Google hits out at HMRC in defence of its £130m tax deal

HMRC, its processes and the insanely complicated British tax system to blame, argues Google

Google has stoutly defended its UK tax practices in front of the House of Commons Public Accounts Committee (PAC), claiming that the £130m deal it struck with government is the right amount - and criticising the politicians themselves for presiding over an increasingly complicated tax system.

The search giant's finance and EMEA executives were grilled by MPs on the PAC about its recent deal with HMRC, whereby Google will pay £130m to cover a 10-year period in which it generated several billion pounds in the UK.

Matt Brittin, president of Google's EMEA Business and Operations division, and Tom Hutchinson, vice president of finance, defended the deal and blamed HMRC for the six years it took to come up with a tax bill for Google's activities in the UK.

MPs from the major parties have been scathing about the amount, describing it as too little and an example of Google freeloading on tax payer-funded UK infrastructure.

However, Brittin was adamant that Google had paid the amount of tax requested by HMRC.

"We've been through an intensive audit that tells us the right amount of tax to pay. We want to pay the right amount of tax. We believe in paying our taxes. We're paying the tax bill the tax man has told us to pay in the UK. We can't pay more," he told the committee.

The committee argued that Google could indeed pay more than the tax bill it had been presented with. But Brittin insisted that Google's tax practices are fair and just. "We want to be in the position where we are seen to be paying the taxes that are due," he said.

Hutchinson added that Google agreed to the amount it was asked to pay under UK tax law and that no negotiation on the figure took place. "There was not a number that was thrown out by HMRC and not a number we negotiated down," he said.

The committee did not seem convinced, however, and asked why, if Google is paying fair taxes in the UK, it has a complex web of financial structures that involves tax havens, such as the British Overseas Territory of Bermuda.

Brittin and Hutchinson remained adamant that Google's £130m tax bill was nothing more, or less, than precisely the sum it owed the UK tax authorities.

Seeking simplicity
Hutchinson went on to describe HMRC's tax processes as complex and inefficient. "I would love to have these rules simpler. There's a debate about tax issues and tax policies, not the amount [Google agreed to pay]," he said.

However, the committee called out the Google executive for having an equally complex tax structure in the US.

One of the main problems with Google's tax structure, as far as HMRC is concerned, is that the company's business is registered as several separate companies in different countries that report smaller profits on which they pay a smaller rate of corporation tax.

For example, Google's European headquarters is in Ireland, where it is subject to lower corporation tax than in the UK and therefore lower tax bills.

The committee acknowledged that HMRC may have been somewhat slow and obtuse in processing Google's tax affairs, but also questioned why it took Google six years to come up with a tax amount. One member of the PAC even suggested that Google's own finance team might be a bit "thick".

But Brittin and Hutchison stuck to their guns. They remained adamant that Google's tax processes are fair and proper, but the MPs were sceptical about Google's call for clarity when the company has equally complex tax structures.

Google recently reported huge profits, and the company's tax arrangements have been under increasing scrutiny for some time, so it is no surprise that its tax deals should come under fire from the government and the public.