THE BLOG

The British People Have a Right to Know Whether Google's Tax Settlement Is a Fair Deal

28/01/2016 07:35 GMT | Updated 28/01/2017 10:12 GMT

Yesterday I wrote to the National Audit Office (NAO) to ask if they will investigate the process by which HMRC agreed the settlement with Google UK for tax owed between 2005 and 2015.

Google UK has over 2,000 employees in the UK and is a good employer. It provides essential online services for UK companies and tens of millions of us who use it every day. It's a very successful company, and we want it to be continue to be successful and grow its UK operations and workforce further.

But this is an issue of fairness. When a multinational company that, according to its own global accounts, shows UK revenues of around £4billion and, according to the same accounts, and with its global pre-tax margin figure of 26% suggesting the UK figure could be similar, Google is likely to have made over £1billion profit in 2014 alone.

So individuals submitting their tax returns this week, and companies based in the UK like our high street stores, paying their fair share of tax, will be asking why large multinational companies, whether or not they are internet-based, should not be paying their fair share of tax in the UK.

Tax revenue not collected is revenue foregone - this has important implications for the funding of public services that British businesses - including Google - and citizens rely on every day.

MPs from all parties are concerned that HMRC appear to have accepted Google UK's argument that the only economic activity that it undertakes in this country - where it asserts that it does not have a permanent establishment - is sale of adverts, not their actual display or use.

But Google UK provides advertising for UK businesses on a website that is explicitly UK-focused and that most of the revenue that Google UK earns is entirely dependent on people in the UK clicking on these adverts. To members of the public this would suggest that the revenue is based on UK activity and should be taxed in the UK.

If Google were paying the corporate tax rate on all its UK earning in 2014 alone it could well have paid around £200million. Yet HMRC has settled for just £130million over ten years, without any transparency or clarity. Little wonder that after George Osborne on Friday heralded this as a "victory", Downing Street has backtracked. Shadow Chancellor John McDonnell and commentators have called the deal "derisory."

The investigation of Google, which started under a Labour Government in 2009, has taken over six years. Questions need to be asked about why it took so long. During this time Osborne has cut HMRC's budget and staffing which many believe may have hit the efficient collection of tax revenues. That's why I have also asked the NAO to look at whether Osborne's cuts have impacted on HMRC's ability to negotiate fair tax settlements with multinational corporations such as Google. The British people have a right to know whether they have received a fair deal.

Seema Malhotra is the Shadow Chief Secretary to the Treasury, and the Labour MP for Feltham and Heston