UK politician accuses Google of devious behaviour

The company vigorously denied trying to avoid tax by disguising the real nature of its UK business

Margaret Hodge, chair of the Commons Public Accounts Committee, accused Google of using “smoke and mirrors to avoid paying tax”

Margaret Hodge, chair of the Commons Public Accounts Committee, accused Google of using “smoke and mirrors to avoid paying tax”

 

A leading UK politician yesterday accused Google of “devious, calculating and unethical” behaviour after a two-hour hearing in which the company vigorously denied trying to avoid tax by disguising the real nature of its UK business.

Margaret Hodge, chair of the Commons Public Accounts Committee, accused Google of using “smoke and mirrors to avoid paying tax” because she alleged the company undertook sales in Britain, as well as Ireland. “I think you do evil,” Ms Hodge told Matt Brittin, Google‘s vice-president for sales and operations in northern Europe,

However, six months after the internet search giant was first called before MPs to explain its low tax bill, Mr Brittin stood by his assertion that it did not sell advertising from London.

Google has said it paid over £10 million (€11.86 million) of UK corporation tax last year, based on services it provided to other companies in the group. Profits on its $4.9 billion of sales to UK customers were made in Ireland, where the sales are transacted. Overall, the company paid foreign tax at a rate of 5 per cent because of its use of a tax-efficient structure involving Bermuda known as a “double Irish”.

Mr Brittin told the committee that 99 per cent of Google’s advertisers had no dealing with the UK sales staff but the remaining 1 per cent were the biggest clients which accounted for 60-70 per cent of revenues. He thought more sales commission was paid to the UK sales staff than their Irish counterparts.

Mr Brittin said “customers will feel they’re being sold to” but he insisted that only the Irish business had the right to close the transaction. Ms Hodge pressed him on details obtained from former Google employees that suggested sales were being executed in the UK .“Why don’t you call a spade a spade?” asked Richard Bacon, a Conservative MP.

John Dixon, head of tax at Ernst & Young, told the committee that an Irish resident company could be deemed to be trading in the UK if the UK-based employees had habitually concluded deals on behalf of the Irish company.

Amyas Morse, head of the National Audit Office, told Mr Brittin the issue was not “going away”.“There are a ton of people who are listening and saying we think they are selling in the UK,” he said.

Ms Hodge said that “if sales activity is taking place in the UK you are misleading parliament and the tax authorities in suggesting that is not happening.” – The Financial Times Limited 2013