Original URL: http://www.theregister.co.uk/2013/05/16/google_testify_at_tax_hearing_again/

Google 'DOES DO EVIL', thunders British politician

Parliamentary tax probe has leaked documents, say MPs

By Brid-Aine Parnell

Posted in Media, 16th May 2013 14:07 GMT

Even as its I/O shindig in San Francisco dominated the headlines, Google was today accused of lying over its claims last year that it makes no sales in the UK - in order to justify its tiny UK corporation tax bill.

The web giant keeps its vast UK ad revenues out of reach of Blighty's taxmen by insisting that a team in Ireland handles bookings from advertisers in Europe, and not its large staff in London. Google claimed its British workforce only promotes the online goliath rather than directly raking in hundreds of millions of pounds in taxable advertising revenue.

But this morning a panel of MPs said that whistleblowers had revealed sales strategy instructions for British staff and salary slips with sales commissions, as well as invoices issued in Blighty. The influential Public Accounts Committee stated the evidence indicated that staff in the UK were closing deals for Google.

Chairwoman Margaret Hodge said that one of the whistleblowers had provided a monthly pay slip that showed a relatively small basic salary and then commission of three or four times that for sales. She said that internal documents also gave staff sales targets and strategies, such as the number of meetings workers should have with potential customers.

In November Matt Brittin, Google's veep for sales and operations in northern and central Europe, told the parliamentary committee that customers were "encouraged" by UK staff to buy ads from the Chocolate Factory's Irish tentacle and Google UK provided "sales, marketing and R&D support", but workers in Britain weren't concluding sales.

"We have a pretty substantial document that informed UK sales staff of what they should be doing and it wasn't promotion, it was selling," Hodge told Brittin this morning during a follow-up committee hearing in Westminster.

The Google veep replied that it was right that workers in Blighty had targets:

"Many companies incentivise staff in a country to grow the business. We could debate sales all day and what is and isn't sales but that isn't the issue."

"That is the issue," Hodge retorted. "If sales are being concluded in the UK, you're misleading [UK's taxmen at] HMRC."

Brittin claimed he couldn't comment specifically on the whistleblowers' evidence unless he could see the testimony and documents, but the committee gave that argument short shrift.

"You keep saying that [you'd be happy to answer if you saw the evidence]," Hodge said. "I'm absolutely not going to betray the confidences of principled whistleblowers!"

"It either happened or it didn't," another MP on the panel said. "You don't need the testimony to determine whether something happened or not."

John Dixon, head of tax at Google's auditor Ernst & Young, irritated the committee during today's grilling by refusing to talk specifically about the web giant. Instead he said a hypothetical company in Ireland that wanted to trade in the UK without being subject to the country had certain terms to satisfy.

"An Irish company is subject to the UK if there's a permanent establishment. [That's] if they have the authority to conclude contracts and habitually use that authority. Then the second bit is, does it get so close to selling that the substance is here?" he said. "The question is what do people do and how much of what they do is the substance of sales, that's the line you're grappling with."

'You do do evil!'

Brittin insisted that Google came down on the right side of that line when it came to UK staff. He said that prices were 90 per cent auction-based, so UK staff couldn't do any price or discount negotiation, and that 99 per cent of British customers never spoke to anyone in London because they bought ads online.

He later clarified that that the one per cent of customers included Google's major clients, who gave the web behemoth "60 to 70 per cent of revenue".

Dixon trotted out the usual argument that no tax laws were broken by Google and companies with similar globe-spanning corporate structures.

"The types of relationships you're seeing here are common. Lots of overseas companies set up this way and equally lots of UK companies set up this way when they're trading overseas," he said.

Towards the end of the questioning, Brittin tried to make the same argument, but Hodge said the point was not illegality, but immorality.

"You're a company that says 'we don't do evil' and I think you do do evil in using smoke and mirrors to avoid paying tax," she said.

Meanwhile, rumours also swirled today that Amazon would be the next firm to be recalled by the committee after its latest Companies House filing showed that its UK subsidiary paid £2.4m in corporate taxes last year on sales of £4.3bn, despite getting as much as £2.5m in government grants to expand its warehouse operations in Scotland.

Taxes are, of course, paid on profits, not sales, and Amazon UK's profits are reported by the firm's Luxembourg business Amazon EU Sarl, much as Google's profits go to Ireland.

A PAC spokesperson said the committee "had not made a decision to call Amazon".

But Hodge told The Register:

"Paying £2.4m in tax on £4.3bn of sales is just a joke. Companies like Amazon should pay their fair share of tax based on their economic activity in this country and the profits they make here.

"Its behaviour is not only unfair, it is anti-competitive, putting British businesses that do pay their proper tax at a disadvantage.” ®