Google, UK Tax Payback Plan Criticized
International internet giant Google’s agreement to pay the UK government $264 million in back taxes has come under fire from a panel of British government officials who say the pay-back plan is inadequate and unfair.
The original agreement between Google and the UK government was reached after a lengthy audit by Her Majesty’s Revenue and Customs (HMRC) ruled that the California-based company had dodged paying taxes for more than a decade by shifting its profits to its European base of operations in Ireland.
Though hailed as a “great success” by British Minister of Finance George Osborne, sharp criticism of the agreement, and the HMRC, came from the government’s Public Accounts Committee (PAC), saying it appeared “to have settled for less corporation tax from Google than other countries are willing to accept.”
The opposition Labour Party has also criticized the agreement, calling it “derisory” and saying it displayed “the government’s failure to act against corporate tax avoidance.”
In its final report, the PAC questioned Google’s claim that it merely followed existing tax law, saying that the company’s defense “is disingenuous” adding that “there is nothing in the rules that says you must set up two companies in Ireland and send large royalty payments, via the Netherlands, to a company that is tax resident in Bermuda.”
It closed by stating that while “it is not possible to judge” whether tax settlement agreed between Google and HMRC is “fair” to taxpayers, “more transparency” is needed in corporate tax affairs.
Google said it followed all tax rules and that, “after a six-year audit by the tax authority we are paying the amount of tax that HMRC agrees we should pay.”
Defending its own position, the HMRC said it “does not settle for a penny less than is due under the law from multinationals.”
The payment agreement, the UK tax authority said, “is entirely in line with international standards and does not impact on our determination to tackle artificial tax avoidance structures. It is only right that HMRC explains the basis on which profits are taxed, particularly where there is keen public interest.”