In a damming report, the Public Accounts Committee called on HMRC to “fully investigate” the company after it had used contrived arrangements to avoid tax on its multi billion pound revenues in the U.K.
14th June 2013
International Finance Magazine with inputs from “The Guardian” reports the story on Google’s contrived arrangements to avoid tax, E&Y’s alleged role in tax avoidance and the whistle blower’s evidence to HMRC.
Search Engine Giant, Google was accused yesterday (June 13th) of ‘relying on deeply unconvincing arguments’ to avoid paying millions in British Taxes. Google should face a comprehensive enquiry into its tax affairs from HM Revenue and Customs, a committee of MP’s said. A report from the all party public accounts committee concluded that the search engine giant uses financial arrangements with the intent of avoiding handing over money to the exchequer running into billions. Last year Google paid just £ 7.3million as corporate taxes on sales of nearly £ 3 billion. Tax experts opine that the figure should have been more than £ 200 million or higher. The shortfall deprives Her Majesty Revenue and Customs (HMRC) of money to fund public services, leaving ordinary tax payers make up the difference.
The online giant in its defence told the Hodge’s committee that its advertising Sales take place in Ireland, rather than in Britain, an argument described by Margaret Hodge, the committee’s chair as “deeply unconvincing and undermined by information from whistleblowers”. She said that the only way Google can salvage its reputation was to arrange to pay a fair share of tax in countries where it earns profits. She said that Google had “brazenly” argued that its tax affairs were lawful and defensible. Hodge said the committee was not specifically targeting Google, Starbucks or Amazon, companies that also gave evidence to the enquiry, but believed their tax avoidance strategies were illustrative of a much wider problem among multinationals in the globalised modern environment. The report also pointed out HMRC of not sufficiently challenging the multinationals manifestly artificial tax structures”.
Whistleblower says it all
When queried by the parliamentary committee on Google’s sales activities in the U.K. for which it has to pay taxes to the U.K. government for its sales activities in the country, Matt Brittin, Google’s vice president responsible for the U.K. operations had told the MP’s that “nobody is selling”. However, he was rapped up again by the MP’s when Barney Jones, an employee of Google handed over electronic documents related to the firm’s sales activities to the HMRC. Jones, a father of four, said he was prompted to do so, after reading what appeared to be misleading evidence from a senior Google executive claiming that it did not undertake any sales activities in the U.K., and therefore it was not required to pay any taxes. Jones, 34, was a member of Google’s sales team between 2002 to 2006, said he would do it again if the company he worked for indulged in immoral and unlawful activities. The dispute of tax revolves around Google’s use of its European headquarters in Dublin to minimize its tax bill in Britain. By booking all UK sales through Ireland, it handed HMRC only £ 10 million as corporate taxes between 2006 and 2011.
Auditors questioned
The committee after obtaining evidence from Britain’s big accountancy firms including Ernst and Young alleged that the reputation of the auditors had been damaged immensely “by their substantial role in advising their clients on corporate structures and tax planning which serve only to help them to avoid paying taxes in the UK”. The cross party committee warned the accountancy firms, calling on them to recognize “the public mood on tax avoidance has changed”.
‘90 minute’ Revenues as charity
In yet another revelation, Google contributed just £ 20,000 an year to a charity to fight against internet child abuse images in Britain, the internet giant has increased its charity contributions to the Internet Watch Foundation to £ 1 million for the next four years. The online giant was exposed for donating the equivalent of profits made in 90 seconds to IWF.