could reopen Google's £130m HMRC tax deal, says Parliament

Everyone else seems 'more challenging in assessing Google’s tax position'

The government may reopen its £130m tax settlement with Google due to concerns that HMRC "appears to have settled for less corporation tax than other countries are willing to accept", an official report has warned today.

The Public Accounts Committee report Corporate Tax Settlement into the six-year tax negotiation with Google said: "It is not possible to judge whether a £130 million tax settlement agreed between Google and HMRC is fair to taxpayers."

It said the sum for the ten-year period “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.”

It is reported that the French and Italian tax authorities have ongoing investigations into Google, and that the amount of tax they believe is due is much larger than the £130m settlement agreed with HMRC, said the report.

"Although we cannot verify those claims, it does appear that other tax authorities have been more challenging in their assessment of Google’s tax position."

It also said HMRC could re-open the investigation into Google if new evidence comes to light from investigations by other tax authorities: "HMRC also said that it collaborates with other tax authorities and has a good understanding of what they are doing."

Labour MP Meg Hillier, chairman of the PAC, said: “Google has been keen to parade its enthusiasm for simplicity in the tax system but the fact remains the company has chosen to set up a complicated tax strategy specifically designed to minimise its tax bill. At the same time, HMRC itself has identified that the current penalty regime treats corporations differently from individual taxpayers.”

She said the bigger prize after a costly six-year investigation would have been to develop a new approach to the activities of internet-based companies.

“We are not convinced HMRC has achieved this and it must work with overseas tax authorities if we are to see lasting and effective change in the international tax system,” added Hillier.

In its latest UK accounts, for the 18 months ending June 2015, Google reported a UK corporation tax liability of £46m. "HMRC also told us that Google’s total charge for corporation tax and interest from 2005 to 2015 was £196.4m," said the report.

The committee noted that the UK “is a key market for Google but the enormous profit derived is out of reach of the UK’s tax system.”

It also found that to avoid UK corporation tax Google relied on “the deeply unconvincing argument that its sales to UK clients take place in Ireland, despite clear evidence that the vast majority of sales activity takes places in the UK.”

HMRC does not know how much its own six year investigation of Google’s tax affairs cost, but admitted that it had been “a very expensive and resource-intensive process”. ®

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