Google tax structure contrived, UK committee says

Google’s claims that its Irish operation is responsible for hundreds of millions of pounds in advertising sales in the United Kingdom are brazen and “deeply unconvincing”, an influential House of Commons committee finds in a report published today.

Following complaints about the tax paid by multinationals operating in Britain, Google, which has had UK revenues of £12 billion since 2006, claimed its British-based staff were not responsible for selling.

However, in an embarrassment for the internet giant, the House of Commons’ public accounts committee today says the company’s defence has been undermined by whistleblowers and reporters.

'Highly contrived'
"Google brazenly argued before this committee that its tax arrangements in the UK are defensible and lawful," said the committee's chairwoman, Labour MP Margaret Hodge, who said Google operates "highly contrived" tax arrangements to avoid UK corporation tax.

The company’s reputation, she goes on, had been damaged by the “revelations of aggressive tax avoidance” and the damage caused will “not be repaired until the company arranges to pay its fair share of tax in the country where it earns the profits from the business it conducts”.

Since 2006, Google has paid just £12 million in UK corporation tax: “The UK is a key market for Google but the enormous profit derived is out of reach of the UK’s tax system,” said the report.

'Undermined confidence'
Most of Google UK's sales are generated by British-based staff, not those in Ireland, said the Commons committee: "It is quite clear to us that sales to UK clients are the primary purpose, responsibility and result of its UK operation. The processing of sales through Google Ireland has no purpose other than to avoid UK corporation tax. This elaborate corporate construct has damaged Google's reputation in the UK and undermined confidence in the effectiveness of [Customs and Excise]."

The committee says the tax authorities have not “been sufficiently challenging of multinationals’ manifestly artificial tax structures”, saying the disparity between where money is generated and where tax is paid is “extraordinary”.

The company should now face a full investigation by tax officials, the MPs said.