process works.”

Mr Brittin said that Google’s tax arrangements would have “come up from time to time as a question” during meetings with government ministers, although the meetings were dominated by issues such as child safety online, counter-terrorism and security.

HMRC mounted a vigorous defence of the settlement. Jim Harra, its director general of business tax, said that the £130 million recouped from the Revenue investigation represented “a very significant uplift on their liability” given that Google paid a total of £196.4 million in corporation tax and interest over the 10-year period.

The six-year audit involved lawyers, data analysts and economists and was labour-intensive. At any one time there would be “more than 10 and less than 30” people working on Google, he said.

Questioned about audits in other jurisdictions such as France and Italy, HMRC revealed it could reopen the investigation if “material” new evidence emerged from future overseas settlements. Mr Harra said: “What would enable us to reopen this is if facts came to light subsequently that were not disclosed to us in the course of this investigation and they were relevant.”

Asked about penalties for the underpayment of tax, Mr Harra said: “I do understand the [public] anger, and I think HM Revenue & Customs and the government position that the current penalty legislation does not work for large companies in the way it should.”

He described penalties for large businesses as “quite a challenge”, saying investigators had to prove “insufficient care was taken in producing the self-assessment”.

He said the challenge in “transfer pricing” cases – involving the allocation of profits between countries – was that companies “can take a lot of expert advice and opinion and they can take a reasonable position in relation to a complex area of law. We can challenge that and they can accept they need to change their position but it is very difficult to establish they have taken insufficient care.”

Mr Harra said draft legislation due to be introduced this year would remove the “reasonable care defence” from companies that habitually understated their tax.

Dame Lin Homer, chief executive of HMRC, said: “We should expect large businesses to publish annual tax strategies and I think if they have to explain to people what their tax strategy is, it does have an effect on their behaviour.”

Dame Lin also defended the tax authority when Ms Hillier described multinational companies “running rings” around tax officials.

She said: “We don’t get outmanoeuvred by these big firms. We make them pay more tax and if I am honest I would like to see more recognition of that.”

– (Copyright The Financial Times Limited 2016)