Google’s Irish tax affairs attract further UK scrutiny

Google’s tax affairs in Ireland came in for yet more international scrutiny as a British parliamentary committee found a £130 million (€165 million) revenue settlement with the London authorities to be “disproportionately small.”

Britain’s public accounts committee expressed concern that HM Revenue & Customs appeared to have settled for less corporation tax from Google than other countries would accept from the Internet search and advertising firm.

Google’s large unit in Ireland – which serves as its headquarters for Europe, the Middle East and Africa – bears the bulk of the tax liability on Google’s profits from sales in Britain and other big European markets.

At issue in the six-year investigation was the allocation of British profits to the Irish operation. According to committee records, British tax inspectors visited Google’s offices in Dublin during the course of inquiry.

HM revenue told the committee that it analysed information on the firm from many sources “including documents provided by a whistleblower.”

Google makes use of the “double Irish” tax mechanism to pay a very low rate of tax on its profits. The mechanism, which is being phased out, plays on differences between Irish tax law and jurisdictions such as the tax haven of Bermuda.

The settlement last month in London was heavily criticised in Westminster for lacking transparency. The firm will pay less tax in Ireland on its British profits in light of the settlement, The Irish Times understands.

Still, the committee noted Google had said “nothing of substance” changed in its tax affairs as a result of the inquiry.

“In the absence of full transparency over the details of this settlement and how it was reached we cannot judge whether it is fair to taxpayers,” the committee found.

“The sum paid by Google seems disproportionately small when compared with the size of Google’s business in the UK, reinforcing our concerns that the rules governing where corporation tax is paid by multinational companies do not produce a fair outcome.

“Google’s stated desire for greater tax simplicity and transparency is at odds with the complex operational structure it has created which appears to be directed at minimising its tax liabilities.”

Compliant

Responding to the committee’s 13-page report, a Google spokeswoman said the company was paying the amount of tax the British revenue body agreed it should pay. “Governments make tax law, the tax authorities enforce the law and Google complies with the law,” said the spokeswoman.

However, the committee said the lack of transparency made it impossible to judge whether the tax authority had settled for the right amount of tax.

Britain is Google’s second-largest single market, after the US, contributing more than $7 billion (€6.34 billion) to the company’s 2015 revenues.

The committee said the London tax body had taken far too long to reach the settlement, adding that authorities in other countries appeared to be more challenging of the company’s position.

“There are reports that the French and Italian tax authorities have ongoing investigations into the amount of tax owed by Google,” it said .

“The French tax authorities are reportedly seeking around £380 million in back taxes from Google. The Italian tax authorities are reported to have asked for £150 million in back taxes, and that Google is also suspected of evading £173 million of tax in Italy between 2009 and 2013.

“These amounts are larger than the UK tax settlement, despite the UK being the most significant market for Google outside of the US. We were told that some European tax jurisdictions begin their investigations with police action and the seizure of documents. For example, in 2011, French authorities raided Google’s offices in Paris.”