Exclusive

Exclusive: After Google tax clash “we didn’t hear the truth”

By Alex Wood 11 February 2016
Meg Hillier MP_PLP
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Meg Hillier MP, Public Accounts Committee Chair.
Summary

Exclusive: Meg Hillier MP says run-in with Google left her wanting more.

Today Google, which recently became the world’s most valuable tech company, was hauled into Parliament to face the Public Accounts Committee and answer a series of cutting questions around its £130m so-called “sweetheart deal” with the British taxman.

The hearing was spearheaded by Meg Hillier MP, chair of the Public Accounts Committee, known for her tireless campaigning on behalf of small businesses in her constituency of Hackney South and Shoreditch.

During the hearing Google fought its side of the story, arguing its £130m tax settlement was “the conclusion of a six-year rigorous, independent tax audit in which we are paying tax at 20% like every other UK company”. For his part Google’s European boss Matt Brittin laid much of the blame on the UK’s “over complicated tax systems”.

As far as the law is concerned, Google paid all of the required taxes in the UK and reached a settlement with the Government. But the public continues to demand answers about how the agreement came about.

“Google must be more transparent and lead the way for the ordinary taxpayer” Hillier told The Memo. “They could lead the way, like the cosmetics retailer Lush did, by choosing to conduct their tax affairs in a transparent manner”.

The Memo caught up with Hillier in an exclusive interview after the hearing.

Alex Wood: What’s your initial reaction to what you’ve heard from Google?

Meg Hillier MP: I came from away the committee feeling frustrated. Talking about tax can be endlessly frustrating, and today we didn’t get to hear the whole story.

Taxpayers are right to be angry because the situation isn’t clear enough. Instead of the clear facts, we saw Google stressing its commitment to transparency over and over, without actually revealing what we needed to hear.

“If I had £100 for each time Google mentioned transparency, I could buy a lovely holiday.”

HMRC sent us information very late yesterday which was too late for us to assess it properly.

During today’s meeting they kept repeating that they pay 19% tax globally but offered nothing to back it up. Matt Brittin could not confirm how much Sundar Pichai, Google’s CEO was paid, despite it being plastered across the news earlier this week. Even more surprisingly, their Head of Finance claimed not to know how much profit they had made in the last 5 years.

That was why I asked Matt Brittin (Google’s Head of Europe) how much he was paid, which he failed to reveal despite being asked 5 times. This gave an impression that they are detached from the real world.

AW: Why did you bring both Google and HMRC in for questioning?

MH: This committee previously brought Matt Brittin in for questioning in 2012. We then called him back in 2013 following a whistleblower’s account.

After the Chancellor announced news of Google’s latest settlement, we felt the public deserved answers and more clarity about how it came about.

Are UK tax rules too complicated? Is this a fair justification?

When it comes to internet companies it’s fair to say we have complex tax systems because it’s less precise where their business activities take place.

But Google chose to create its own structure that makes use of complicated things like the Double Irish and the Dutch Sandwich. For ordinary taxpayers it seems extraordinary.

Back in 2012, when Matt Brittin attending an earlier hearing he implied that if Google can have a tax haven in Bermuda, why wouldn’t they? It is still their voluntary choice to have these complicated structures.

Should we be pointing the finger at HMRC for their failure to get a better deal with Google?

HMRC couldn’t tell us how much the enquiry cost, which we hoped to find out more about today. HMRC has a 75:1 cost recovery ration. We wanted clarity on the cost of investigation.

I think ordinary taxpayers have a right to know how much HMRC invested into this investigation. Especially when so many taxpayers say the taxman struggles to answer the phone to them.

It’s important to know that the figure agreed between Google and HMRC is not final and if new evidence comes to light, which may well happen with other investigations in Europe, HMRC may revise the settlement.

On a more positive note, if the result of this 6 year enquiry is that the findings can applied to other internet companies and more settlements take place, then HMRC’s actions may have greater benefits. But we do not have a clear picture of the likely impact.

Are tech companies like Google being unfairly targeted?

In the modern world everybody is a tech company to a certain degree and there needs to be an adult discussion about internet-based companies and how they should be taxed.

There have been other examples of companies brought in for questioning including Starbucks, which resulted in the company rethinking its practices after a public outcry.

There’s nothing to stop Google from changing their corporate structure and becoming more transparent.

How much power do you and the Public Accounts Committee have to make a difference?

On behalf of taxpayers we’re holding people to account in public. After today’s hearing we will publish a report. Government has to respond to our recommendations.

If the Government disagree with our recommendations it has to explain why. And if it agrees, we then check that the recommendations are acted upon. We also have the right to summon witnesses if we need more information in the future.

What happens next?

Over the next couple of weeks we will compile our report to be published to Parliament.

The Public Accounts Committee is a cross-party committee, we always strive to publish reports with consensus.

 


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