THE BLOG

The Google Tax is Not for Google, says Google

09/03/2016 10:31 GMT | Updated 08/03/2017 10:12 GMT

In the latest example of the impunity Google acts with in its dealings with governments, it has declared that the UK's recently created "Google tax" is not for Google. The comment was made by Tom Hutchinson, Google's Vice-President for Finance, at a hearing with a UK Parliamentary Committee over the company's recent tax deal with the UK government.

The tax referred to officially goes by the name of the "diverted profits tax" and was set up specifically to target companies, such as google with aggressive tax avoidance systems. It enabled the UK government to impose a 25% tax (5% above the normal 20% rate of corporate tax) on profits that are inappropriately diverted from the UK .

Google's indication that their recent tax deal with the UK government, hailed by many as "derisory", will mean this tax does not apply to them, is disturbing evidence that the influence over government and regulatory capture already so evident in the US has been transferred to Europe. The deal between the UK and Google has seen Google agree to pay £130 million in back taxes and interest to cover the period between 2005 and 2015. This is for a country that is Google's second biggest market and in which it reportedly brought in £4.6 billion euros in revenue in 2014 alone. It is little wonder the agreement has not been seen as a bargain for the UK.

Paradoxically, the only state that has taken a firm stand against Google has been China, not a perfect country but for sure hardly known for its anti-monopolistic principles. In the US, meanwhile, the evidence of Google's undue influence over the government keeps rolling in, with the FCC recently passing a decision to open up the US set-top box market, a proposal closely associated with Google. This proposal will allow other competitors, including Google, to provide their own set-top boxes, allowing them to repackage and monetise the content negotiated and delivered by Pay TV providers. This has passed despite the worrying implications for privacy, investment, and diversity of programming that many critics have raised.

This is certainly not the first time that google has made use of this tactic, reusing and repackaging content developed by its competitors. Indeed, one of the initial lines of investigation of the EU's ongoing competition case regarding Google's search engine focussed on its use of content from competing specialised web search services , for example making use of user reviews on its competitor's websites.

This is of course just one of the EU's two ongoing antitrust investigations focussed on Google. The other, still at an earlier stage, is focussed on the company's behaviour regarding its Android operating systems. However, it is hard not to see the two cases as linked given the way Google have been able to translate their dominance in the search market into dominance in the mobile operating system market.

In turn, the fact that 50% of google searches are now done by a mobile device means that Google's success with its operating system is now feeding into and reinforcing its dominance on search. This is a dominance that, it is important to remember, is even more unchallenged in the EU, where Google accounts for 90% of online searches, than it is in the US, where it accounts for a still hefty 64% .

The Statement of Objections eventually released by the European Commission in relation to the online search case was quite narrow, focussing only on the way google has allegedly used its platform to favour its own comparison shopping service, Google Shopping, over the services of its competitors. However, there have been hints recently from Margrethe Vestager, the European Commission's Commissioner for Competition, that the company will face a broader range of antitrust challenges over the coming years .

The resolution of these issues is crucial if Europe truly wants to establish itself as a technology leader and finally implement the much talked about Digital Single Market. It cannot do this if there are companies such as Google hovering over the market, impeding fair competition. There have recently been grumblings from the US that American companies are being unfairly targeted in Europe. These accusations do not ring true.The recent debate has not been about bringing down American companies but simply about ensuring that companies are treated equally.

The example of the UK Google tax deal is an excellent illustration of this. Other companies do not make tax deals, they just pay their taxes. Why should Google be different?